Thread: Daily Market Analysis from ForexMart

Brent. August 04, 2020 – Oil awaiting data from API

Yesterday ended with the growth of Brent quotes to $44.40 per barrel. Market participants are optimistic about the further recovery of demand after the release of fairly good reports on business activity in the manufacturing sector of the eurozone and the United States.

Further support for oil prices is provided by a decrease in the number of new cases of coronavirus infection in the United States, which also indicates a further recovery in demand.

However, on Tuesday Brent quotes began to decline to $ 43.40 per barrel. The asset is still under pressure from the increase in oil production by the OPEC+ countries and Russia. More and more countries are gradually phasing out the previously set production quotas as part of the OPEC deal.

Today and tomorrow you should pay attention to the data from the American Petroleum Institute (API) and the US Department of Energy on crude oil reserves in the country. In case of another decline in reserves, Brent quotes may test the resistance of $45 per barrel.

GBP/USD. August 05, 2020 – Sterling continues to rise from 1.31

The British currency continues to grow in tandem with the dollar, reaching 1.3130. Today the UK released the final data on business activity in the service sector for July: the index was 56.5 points, which was slightly worse than analysts' expectations (56.6 points). The last month's figure was noted at the level of 47.1.

The key event for the pound sterling will be the meeting of the Bank of England on Thursday. No major changes in monetary policy are expected (the rate will remain at the level of 0.10% per annum), but the regulator is likely to share its plans to maintain a «balance» in finance and economy.

It should be noted that the British currency has plenty of risks for the second half of the year. Here are the low rates of GDP recovery, and the weakness of the employment market, and the possibility of a second wave of coronavirus. Moreover, the failure of the Brexit negotiations continues to put strong permanent pressure on the pound. Thus, the current growth of the currency is seen to be short-lived.

Brent. August 06, 2020 – Oil drops slightly after updating March highs

Yesterday Brent quotes rose to $46.16 per barrel on the back of a favorable general market environment and further weakening of the US dollar. However, on Thursday, the asset fell slightly – to $45.

The prices were supported by reports from the API and the US Department of Energy on crude oil reserves in the country: indicators showed a reduction in reserves by 8.5 million and 7.37 million, respectively. At the same time, the loading of refineries in the United States increased by only 0.1%, and oil product inventories, contrary to forecasts, grew. Gasoline stocks increased by 419 thousand barrels, distillates – by 1.592 million barrels. Oil reserves at the Cushing terminal increased by 532 thousand barrels.

The depreciation of the US dollar in recent days also contributes to the rise in oil prices. Since oil futures are priced in dollars, prices usually rise during such periods, which compensates for the weakening of the US currency.

GBP/USD. August 06, 2020 – What to expect from the Bank of England meeting?

GBP/USD is approaching the 1.3200 level, the high of early March. The sterling is supported by investors' expectations of today's meeting of the Bank of England. The regulator is to make a statement on monetary policy, as well as submit a quarterly report on inflation in the UK.

The central bank is not expected to change its monetary policy as macroeconomic indicators continue to show an improvement in the UK economy. Moreover, the situation with the spread of Covid-19 in the country remains under control.

However, in June, the position of the Bank of England turned out to be more «hawkish» than market participants had expected. If at today's meeting the atmosphere is saturated with pessimism and the regulator lowers economic forecasts, the pound sterling will inevitably go down to the 1.30 area. Additional pressure on the currency will come from the revised downward indicators of business activity in the services sector (56.5 points) and the composite PMI index (57.0).

EUR/USD. August 07, 2020 – The pair consolidates at 1.18 in anticipation of data on the US labor market

At the end of the week, the euro depreciates moderately, reaching the level of 1.1800. The EUR/USD pair has entered the overbought zone, which may trigger profit taking before the weekend, as well as cause a corrective decline.

The US dollar received some support from the data on applications for unemployment benefits, the number of which fell to 1.19 million. This figure was below the forecast of decline to 1.4 million applications. Fewer Americans are applying for benefits, even as the Unemployment Benefit Enhanced Program expired at the end of July. This suggests that the situation in the US labor market is gradually improving.

Today you should pay attention to the key release of the employment market in the United States for July. Forecasts are quite optimistic: the unemployment rate should fall from 11.1% to 10.5%. Moreover, outside agriculture, 2,200 new jobs can be created.

So, in anticipation of these data, the pair is consolidating at the level of 1.18. Further dynamics of the pair will fully depend on American statistics.

GBP/USD. August 10, 2020 – The sterling fell to 1.30

The British pound continues to decline against the US dollar at the start of a new trading week. The American currency was supported by strong data on the labor market, published last Friday.

At the same time, the pressure on the sterling itself increased after the announcement of the results of the meeting of the Bank of England on Thursday. The regulator kept the base interest rate at a record low level of 0.1% and left unchanged the parameters for purchasing government and corporate bonds. At the same time, the unemployment forecast suggested an increase in the indicator to 7.5% in 2020 and a gradual decline in 2021. The central bank also does not expect the country's GDP to grow to pre-crisis levels, at least until the end of 2021.

The unsuccessful negotiations on a post-Brexit trade deal also add to the negative effect on the British currency. Senior negotiators from the EU and the UK have repeatedly noted the lack of progress.

Thus, the GBP/USD pair reached the 1.3000 level. The RSI indicator is directed downward, which signals further weakening of the pound sterling.

