Spot Gold due to soaring U.S. bond yields, from last Tuesday continued to fall, before the release of the “scary data” below the 1780 mark, Thursday once lost $ 1770, Friday’s lowest approaching 1760, finally closing at $ 1783.35 / ounce, a cumulative decline of nearly $ 40, down more than 2%.
Spot silver fell less than gold, last Tuesday once below the $ 27 mark, Wednesday managed to close up, the trend and gold divergence, Thursday struggled near $ 27, barely holding the mark, Friday nearly lost the $ 26 mark, but finally managed to close at $ 27.29 / ounce, a weekly decline of 0.25%.
In the oil market, WTI Crude Oil surged more than 2% last Monday to hit a new high of more than a year, closing above $60; news of possible Saudi Arabia production increase on Wednesday brought a brief panic to the market, but due to the sharp drop in U.S. production, the two oils closed sharply up more than 2%, WTI crude oil returned to above the 61 mark, and the cloth oil approached $65/barrel; on Thursday, the threat of cold wave disruption in Texas showed signs of easing, and crude oil fell away from the recent 13-month high that continued to hover Both oils closed down more than 2% on Thursday as the threat of cold snap disruptions in Texas showed signs of easing. Oil prices continued to come under pressure on Friday, with WTI crude oil closing at $58.93/barrel, down 2.20%, and down 1.14% for the week; and 布油 closed at $62.67/barrel, down 1.45%, with a slight weekly gain of 0.05%.
In the currency market, the U.S. index last Wednesday once above the 91 mark, the same day the 10-year U.S. bond yield twice on touch 1.33%, Thursday due to poor initial claims data, the U.S. index hit the largest decline in 10 days (0.42%), down from the three-week high, suspending the two-day streak. On Friday, the pound and the euro rose significantly, the U.S. index continued to fall, closing at 90.36, a slight weekly decline of 0.07%. The British pound was a strong performer against the U.S. dollar, hitting 1.40 on Friday for the first Time in nearly three years, with a weekly gain of 1.16 percent.
Bitcoin fluctuated sharply last week, with a pullback of nearly $3,000 last Tuesday, falling to near $48,000, breaking the $52,000 mark last Wednesday and hitting a new all-time high, dropping more than $1,700 from its record high on Thursday, and regaining momentum from Friday to Saturday to attack a new all-time high of $56,500, with bitcoin even breaking the $58,000 per coin barrier early on the 22nd, continuing to hit The new all-time highs. With the world’s first bitcoin ETF, the Purpose Bitcoin ETF (BTCC), listed for trading on the Toronto Stock Exchange, Wall Street is seeing new speculation on bitcoin.
[This week’s events at a glance
① Powell testimony expected to remain dovish and urge Congress to pass more fiscal stimulus
This Tuesday and Wednesday at 23:00 Fed Chairman Jerome Powell will attend hearings of the Senate Banking Committee and House Financial Services Committee respectively to testify on the semi-annual monetary policy report. There is not much new information in the minutes of the Fed’s January meeting released last week, and the market is looking forward to Powell’s testimony this week.
Foreign media said Powell is expected to maintain dovish remarks at the hearing, and traders will pay close attention to whether there are signs that rising long-term borrowing costs are troubling Powell. In addition, Powell may also put pressure on Congress to urge them to pass President Biden‘s stimulus plan, although he may not comment on the specifics of Biden’s policies.
Powell may also be grilled by Congress on issues including financial stability, whether U.S. stocks are overheating, for example, and the recent GameStop stock shorting incident.
②US $1.9 trillion fiscal stimulus ushers in vote
The House of Representatives will vote on a new stimulus bill this Monday (Feb. 22) local time, according to House Majority Leader Hoyer. House Speaker Nancy Pelosi said last Thursday that she hopes to vote “sometime before the end of the week,” saying the House aims to pass a $1.9 trillion stimulus package by the end of February. However, she acknowledged that there are still some procedural hurdles to the bill.
According to the $1.9 trillion stimulus draft released by the House of Representatives over the weekend, the proposal would give $1,400 in relief per person, plus $600 per person for the December 2020 Epidemic relief package, raising the total relief to $2,000 per person. In addition, the proposal includes raising unemployment benefits and the minimum wage, aid to state and local governments, aid to educational institutions, increased spending on new crown testing and vaccines, and funding for tenants, among many other things.
