Thread: Daily Market Analysis from ForexMart

USD/CAD. January 21, 2021 – Canadian dollar strengthens to 3-year highs

The USD/CAD currency pair on Thursday dropped to the level of 1.2600. The Canadian dollar strengthened to a maximum of three years after the announcement of the results of the meeting of the Bank of Canada.

As market participants expected, the regulator kept the interest rate unchanged at 0.25%. At the same time, it was announced that the rate would be near zero until at least 2023. The program of quantitative easing also remained unchanged, the volume of which currently amounts to 4 billion Canadian dollars per week.

The Central Bank also shared its forecasts for economic growth this year. Experts expect GDP growth in 2021 to be 4.0%, slightly below the previous forecast of 4.2%, while in 2022 and 2023 the economy will grow by 4.8% and 2.5%, respectively.

However, the «loonie» is showing growth, despite these expectations, as well as weak economic statistics. In particular, Canada's core CPI fell 0.4% in December after rising 0.2% in November, while CPI declined 0.2% after rising 0.1% a month earlier.

Considering all of the above, the pressure on the Canadian dollar should have increased, but the loonie unexpectedly strengthened to highs. Analysts regard such dynamics as a temporary phenomenon, and the pair's growth may continue at any minute. An additional factor that could put pressure on the «Canadian» is one of Joe Biden's first decrees to stop the construction of the Keystone XL oil pipeline, which was actively supported by the Canadian authorities.

GBP/USD. January 22, 2021 – Pound falls under pressure from economic publications

Yesterday the British pound fell to 1.3650, today the pair recovered to 1.3670.

Sterling looks pretty stable against the dollar, despite the local correction. The fact is that the currency finally got rid of the strong pressure from the Brexit risks and the confrontation between the politicians of the European Union and London.

At the same time, support for the currency today is also provided by successful vaccination in the UK against the background of a double lockdown, and perhaps the country's population will be able to return to their usual way of life in the second quarter.

Macroeconomic statistics are negative today for the pound: retail sales in December rose only 0.3%, worse than the forecast for growth by 1.2%. Composite PMI also fell short of the forecast: 40.6 points in January against expectations of 50.7 points. The business activity index in the manufacturing sector was 52.9 points (forecast - 57.3), and in the service sector – 38.8 points (forecast - 49.9).

Thus, at the end of the week sterling came under pressure from economic indicators. The RSI indicator is targeting the support area, which signals further currency weakening.

Brent. January 25, 2021 – Oil recovers after falling last week

Brent oil quotes are growing on Monday, approaching $56 per barrel. The current price is $55.72.

Last week ended with a fall in prices to $54.60 per barrel. The decline was driven by data on changes in US oil reserves. According to a published report from the Energy Information Administration, crude oil inventories rose 4.4 million barrels in the reporting week, reaching 486.6 million barrels. Analysts, on the other hand, had expected a decline in inventories by 1.3 million barrels from the previous week. Oil production in the United States remained unchanged at 11 million barrels per day.

Additional pressure on prices was also exerted by the increase in the number of cases of coronavirus in China. Experts note that the deterioration of the epidemiological situation in China will inevitably affect the demand for oil.

Today's growth in quotations was due to the news about the reduction in oil production in Iraq. It became known that the country intends to cut oil production in the first two months of this year in order to compensate for the violation of the terms of the OPEC + agreement from last year.

EUR/USD. January 25, 2021 – The dollar started the week with a decline

The main currency pair is trading at 1.2145 on Monday. The macroeconomic calendar for today is practically empty, attention should be paid only to the publication of the IFO business climate index in Germany. The indicator came out worse than forecast: 90.1 points in January against 92.2 in December and the forecast of 91.8 points.

The US dollar is now showing mainly a downward trend. The fact is that Joe Biden has already officially assumed the presidency of the United States, and the markets are waiting for the imminent introduction of additional measures to stimulate the economy. Therefore, the dollar in its «safe» status is no longer popular as investors intend to buy.

This week promises to be quite interesting. First, a meeting of the Federal Reserve System and a rate decision is scheduled. Market participants are confident that the rate will remain at the current level of 0-0.25% for a long time, however, the FRS comments will be of the greatest interest, which may become more optimistic.

