[Market Review].
The US dollar index was under slight pressure. The dollar index was under slight pressure during the day, still hovering around the 90 mark.
Some analysts say that if the Fed does not raise interest rates, it will be difficult for the dollar to gain more upward momentum. Although market participants believe that the ultra-loose monetary policy is exacerbating inflation, most Fed officials said they still need easing. In his latest speech, Fed Vice Chairman Clarida said that last month’s weaker-than-expected U.S. jobs report showed that the economy has not yet reached the threshold at which the Fed can scale back its massive bond purchase program. The Fed fixed interest rates at near-zero levels to help the economy recover from the epidemic.
However, as the economic recovery continues to expand, forecasts of the Fed tapering monetary stimulus in the second half of this year are still heating up. Analysts at the German Central Bank for Cooperation expect the Fed to first set a timetable for tapering its bond purchases, with Fed Chairman Jerome Powell likely to announce his plans at the central bank’s meeting in Jackson Hole in late August. This event may trigger some short-term market turmoil.
Gold prices rose above $1,870 at one point. Next, let’s focus on gold. Gold prices shuddered upward during the day, rising from near $1,840 to above $1,870 at one point, with an intra-day gain of $30. On the one hand, the weakness of the U.S. dollar supported gold; on the other hand, the Israeli-Palestinian conflict increased international tensions, which also boosted gold prices.
In addition, government data released on Friday showed that hedge fund managers held long positions in U.S. gold futures and options increased by 12% from the previous week, the largest increase since June. In addition, ETFs have increased their gold holdings for the past six consecutive trading days, after months of selling. Fund managers and ETF investors are bullish on gold, boosting market sentiment.
Silver broke above $28. Gold prices climbed, and silver prices were no exception. Earlier, silver consolidated above $27 before moving up strongly to break the $28 barrier.
The euro edged higher. In non-U.S. currencies. The dollar was under slight pressure, while the euro edged higher. The euro traded mainly in the 1.2120-1.2170 range against the dollar during the day. Likewise, there is much discussion in the market about the ECB tapering its bond purchases. Some analysts expect that the ECB will announce the tapering plan at its monetary policy meeting in December, when the spread of the new crown virus is expected to end and the emergency anti-epidemic bond purchase program will be completed.
The British pound continues to rise strongly. Let’s look at the British pound again. The pound’s recent gains have been remarkable, and it has now climbed to around 1.4160.
U.S. oil rose above $66. Finally, take a look at the oil market. U.S. oil has shaken higher during the day and is now up above $66. While the Indian epidemic remains quite severe, fueling concerns about a slowing recovery in fuel demand, the easing of epidemic restrictions in the U.S. and European countries has boosted confidence in the recovery. In addition, the tense geopolitical situation in the Middle East has also helped oil prices rise.
[Risk Warning].
If the breakthrough of 1.1075 Euro-Swiss will continue to move up
Commerzbank said that the EUR/CHF stabilized above the 6-month uptrend line of 1.0905 and is expected to continue to rally. 2020 June high of 1.0915 and the 6-month uptrend line will provide support. A close above the late April high at 1.1075 would point to the March high at 1.1151 as well as the 200-week moving average at 1.1152. A break above that would take us further up to the 50% Fibonacci retracement of the entire downtrend since the 2018 top at 1.1255 as well as 1.1325.
GBPUSD may start an uptrend with a target of 1.55
Bank of America says that the GBPUSD trend has formed the bottom of a head and shoulders bottom and wedge pattern, which signals that the GBPUSD may open a long-term uptrend. The bullish signal is confirmed if the pair closes above the 100-month SMA at 1.41 this month. We could then look towards 1.47, the 2016 Brexit high of 1.50, and 1.55. If there is a downside move to retest the neckline of the head and shoulders bottom at 1.35, consider buying on the downside.
U.S. and Japanese declines are limited, and the market is expected to extend sideways afterwards
UOB analysts pointed out that the market risk sentiment is mixed, the economic recovery and the reignition of the epidemic news intertwined, and the Fed policy outlook is also in the inflation and economic data double material squeeze indecision, the dollar against the yen after the market is expected to be trapped in consolidation, break above the 110 mark is difficult, but below the same 60-day SMA support. Unless there is a clear short or long strong signal in the market, the U.S. market will still be trading in the 108.80-109.95 range.
Key Forecast
14:00 UK unemployment rate expected to rise
First, let’s take a look at the UK’s ILO unemployment rate. Unemployment data released in the last three months has been steadily moving downwards, with last month’s release registering 4.9%. The labor market is expected to strengthen as the economy recovers rapidly with the widespread vaccination in the UK.
Currently, the market expects the UK’s three-month ILO unemployment rate for March to be 4.9%, which may be negative for the pound if the published value is larger than expected; conversely, it is positive for the pound.
According to the British government’s roadmap to lift the embargo, the UK officially entered the third phase on May 17. Although the economy is further opened, but the majority of British employers are facing a state of labor shortage at the moment.
Some job search website data show that the number of job openings in some cities even exceeds the number of job seekers. In Manchester, each job seeker corresponds to an average of 13 job opportunities. The survey shows that the massive loss of foreign workers is a major reason for the shortage of job seekers, with the outbreak of the new crown epidemic and Britain’s exit from the European Union leading to a reduction in the number of foreign workers in the UK. The UK Statistics Authority estimates that the number of non-UK citizens employed in the UK in the last three months of 2020 is 4.22 million, down 4.0% from the same period in 2019. This suggests that the UK labor market is picking up quickly and the pound is expected to gain support.
17:00 Eurozone Q1 GDP Fears to Remain in Decline
Next, take a look at the revised Eurozone GDP for the first quarter. Last year, the eurozone recorded negative GDP in all four quarters, and GDP growth contracted by 6.8% for the year 2020.
At the end of last month, the Eurodollar released the preliminary annual GDP rate for the first quarter recorded -1.8%. Financial website Forexlive commented that the data confirmed a double-dip recession in the region, but the positive conclusion is that the situation is not as bad as feared and a strong economic rebound in the second half of 2021 is expected as the pace of vaccine rollout accelerates.
Currently, the market is expecting a -1.8% annualized revision of Eurozone GDP in the first quarter, which may be positive for the euro if the published value is better than expected; conversely, it may be negative for the euro.
According to the previous experience, the revised value of eurozone GDP has little impact on the market, so you should pay attention to it.
Wednesday 04:30 API crude oil inventories may increase
Finally, let’s focus on API crude oil inventories. Last week’s API report showed that US crude oil inventories decreased by 2.533 million barrels. Then the EIA crude oil inventories were released with a decrease of 426,000 barrels. Crude oil inventories may increase because of the Colonial Pipeline pipeline outage.
Currently, the market expects that U.S. API crude oil inventories may increase by 1.68 million barrels for the week ending May 14. If the published value is larger than expected, oil prices may come under pressure; on the contrary, oil prices may rise.
Despite the outbreak in some parts of Asia, market optimism for a rebound in fuel demand in Europe and the US and other regions has increased. The U.S., China and parts of Europe are recovering quickly from the outbreak as vaccinations advance, thus overshadowing the impact of weakening demand in India. In the U.S., airport passenger numbers jumped to the highest level since the outbreak began, suggesting that a resurgence in domestic travel is leading a rebound in jet fuel demand. In addition, the Italian government is preparing to deregulate measures, which will support oil prices.
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