The 10-year U.S. bond yield surged above 1.36 percent on Friday precisely because investors expect Biden’s $1.9 trillion stimulus package to spark a strong rebound in economic growth and Inflation later this year. Economists expect that Biden’s stimulus will not only boost U.S. GDP growth, but will also drive many advances in the vaccine sector.
However, the market generally expects that the stimulus plan will perhaps be somewhat abated when the proposal goes to the Senate for a vote. Among them, the $15 minimum wage is the focus of bipartisan controversy in the United States. Some foreign media reported that Biden had recently told the mayors and governors in no uncertain terms that his proposed minimum wage package might not be passed in the near future. This may disappoint the market.
Moreover, the current performance of risk assets may have digested the positive impact of the fiscal stimulus, so we cannot rule out buying rumors and selling facts, and any surprises, such as scaling back or postponing again, may hit the current investment sentiment, thus adding pullback pressure, especially in the equity market.
③Texas refineries still weeks away from returning to normal
Texas refineries hit by the cold snap could take weeks to return to normal operations, industry experts said Friday. About one-fifth of the state’s crude processing plants suspended production last week.
Andrew Lipow, president of Houston consulting firm Lipow Oil Associates, said.
The time needed to resume most operations at the affected refineries is 2 1/2 to 3 weeks. Refinery operators are evaluating facilities and may need to repair any damage to pipelines, cooling towers and other equipment before they can restart slowly and carefully.
Paul Sankey of Sankey Research, an independent energy research firm, said in a report that the refinery shutdowns will depress U.S. crude prices and widen the spread between U.S. oil and Brent crude. He predicted that this situation will last for 2-3 weeks.
[Hot commodity outlook].
①US bond yields are just starting their way up?
The trend of U.S. bond yields should still be highly watched this week.
At the end of last Friday’s U.S. session, the yield on the benchmark 10-year U.S. Treasury note broke through 1.3%, rising to 1.3601% at one point during the session and accumulating a gain of 12.82 basis points last week. However, the spike in the copper-to-gold ratio suggests that the rise in yields may just be beginning. The ratio has historically been a more reliable predictor of yields.
The market is concerned that if U.S. bond yields rise to a certain threshold, it could begin to dampen the performance of risk assets, including U.S. stocks. Other analysts say that if U.S. bond yields continue to rise this quickly, it could cause all assets to decline. Moreover, a rise in U.S. bond yields could lead to tighter financial conditions, so at the moment, the Fed’s attitude will be particularly critical.
Stephen Stanley, chief economist at Amherst Pierpont Securities, said the 10-year U.S. bond yield was around 1.6% before the epidemic, and there is no reason why yields should be lower than that if they are to return to previous economic levels. He expects the 10-year U.S. bond yield to reach 2%, the last time that level was seen in August 2019.
The survey also shows that the median expectation indicates that the 10-year U.S. bond yield will reach 1.45% in the fourth quarter. Wells Fargo analyst Zachary Griffiths, on the other hand, expects rates to be between 1.3% and 1.5% by the middle of the year.
According to CFTC data, there was no significant major movement in short U.S. bonds. By the week of Feb. 16, CBOT’s speculative net short position in 2-year U.S. Treasury futures decreased by 27,027 lots to 142,489 lots, U.S. 5-year Treasury futures shifted to net short with a position size of 6,152 lots, and net long position in U.S. 10-year Treasury futures increased by 23,870 lots to 103,413 lots.
② Crude oil: trend up market is still attractive
Some analyses attributed the decline in oil prices in the latter part of last week to profit-taking.
According to CFTC data, the speculative net long position in WTI crude oil futures increased by 16,219 lots to 399,935 lots in the week ended February 16, highlighting that the trending crude oil market is still attracting a lot of investors’ attention.
In addition, according to the weather forecast, the U.S. will be affected by cold air again in the middle of this week, and according to the current situation, it will take two and a half to three weeks for most of the refineries affected by the severe cold weather to resume operations. Citi expects to lose 16 million barrels of oil production by early March; up to 1 million barrels per day of capacity may still be available in the Texas Permian Basin over the next 10 days and will remain offline.
