The Analysis of Forex Market(17th February 2020)
This article is daily technical analysis from Ray Shen.
Several Fed officials, including the Fed Chairman, have all spoken, expressing optimistic expectations of the U.S. economic outlook, coupled with better-than-expected CPI data, the dollar index continued to rise, once refreshing a four-month high to 99.17 , A new high since October 9, 2019.
On Tuesday (February 11), Federal Reserve Chairman Powell told the House of Representatives that the U.S. economic situation is good. With risks such as trade policy uncertainty declining and the global economy stabilizing, “The U.S. economic situation is excellent and well-run. The reason is not to continue, “he said, reiterating that the current short-term borrowing cost target range of 1.5% -1.75% is an” appropriate “level to keep the economy expanding on a given track.
On Wednesday (February 12), Federal Reserve Chairman Powell reiterated his confidence in the prospects of the US economy in the Senate. “There is no reason why the current situation of low unemployment, high wages and high employment growth cannot continue.”
Data released on Thursday (February 15) showed that the US core consumer price index (CPI) rose in January, indicating that the US economy is stable enough to allow the Federal Reserve to keep interest rates unchanged this year. Excluding volatile food and energy, core CPI in January rose 0.2% from the previous month. Due to increased spending on rents and clothing by American consumers, core CPI rose 0.1% in December last year. In January, the core CPI rose by 2.3% over the same period of the previous year, and it continued to increase at the same rate for four consecutive months.
Analysts believe that a stronger US economic outlook supports the US dollar, while the US dollar has benefited from a popular deal in which investors borrowed euros to invest in higher-yielding US assets. It is worth mentioning that the speeches of several other Fed officials also hinted that the Fed policy will not change easily in 2020, which also provides support for the US dollar, because the market generally expected the Fed to cut interest rates once in 2020. San Francisco Fed Chairman Daley said the US economy is healthy and can withstand any storm. Philadelphia Federal Reserve Chairman Huck said that the Fed should keep interest rates unchanged for a period of time. New York Federal Reserve Chairman Williams said he thought the economy was “very, very good,” and he expects inflation to pick up to nearly 2% this year. St. Louis Federal Reserve Chairman Brad said the epidemic would slow down China’s economy significantly in the first quarter and affect the world.
The pressure above the US dollar index is at the previous low of 99.67, and the support below it is near 98.50.
The euro has performed poorly against the dollar this week. In addition to the strength of the dollar, the market’s pessimistic expectations of the euro area economy and the slowdown in GDP growth in the fourth quarter have all weighed heavily on the euro. The euro continued to decline this week against the dollar for five trading days. There were four trading days, the lowest reached 1.0827 and closed at 1.0831, the lowest since April 25, 2017; the weekly decline was 1.05%, and the cumulative decline in the past two weeks was 2.38%, the worst two weeks since mid-2018. which performed. Eurostat released data showing that the euro zone economy slowed as expected in the fourth quarter of 2019, an increase of 0.9% year-on-year, worse than the 1% in the third quarter.
On the whole, the strengthening of the US dollar this week and concerns about the economic outlook of the euro zone have contributed to the sharp weakening of the euro. Currently, it is testing the 1.0821 support at the end of April 2017, and the support below the gap is near 1.0778. Investors need to focus on.
The pound against the dollar still recorded five consecutive days, with a weekly increase of 1.19%, the largest weekly gain in the past two months. On the one hand, the UK’s fourth quarter GDP data performed better than expected; on the other hand, it was because of the British Prime Minister A cabinet reshuffle has been carried out, and investors have increased expectations that the new Chancellor of the Exchequer will announce a more expansive budget plan next month.
In terms of data, the initial value of the UK’s GDP in the fourth quarter recorded an annual rate of 1.1%, which was better than market expectations of 0.8%. This reduces the market’s expectations of the Bank of England’s future interest rate cuts. According to observations, the market’s expectations of the Bank of England’s rate cuts by the end of 2021 have almost disappeared, and the currency market currently expects no 25 rate cuts by December 2021. Basis point is possible.
In terms of cabinet reshuffle, on Thursday Prime Minister Johnson of England asked the then Chancellor of the Exchequer Javid to remove his adviser, forcing him to resign. The British government soon announced that Sunak succeeded Javid as Chancellor of the Exchequer. Investors believed the move was intended to strengthen Johnson’s control of the Treasury and pave the way for increased public spending in the March budget plan.
GBP/USD reached a maximum of 1.3070 this week, the highest since February 4; it closed at 1.3046; if the next week can hold the 1.30 mark, it is expected to continue the rebound trend. Next week’s attention will return to the state of the British economy, when employment, inflation and retail sales data will be released.
In the past week, worries over public health events shrouded the market. The market generally lowered global economic growth expectations, which increased the need for safe-haven gold. Gold ETF positions rose to a high of nearly four and a half months; although the US dollar index rose to nearly four Monthly high, but the price of gold still rose strongly, initially breaking the 1580 mark, closing at $ 1584.08 per ounce, up 0.87% weekly. And market surveys show that the market is generally bullish on the gold market.
The upper pressure is at 1600, the upper pressure is at the previous high of 1611.30, the short-term support below is at 1560, and the lower support is at 1540.
U.S. crude oil has held support near 49.31 and has rebounded. The market generally expects that public health events will have a limited impact on the economy and demand. Global stock markets have rebounded sharply. European and American stock markets have repeatedly hit record highs to provide support for oil prices. In addition, the market expects OPEC + Oil-producing countries are more likely to expand the scale of production cuts and also provide oil prices with an opportunity to rise.
Another factor supporting the rise in oil prices this week is the market’s general expectations that the OPEC + major oil producers will expand production and reduce production in order to deal with the decline in demand; although the Russian government has said that no decision has been made on further production cuts. However, industry sources said that Russia’s increased crude oil supply oversupply and the prospect that a major bank’s sale could bring a lot of funds made the case for crude oil production more compelling.
US crude oil rose 3.79% this week, reaching a maximum of 52.34 US dollars / barrel, the highest since February and closing at 52.25 US dollars / barrel. The subsequent rise will continue, and the pressure is at 55.00.
PS: Today focus
U.S. President’s Day
This week there are relatively many economic data and risk events. First of all, investors need to continue to pay attention to the impact of public health events on market sentiment. Secondly, the minutes of the Fed meeting and the speeches of several Fed ticket commissions need to focus on the data. Focus on the United States in terms of data. Performance of real estate market data and European and American manufacturing PMI data.
The above views are for reference only, not for ordering basis. Investment is risky, so proceed with caution.