Thread: Forex daily News FBS

EUR and weak data from Germany

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22.04.2020

Germany will release Ifo Business Climate Index on Friday at 11:00 MT time.

Instruments to trade: EUR/USD, EUR/GBP, EUR/JPY, EUR/AUD

You don’t have to be a fortune teller to say that German business will be hit hard by the coronavirus-related lockdown. In March, the index fell to 87.7 points from 96 in February, its biggest drop since 1991. This was the preliminary estimate: the final number turned out to be even grimmer: 86.1.It’s time to remember that Germany is the key economy of the euro area. When it falters, a shadow falls on the entire region and hence on the EUR. Such pairs as EUR/GBP and EUR/JPY will be especially sensitive to the news right after the release. As for the EUR/USD, it will move actively later that day when durable goods orders come out in America. The economy which shows less negative results will see its currency go up.

If German Ifo Business climate index is greater than the forecast, the EUR will rise. If the indicator disappoints, the EUR will fall.

Check the economic calendar

Gold shines as bright as $3,000

More at: https://bit.ly/2VRabtL

15:48 23.04.2020

At the beginning of the American trading session on April 24, gold unveiled its hidden powers and was trading quite close to the $1,740 level – its highest peak of April 14.

Many analysts continue to see the yellow metal ultra-bullish, thanks to COVID-19 and the world economy falling into recession. One of the most optimistic forecasts belongs to the Bank of America. The famous financial company recently raised its 18-month target from $2,000 to $3,000. That is more than 50% of the current price level! How crazy is that?

Among the major reasons for this kind of scenario analysts of the Bank mention increased fiscal stimulus and doubling balance sheets of the major central banks. According to their point of view, fiat currencies will not be as attractive as gold.

For this year, the Bank of America sees the price of a yellow metal hovering around $1,695. In 2021, the target level is expected at $2,063.

Friday’s news digest

Check https://bit.ly/2Ku5v7X

24.04.2020

Let’s see what drives the market on April 24.
US coronavirus aid package

There are good and bad news from the US. The bad one is that 4,427,000 Americans lost jobs. In total nearly 26 million people were fired because of the coronavirus. The good one is the 484-billion-dollar aid package was sent to those, who are struggling the most, small businesses and hospitals. It was the fourth relief package during the coronavirus crisis, their total sum passed 3 trillion dollars.
Oil climbed a little after dramatic fall

The WTI oil price rebounded to its previous level near $16 per barrel after its historic drop below zero. However, it will be a long way up to the pre-crisis price with the present massive glut and no visible rise in the demand side.
Stocks drop

European stocks slumped as the region’s leaders couldn’t come to the same opinion about how to mitigate the coronavirus impact in the long-term. Also, we have seen a slowdown in a global stock rally. It’s happened because the sentiment on the market is really negative these days. One of the reasons was that Gilead Sciences Inc.’s antiviral drug failed it first randomized clinical trial. As a result, all the hopes and dreams for the recovery disappeared.
UK retail sales drop

The monthly UK retail sales dropped dramatically by 5.1%. It was the largest fall over 30 years since records began. Most analysts anticipate the indicator to decline further in April by 20-30%. GBP is under the huge pressure now.
German Ifo Business Climate Index slump

The Ifo Business Climate indicator for Germany declined to 74.3 below expectations of 80. It is the historic low. The coronavirus spares no one, it stroke even the most sustainable and reliable German economy. EUR shouldn’t fall significantly but the short contraction could be.

Things to watch this week

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27.04.2020

These days we’ve got a quite busy market and a really interesting environment. Events below will add more market volatility!
FOMC statement, press conference and US GDP

April 29 is a day of the USA. The Fed will have an important policy meeting at 9:00 MT. Nobody expects any major announcements. Investors wait for it mostly because of the guidance on future policy measures that will determine how fast the economy will recover from the crisis.