More importantly, the market has now increased its bets on reflationary trading, which will limit the short-term decline in oil prices. It is now widely believed in the market that the repair of crude oil-related demand will be further accelerated along with the expansion of the vaccine rollout, the improvement of the global epidemic situation, and the imminent implementation of Biden’s massive fiscal stimulus bill.
However, expectations that OPEC+ will increase production as early as next month, coupled with the first signs of a thaw in U.S.-Iran relations are putting pressure on oil prices.
Goldman Sachs latest raised its Brent crude price estimate by $10/bbl, expecting Brent crude prices to reach $70/bbl in the second quarter and $75/bbl in the third quarter. Kerry Craig, global market strategist at JP Morgan Asset Management, also told CNBC on Friday that there is still room for oil prices to rise in the current environment, but there will probably only be a $5-10 upside, and don’t delude yourself into thinking it will rise to $80-90.
③ Gold: singing short, the decline is afraid that it will not end
Gold was hit last week by a double whammy of soaring U.S. bond yields and bitcoin grabbing market capital. Heading into the week, gold rallied and is attacking 1800 as risk sentiment rises on the back of epidemic-restricted activity around the world and on the back of expectations of fiscal stimulus in the US. Gold investors will be more focused on the dollar this week due to the lack of major data and major risk events.
According to a Kitco gold survey out on Friday, Wall Street analysts are definitely bearish on gold in the near term, while bullish sentiment among retail investors has fallen to its lowest point since May 2019. Most market analysts believe that the bond market remains the biggest threat to gold prices in the near term.
Analysts at DailyFX wrote that if gold can effectively stabilize at the $1,770 level, the market is expected to rally further around the $1,800 resistance, and once it successfully recovers $1,800, the market can look up to the resistance around $1,828. However, it should be noted that if gold fails to recover the $1,800 level, it should be wary of the possibility of falling back to test the $1,760 level again.
Economies.com said that as long as gold prices remain below the $1785/oz resistance, then the bearish trend scenario remains valid for some time to come, and is now waiting for gold prices to test the next major bearish target of $1740/oz.
David Madden, senior market strategist at CMC Markets, said investors should consider playing gold in the $1,700 to $1,900 range.
Colin Cieszynski, chief market analyst at SIA Wealth Management, on the other hand, said more bulls exited after gold prices fell toward $1,760, and he believes gold prices will test the $1,795-$1,810 area and will begin to repair the technical tone if it rises above $1,820.
The latest CFTC data showed that the COMEX gold futures speculative net long position decreased by 22,269 lots to 83,581 lots in the week ended Feb. 16.
④ Currency markets: Net short positions in the dollar fell for four weeks in a row, but the market favors riskier currencies
The dollar’s recent rally triggered short-covering. The size of the net short position held by speculators in the dollar fell to its lowest level since mid-December last year, at $29.09 billion in the latest week. The size of the net short position in the dollar has fallen for the fourth consecutive week. Net short position size had hit the highest in nearly 10 years in the week of January 19. But market participants now favor higher risk currencies over the safe-haven dollar.
Fxstreet analysts recently pointed out that the U.S. index broke through the resistance line near 90.80, easing its downside pressure to some extent. The current rally should be seen as a correction, and in the long term, a bearish stance is expected to be maintained as long as the US index is trading below its 200-day moving average, which is below the 93.94 level.
There is a lot of important economic data coming out this week, but the impact of these data on the foreign exchange market is likely to be limited as the market focus remains on U.S. bond yields and the global economic recovery.
The market is currently bullish on currencies that are closely linked to commodity prices and global growth prospects, with the AUDUSD touching its highest level since March 2018 on Friday. The New Zealand dollar is approaching a more than two-year high against the U.S. dollar, and the Canadian dollar is also rising against the U.S. dollar.
The British pound, on the other hand, benefited from stronger risk appetite from the U.K. vaccine program and is expected to remain strong in the aftermarket as Prime Minister Boris Johnson announced on Saturday (Feb. 20) that the U.K. will significantly accelerate its new crown vaccination program, with all adults in the U.K. receiving their first dose of the new crown vaccine by the end of July and all citizens over the age of 50 by mid-April.
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