22 July 2019 Weekly Analysis
GCMAsia Weekly Report: July 22 – 26
Market Review (Forex): July 15 – July 19
US Dollar
Dollar index was traded higher throughout the entire last week while closing its market on last Friday at 96.75. Last week, upbeat economic data from US pushed up the market demand on dollar while dovish comments from Fed members limited the gains of dollar on later last week.
Earlier last week, dollar received huge bullish momentum from the market following the release of Core Retails Sales and Philadelphia Fed Manufacturing Index data. Both data came in at a rate of 0.4% and 21.8 respectively, beating the economist forecast of 0.1% and 5.0. These economic data slightly uplifted the market confidence toward the dollar while expecting Fed will still have at least a rate cut of 25 basis point in the upcoming Fed interest rate decision. Moreover, Donald Trump has also threatened China that Washington can impose tariff on China imported goods again anytime as soon as the US President said that China did not compliance to their promise that made during G20 Summit two weeks ago. In Japan G20 Summit, China has agreed to purchase more agriculture goods from US while US delisted Huawei from the blacklist and enable Huawei and US domestic company continue to have business relationship. Heightened tensions between both countries has urged the investors to exit dollar market and shifted their investment portfolio to other currencies to avoid uncertainty.
Later last week, shininess of dollar has faded after Fed members including John Williams and Richard Clarida commented on US current economy condition. Richard Clarida reiterated that the US economy condition is still growing at a steady pace, but global uncertainties still remain high and haunting the global economic growth. Besides, John Williams also emphasized that Fed is better to take preventive measure before ‘disaster’ unfold as rate cut would definitely sustain the economy growth as of now.
USD/JPY
USD/JPY extended its losses from the highest level while closing last Friday’s market at 107.70. Last week, appeal of Japanese yen rose as market appetite toward safe haven asset increased following dovish comments from Fed Members. US Federal Reserve dovish stance cemented the market expectation toward a rate cut in the upcoming interest rate decision and urged the investors shift their investment portfolio from dollar market to safe haven assets such as Japanese Yen. Besides, Japan Core CPI data which showed a reading of 0.6%, similar to the economist forecast has also triggered bullish support upon Japanese Yen.
EUR/USD
The pair of EUR/USD extended its losses throughout the entire last week while closing last Friday’s market at 1.1220. Earlier last week, Euro received strong sell off pressures from the market following the release of downbeat data such as Germany ZEW Economic Sentiment and German PPI. Both economic data came in at -24.5 and 0.4% respectively while the economist forecast of -22.1 and -0.1%, indicating that economy slowdown problem is still haunted Eurozone. In order to solve the issue, ECB has announced that they may restart their government bond purchases by November and ready to take any measures to support their economy. As of now, Investors are expecting ECB will remain their interest rate unchanged in the ECB interest rate decision and eye on Mario Draghi Press Conferences as it may provide further signal on what measure will be taken by ECB in order to sustain their economy.
GBP/USD
Pair of GBP/USD extended its losses throughout the last week while closing the Friday market at around 1.2500. Last week, uncertainty of Brexit still dominate the bearish trend of Pound as Boris Johnson who tilt to hard Brexit is still leading in the leadership contest. Besides, he also emphasized that he will pull United Kingdom out from the Eurozone before the deadline on 31th October 2019 regardless of the outcome. Investors continue to sell off their Pound investment holding as heightening of hard Brexit possibility. However, the losses of Pound limited following economic data showed a positive sign for UK economy condition. The most worthy part is that UK Retail Sales data came in at 1.0%, beating the economist forecast of -0.3% ahead of UK Prime minister leadership contest where a new prime minister can be expected before the end of this week.
Market Review (Commodities): July 15 – July 19
GOLD
Gold price extended its rebound while closing its trading at around $1408.85 a troy ounce. The yellow metal received huge demand from the market following Fed members dovish comments, urging the investor flee to safe haven assets market such as Gold. Besides, Eurozone Central Bank (ECB) member Coeure comments has also further increased the appealing of Gold as he reiterated that risks surrounding the Euro area growth outlook continue to be tilted downside. However, investors shied away from this yellow metal during the later of last week as upbeat economic data been released by US.
Crude Oil
Crude oil price reversed from its prior 7 weeks high level while closing the market on last Friday at $55.75 per barrel. Earlier last week, crude oil received bearish momentum from the market following China GDP came in at 6.2%, lowest in 27 years which indicating weaker oil consumption from China as trade war aftershock kicks-in.
Moreover, pessimistic crude oil inventories data from EIA and API also dragged down the market demand toward crude oil as both inventories data came in at -1.401M and -3.116M respectively, weaker than the previous reading of -8.129M and -9.499M. Although the data showed a drop in stockpile, but the global supply of crude oil is still exceeded the demand at a rate of 0.9M barrels a day during the first six months of 2019, according to IEA. Hence, Investors start to doubt on the oil production cut plan by OPEC over their ability to solve the supply glut. Besides, the news of US oil production facilities near the Gulf of Mexico has resumed their production after damaging by Hurricane Barry also further dampened the oil market sentiment.
However, heightening geopolitical tensions has formed a strong ‘tripod’ to avoid the oil market from dropping further. Later last week, a news has reported that an oil tanker from United Kingdom has been seized by Iran in the Persian Gulf. UK government warned Iran to release their oil tanker immediately or else Iran will face ‘serious consequences’. Besides, geopolitical tension between US and Iran has also increased further after a report showed that one of the Iran drone has been shoot down by US aircraft carrier (USS Boxer) last Thursday as it came close to the vessel and ignored the warnings from US military.
Weekly Outlook: July 22 – 26
For the week ahead, investors will keep an eye on the important economic data such as GDP data in order to determine the direction of the currencies. Besides, ECB interest rate decision and ECB monetary policy statement will also be used to gauge the further direction of currencies pair.
As for oil traders, they will be eyeing on US inventories level reported by API and EIA to gauge the strength of crude demand for world’s largest oil consumer.
Highlighted economy data and events for the week: July 22 – 26
| Monday, July 22 |
Data N/A
Events N/A
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| Tuesday, July 23 |
Data USD – Existing Home Sales (Jun)
Events N/A
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| Wednesday, July 24 |
Data CrudeOIL – API Weekly Crude Oil Stock EUR – French Manufacturing PMI (Jul) EUR – French Services PMI (Jul) EUR – German Services PMI (Jul) EUR – Markit Composite PMI (Jul) EUR – Services PMI (Jul) USD – Manufacturing PMI (Jul) USD – Markit Composite PMI USD – Services PMI (Jul) USD – New Home Sales (Jun)
Events N/A
|
| Thursday, July 25 |
Data AUD – RBA Governor Lowe Speaks EUR – Deposit Facility Rate EUR – ECB Interest Rate Decision (Jul) USD – Core Durable Goods Orders (MoM) (Jun) USD – Initial Jobless Claims
Events EUR – ECB Press Conference
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Friday, July 26
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Data JPY – Tokyo Core CPI (YoY) (Jul) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A
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