The US GDP is a significant indicator that will show the whole picture of the coronavirus impact as the economic activity fell down enormously in March and jobless claims reached unseen highs. It will be released on April 29 at 15:30 MT.
Important data from Eurozone

On April 30 at 14:45 MT time the ECB will release main refinancing rate and make a monetary policy statement. Also Euro area GDP will be released this day at 12:00 MT time. Some analysts expect it to fall by 4.5% for the first quarter, while it will be much worse for the second.
OPEC+ deal will start in May

The OPEC+ deal was to cut the oil production by 9.7 thousand barrels per day in May and June. However, it didn’t help to stabilize the oil market. While Donald Trump openly supports the US shale oil market, Saudi Arabia and Russia will continue their price war as they produce cheaper oil and can sustain its low price. We will see the oil price falling down further.
Earnings season of the largest companies

We are waiting for earning reports from Google, Microsoft, Facebook, Apple, Amazon, Intel and Tesla. This data will reveal their performance amid the coronavirus crisis. It will shake the stock market! Stay tuned!

How far can US GDP fall?

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09:53 28.04.2020

American advance GDP will be released on April 29 at 15:30 MT. It will definitely move USD as it will show the broadest picture of the US economic health amid the COVID-19.

Instruments to trade: EUR/USD, USD/JPY, USD/CHF, AUD/USD, USD/CNH, USD/CAD

It’s obvious that the present US lockdown will lead to a decline of the GDP. What is more intriguing for investors is how bad the indicator will be. Among other economic indicators GDP is the most significant one as it reveals almost every area of the US economy. The largest part of it, nearly 70%, is money that Americans spend domestically. Consumer spending collapsed, that’s why the future GDP fall will be so huge.

How would you rate the coronavirus recession among other US downturns on the Richter scale, which measures the severity of earthquakes? Didier Sornette, who heads the Financial Crisis Observatory, assessed it at a magnitude of 9, when the crisis of 2008 – 8.5. The St. Louis Federal Reserve anticipates the real GDP to drop by 15%. The Atlanta Federal Reserve gave a much better forecast of a 0.3% decline. According to Goldman, GDP will contract by 10%.

If GDP is greater than its forecast, the US dollar will surge, otherwise – drop.

Be cautious! This is a general rule. These days, the US dollar plays a role of a safe-haven currency. That’s why USD won’t fall so deep as the US GDP.

3 stocks that beat expectations

https://bit.ly/2W37Zkl

30.04.2020

Tesla, Facebook and Microsoft have outperformed analysts’ forecasts and ramped up after earnings reports. How is it possible amid the coronavirus crisis?
Tesla

Surprisingly, Tesla has managed to make a profit in the first quarter amid the global crisis. Elon Musk even didn’t mention the coronavirus in his letter to investors. The company earned 16 million dollars in the quarter, sales rose to 5.99 billion dollars from 4.54 billion dollars a year ago. The stock surged more than 9% after the report. Overall, Tesla shares increased by 36% in the last three months. However, the second quarter might be worse as people’s incomes reduced. Also, lower gasoline prices made people keep driving their petrol-driven cars. Despite these doubts, Tesla targeted the 40% annual growth.
Facebook

The Facebook revenue for the first quarter was better than expected(17.74 billion dollars), but earnings came worse because of the virus impact(4.9 billion dollars). Overall reaction to the report was positive and mixed results pushed the Facebook stock up by 10%. The outlook for the second quarter is still uncertain, but the company will make all efforts to mitigate the coronavirus effect. For example, last week it released Messenger Rooms, a video chat meeting service as an alternative to Zoom. Future perspectives are positive for Facebook.
Microsoft

Microsoft outperformed expectations that had been made before the coronavirus spread. It’s the only Dow Jones component to see its stock up in the first quarter. Microsoft reported 10.75 billion dollars earnings, or $1.40 a share, on sales of 35 billion dollars, up from profit of $1.14 a share on revenue of 30.57 billion dollars a year ago. Analysts anticipated earnings of $1.27 a share on sales of $33.76 billion. Microsoft shares rose more than 2% in after-hours trading. Also, the company has the Azure cloud-computing software that would help to offset the coronavirus damage as most companies need this tool to work from home. However, the company is not so confident about the future growth.

EUR is fragile: ECB statement on April 30

https://bit.ly/3aUIaqx

10:11 29.04.2020

The European Central Bank will unveil the refinancing rate and make the monetary policy statement on April 30 at 14:45 MT.