EUR/USD. August 10, 2020 – Dollar is growing, playing back positive statistics on the labor market

At the beginning of the new trading week, the US dollar continues to moderately strengthen, approaching 1.1740. The currency was supported by a block of statistics on the labor market, published on Friday. The unemployment rate improved in July and amounted to 10.2% against the previous figure of 11.1%. The forecast assumed a mark of 10.5%.

The number of jobs outside the agricultural sector increased by 1.763 million against the forecast of growth of 1.530 million. Average hourly wages in the United States increased by 0.2% m / m, which is well above forecasts. Tonight, attention should be paid to the number of job openings in the US labor market.

The dollar also acted as a defensive asset after Donald Trump signed an executive order banning the use of two popular Chinese applications WeChat and Tiktok. The ban will take effect next month.

Today the trading day will be calm. The dollar will continue to rise slightly towards the 1.1700 area.

EUR/USD. August 11, 2020 – Euro grows on positive data from Germany

The euro is showing signs of recovery on Tuesday, hitting the 1.1800 level. The single European currency was supported by the data from the ZEW Institute on the index of economic sentiment in Germany: the indicator in August amounted to 71.5 points, which turned out to be significantly higher than forecasts and the previous value of 59.3 points. Experts had expected the indicator to decline to 58.0.

At the same time, pressure on the dollar exchange rate is exerted by the expectation of actions by the US financial authorities: the Ministry of Finance will today redeem bonds in the amount of $10 billion, and the Fed will buy back bonds in the open market in the amount of $2.42 billion. Thus, $12.42 billion will be injected into the US financial system , which will have a negative impact on the dollar.

Tonight you should pay attention to the data on producer prices in the US. Their decline should slow down from -0.8% to -0.7%. On a monthly basis, prices may rise by 0.3%. Given the fact that this is a leading indicator for inflation, it can be concluded that inflation in the United States is unlikely to decline in the near future. And this is definitely a positive factor for the American currency.

EUR/USD. August 12, 2020 – Euro is growing moderately towards the 1.18 area

The euro continues to moderately strengthen against the dollar after the publication of positive macroeconomic data from Germany. The index of investor confidence in the country's economy jumped in August to 71.5 points from 59.3 points in July. Experts predicted a decrease in the indicator to 58 points.

At the same time, the US dollar also received some support after the publication of the PPI indicator. Producer price index rose 0.6% month-on-month in July, better than forecasted 0.3%. This was the highest growth rate since October 2018.

Today you should pay attention to the data on inflation in the United States. And since the PPI is a leading indicator of inflation, it can be assumed that the consumer price index is growing. Experts predict an increase in the indicator from 0.6% to 0.7%. This is definitely a positive factor for the American currency.

The current quote for the EUR/USD pair is 1.1770. During the day, we continue to follow the news publications.

Brent. August 13, 2020 – Oil returned to growth after the report on US oil inventories

Oil quotes again started to rise to$ 45.50 per barrel. The prices were supported by the data on oil reserves from the Energy Information Administration of the US Department of Energy. According to the latest figures, stocks of raw materials in the reporting week fell by 4.5 million barrels, to 514.1 million barrels. Analysts predicted a reduction of 2 million barrels.

At the same time, gasoline stocks fell by 722 thousand barrels, to 247.1 million barrels, while experts expected a decline of 800 thousand barrels. The report also showed that oil production in the United States over the past week fell by 300 thousand barrels per day, to 10.7 million barrels per day.

In addition, the growth in Brent quotes is due to expectations of a further recovery in demand for hydrocarbons after the quarantine restrictions. Many also believe that fuel demand will increase in the fall.

However, the risks of weakening Brent still remain: growing tensions between the US and China continue to put pressure on the oil market. The next round of negotiations will begin this coming Saturday, while oil prices may test the resistance of $46 per barrel.

EUR/USD. August 14, 2020 – Euro weakens under pressure from weak statistics

The euro is moving almost horizontally above the 1.1800 level. The currency is under some pressure from macroeconomic data: the euro zone's GDP for the II quarter collapsed by 12.1% in quarterly terms and by 9.0% in annual terms. At the same time, experts predicted a 15% decline in annual GDP, so there is some positive for the euro.

The trade balance of the euro area in June amounted to 17.1 billion euros, which was weaker than expected.

Additional pressure on the European currency rate is exerted by the absence of any effects from stimulating the economy, into which a huge amount of financial resources were poured. However, time is passing, and there are no signs of stabilization yet, which leads to sales of the euro.

Tonight you should pay attention to the data on retail sales for July in the United States, as well as statistics on industrial production. Experts predict an acceleration in sales growth from 1.1% to 1.9%, which will support the dollar.

EUR/USD. August 17, 2020 – Dollar weakens under inflation pressure

EUR/USD continues to strengthen weakly at the start of the new trading week, trading at 1.1850. The reason for the weakness of the US dollar is in the latest inflation statistics. The granting of benefits to Americans amid a weak economy has led to an increase in inflation. At the same time, the Fed's interest rate is declining, which feeds the weakness of the US currency. According to the latest data, the consumer price index in the US in July accelerated growth to 1% in annual terms from 0.6% in June, while analysts had expected 0.8%. In monthly terms, the growth was 0.6% against the forecasted 0.3%.

However, today the dollar may recover somewhat, since the US Treasury will raise $ 62.48 billion from the market by placing Treasury bonds, which is the maximum since July 31 (then the Ministry of Finance raised $ 63 billion, which caused an increase in dollar quotes). At that time, the situation may repeat itself.

The economic calendar is practically empty today. The pair will continue to trade in the range of 1.18-1.19.