Secondly, interesting statistics from the United States will be presented: the January consumer confidence index from the Conference Board, the US GDP for the IV quarter of 2020, the parameters of personal income and expenses of Americans, as well as data on the trade balance.

GBP/USD. January 26, 2021 – The pound is growing steadily after the release of strong statistics

The GBP/USD pair started the day with growth from 1.3600 to 1.3690. The sterling was supported by positive statistics on the labor market in the UK.

In particular, the average level of wages in the country in November rose by 3.6% against the previous figure of 2.8% and the forecast for growth by 2.9%. The number of applications for unemployment benefits in December fell to 7 thousand, while analysts predicted the figure at 35 thousand. Moreover, the unemployment rate rose to 5%, which was better than the forecast for growth to 5.1%. At the same time, experts note that the current unemployment rate has updated its maximum since the beginning of 2016.

In the US today, it is worth paying attention to the CB consumer confidence index. Analysts expect the indicator to rise from 88.6 to 89.0 points.

The RSI indicator is heading towards the resistance area, which signals further strengthening of the pound sterling during the day. The nearest target of the «bulls» is 1.3700, where the pair, however, will see some consolidation.

EUR/USD. January 27, 2021 – Euro declines on negative fundamental background

The EUR/USD pair demonstrates multidirectional trading dynamics on Wednesday, fluctuating in the 1.2100-1.2180 price range. The current quote for the pair is 1.2115.

The euro was under pressure from negative news from Europe. In particular, in Italy, Prime Minister Giuseppe Conte resigned, the index of business sentiment in Germany from IFO dropped again, and Angela Merkel in Germany said that the country's governance had gotten out of control and spoke about the need for stricter restrictions.

Pressure on the European currency is also exerted by Europe's lag behind the United States in the speed of vaccination. Pfizer says it is ready to ship 200 million vaccines to the United States by the end of May (or 2 months ahead of schedule). But the supply of vaccines to Europe is being delayed due to the problems of the Belgian manufacturer AstraZeneca.

Today, the first US Federal Reserve meeting this year will take place and a press conference by Jerome Powell, who is trying to assure the markets of maintaining the monetary policy of the regulator. However, many analysts interviewed are confident that the scale of the QE program needs to be scaled back this year. So, further dynamics of the pair will depend on the results of the meeting.

EUR/USD. January 28, 2021 – Euro continues to decline

The euro rate continues to decline on Thursday, the current quotation of the EUR/USD pair is 1.2080. Markets fear that existing vaccines will fail to cope with mutating Covid strains, endangering the prospects for global economic recovery.

Jerome Powell, whose press conference failed to clarify the topic of the Fed's further position and calm the markets, also added negative investors. Although the head of the regulator said that the Fed does not plan to cut QE and will make sure that investors know in advance about the systematic and gradual reduction in the volume of asset purchases. However, market participants did not see a negative assessment of the situation in the general tone of the speech, which provoked dollar purchases.

The euro is also declining in value after the ECB meeting on January 21. Then the regulator announced that it was ready to take action, as it was not satisfied with the high rate of the single currency. And the actions of the ECB are fully justified. According to IMF forecasts, the euro zone will be able to return to pre-crisis levels only by the end of 2022. For comparison, the Chinese economy has already outpaced 2019, and the US economy will return to the trend at the end of this year.

Thus, the pair's downside potential is quite high. During the day we expect further strengthening of the US dollar with the target of 1.2050.

January 28, 2021 – Oil market weakens on concerns about demand prospects

Oil prices began to decline on Thursday amid expectations of a drop in demand due to the continuing rise in the number of Covid-19 diseases and the current restrictive measures. The quotes were not helped either by the data on crude oil reserves in the United States published yesterday: according to the Ministry of Energy, reserves unexpectedly fell by 9.91 million barrels over the week. At the same time, gasoline stocks increased by 2.47 million barrels, while distillate stocks decreased by 815 thousand barrels. Analysts predicted an increase in oil reserves by 430 thousand barrels.