Instruments to trade: EUR/USD, EUR/GBP, EUR/AUD, EUR/CAD, EUR/CNH, EUR/CHF, EUR/NZD, EUR/JPY

Europe has been enormously damaged by the COVID-19. The IMF anticipates the GDP of the euro area to decline by 7.5% this year. There’s little the ECB can do to prevent the fall but it can mitigate the coronavirus impact.

The ECB has already taken some actions. Last month it effectively allowed Greek lenders to borrow from the central bank. Then, it has started accepting junk debts that shield sovereigns such as Italy from a downgrade. However, the ECB’s coronavirus program might expire by October if the central bank continues buying sovereign bonds at the same rate.

If there is no result, the bank would even have to try helicopter money. Just imagine, money that is falling out of a helicopter to the people below. However, it would not be the same in reality. According to Pictet Wealth Management, the ECB could offer money to banks at -1% under a condition that they grant 0% loans to their customers. Some analysts think that it could be a good option amid the present crisis.

Let’s see what the ECB will propose on April 30. Also the ECB press conference will be that day at 15:30 MT that often creates the heavy market volatility. Stay tune and remember:

If the ECB’s monetary policy statement is hawkish than expected, it will push EUR upward.

GBP: April gains undone

https://bit.ly/3b4E0N4

04.05.2020

The GBP/USD currently is testing 1.2390 - that's where it started its April march upwards. In other words, the victories of the previous month are written off for this currency pair. What does it mean?

Analyst comment that May is a seasonally low month for the GBP against the US dollar in particular. The fact that the British pound opened the month in such a weak way probably means that the entire month will be like that for this currency pair, if not further in the same direction. If that's the case, prepare for the GBP/USD to hit the support of 1.2267 very possibly within a week or so. "Risk-off" is a password so far for this currency pair.

Will the GBP advance on a strong BOE policy?

https://bit.ly/3b4E0N4

05.05.2020

The Bank of England gives the interest rate press conference on Thursday at 14:00 MT time.

Instruments to trade: EUR/GBP, GBP/USD, GBP/CAD, GBP/CHF

The last activity from the side of the Bank of England was a unanimous vote to keep the rate unchanged at 0.1% after it was reduced twice in March to respond to the virus damage. The policymakers expressed their commitment to support the economy and maintain a possibly favorable financial climate in the UK. The latter has been fortified by an extensive policy of quantitative easing the Bank has been implementing. Nevertheless, similar to other countries, an increase in unemployment is expected in line with economic damage in the nearest future. Coupled with Brexit, this period promises to be one of the toughest challenges for the British economy and the Bank of England. We will be looking into the details and subtle messages about the economic outlook in the report of the Bank of England’s policymakers while the rate is expected to stay steady.

If the bank’s message is optimistic, the GBP will rise.
If the bank’s message is not very optimistic, the GBP will fall.

May 2020 forex season trading

https://bit.ly/2SEL5xk

06.05.2020

April seasonal patterns weren’t supposed to work, but somehow they did. Even a strong fundamental issue such as the global recession amid the coronavirus couldn’t overwhelm it. That’s why May seasonal patterns may work as well.

However, it’s better to combine seasonal trading with technical and fundamental analysis. All together they will help you to make a successful trade.
Risk-off currency pairs

There is a good proverb: “Sell in May and go away”. It seems that it’s true for all currencies this month except safe-haven ones such as USD, CHF and JPY that will remain strong. According to Bloomberg, the US dollar index increased in 8 of the past 9 months of May. On average it rose by 1.53% in May over the past decade. Also, CHF should perform greatly in May as it's the strongest month over the past decade for the franc against the US dollar. However, take into account that CHF has been fallen for last 3 years.
Risk-on currency pairs

AUD has recently showed the steady rise, but according to seasonal patterns it’s time to stop it as May is going to be a weak month for the aussie. The average May decline over the past ten years was 2.33%.
Euro

May will be the worst time for EUR/USD, EUR/GBP and EUR/CHF. EUR/USD was decreasing in 8 of the past 9 years. The average May decline was 1.76% over the past decade.
Pound

This month will be disappointing for GBP/USD as the US dollar will be more favorable for investors amid the economic uncertainty. However, EUR should perform worse than GBP, that’s why EUR/GBP can drop.