The current Brent quote is $55.18 per barrel. A myriad of concerns about the outlook for demand are putting strong pressure on prices. Moreover, the Chinese authorities are urging their citizens to stop traveling during the Lunar New Year holidays, which is the most active tourist season of the year. And this will inevitably lead to an additional decrease in demand.

Another factor in the weakening of the oil market was a sharp drop in traffic in Los Angeles over the past month due to restrictive measures in California.

EUR/USD. February 01, 2021 – Euro declines amid weak statistics

The EUR/USD pair closed last week with a rise to the 1.2150 area. The euro was supported by the GDP data of the leading eurozone countries. In particular, France's GDP growth in December was 23%, exceeding the projected increase by 19%. Spain's GDP in the IV quarter added 0.4%, while experts had expected a decline of 1.5%. Germany's GDP also remained in positive territory at 0.1%. In Germany, in addition, the unemployment rate fell to 6%.

However, today the pair started to decline, which is also explained by the reaction of traders to the latest macro statistics. According to the Federal Bureau of Statistics Destatis, retail sales in Germany were down 9.6% in December from the previous month.

At the same time, the US continues to discuss a new package of measures to help the economy, which puts general pressure on the dollar. Market participants believe that the project will be criticized by the Republicans, who are unhappy with the huge volume and want to reduce it to $600 billion. However, the Ministry of Finance and the Federal Reserve still insist on the need for new incentives. In this case, the pair's rate can rush to new highs.

EUR/USD. February 2, 2021 – Euro falls on weak data from Germany

The US dollar continues to trade near local highs in the 1.2050 area. Weak macroeconomic data from Germany put pressure on the European currency.

According to the European statistical agency Eurostat, unemployment in the region remained at 8.3% in December, in line with market expectations. At the same time, the volume of retail sales fell by 9.6% in December after growing by 1.1% a month earlier. Analysts had expected a 2.6% decline. On an annualized basis, sales growth was 1.5% against the forecast of 5%.

Today, the dynamics of the pair will be influenced by the report on the eurozone GDP. Analysts predict that the pace of economic decline in the region in the IV quarter should accelerate from -4.3% to -6.0%, which may provoke further sales of the single currency.

EUR/USD. February 3, 2021 – Euro near 2-month lows

The euro continues to decline paired with the dollar, reaching 1.20. The last time the single currency traded at such levels was at the beginning of December 2020. The weak rates of vaccination in Europe and the ECB's dissatisfaction with the high rate of the European currency remain negative factors for the euro. The regulator noted that it is closely monitoring the dynamics of the exchange rate and does not exclude a decrease in the rate on deposits, if this will help to accelerate inflation.

Macroeconomic indicators of the euro area are also not encouraging. Although earlier data on GDP for the IV quarter showed a decrease in the economy by 0.7% (q / q) and by 5.1% on an annualized basis, which turned out to be better than forecasts (a decrease by 0.9% and 5.4%, respectively).

Today we should pay attention to the report of the American labor market from ADP, as well as the index of business activity in the service sector ISM. Experts do not expect strong indicators, which may provoke a weakening of the dollar. Moreover, today's statistics may influence the decision in the Congress on incentives, which, if the package of assistance measures is approved, will entail further sales of the American currency.

EUR/USD. February 04, 2021 – Euro remains weak at 1.20

The EUR/USD pair continues to update local lows, trading below 1.20. Market participants continue to monitor forecasts for GDP growth in the eurozone and the United States, where European countries are clearly losing. Last week, worsened expectations for German GDP this year were published, and traders are now very attentive to any data from the FRG, projecting them to the entire eurozone as a whole.

Earlier Germany published the final data on the index of business activity in the service sector for January, where the indicator was 46.7 points against the previous level of 46.8. The same figure for the euro area rose to 45.4 points from the December value of 45.0.

The preliminary calculation of inflation in the euro area reflected an increase in the indicator by 0.9% (y/y), while the forecast assumed an increase of 0.6%. Core inflation in the region accelerated even more – by 1.4% y/y, while expected to rise by 0.9%.

At the same time, the US dollar was supported by yesterday's positive statistics from ADP. The January report on the number of jobs in the private sector showed an increase of 174 thousand against the forecast of 48 thousand. It should be assumed that tomorrow's report on the US labor market will also exceed the expectations of traders