Daily market analysis

JUN 15,2020

June 15, 2020

GOLD

Gold markets went on a rally during the week, wiping out the loss from the previous week. However, the market entered a phase of consolidation since Wednesday and has been going up and down between 1723 and 1745 for the remaining of the week. As a market that is quite volatile, the current gold’s fluctuation is enabling short-term traders to make a profit for themselves if they trade back and forth in the market. However, in the long-term, the current rally and consolidation is likely to extend upward.

Considering the fact that there are still plenty of macroeconomic reasons and data that can increase demands for the safe-haven metal, gold’s price will enter a bullish run. For example, with the concerns over the virus, the central banks around the world continue to devalue the paper currencies that they back, which would send gold price higher in the future.

A few upcoming indicators we should be aware of include intensified geopolitical relationships, economy re-openings, and vaccine developments. Although some analysts expect the gold to move towards the 1800 region, we believe the gold is going stay fluctuating unless a major risk averse event kicks in.

GBPUSD

GBPUSD started the week off strong by breaking above 1.2750 level momentarily but went downhill ever since. The sharp decline makes this week’s GBPUSD candlesticks look like an upside-down V. Although there appears to be a strong support at 1.25395, the strong plummet has penetrated the first layer of support on Friday, aiming towards the next support level at 1.24780.

We have witnessed a sharp turn of event in the US equity markets in the last two days of the week as markets begin to see a lot volatility and selling pressure when news regarding a second wave of pandemic have broken out. Therefore, due to the fact that the fluctuating market has concerned most of the investors, USD is currently more favored, which in turn, drags down GBPUSD.

There has yet to be a strong indicator that is driving the market besides the consistent threats posted by the virus outbreak; hence, it is unlikely to predict what the GBPUSD would perform down the road. However, if the pair breaks above the highs, it could be a continued impulsive move to the upside. And if the pair moves to the downside, it is likely that some sort of risk-off sentiment or event has taken place.

EURUSD

The EUR/USD pair continued to gain traction, and it rose to a weekly high of 1.14225 this week; however, the pair reversed the direction after testing 1.1402, plummeting toward 1.1250.

As ECB announced the stimulus plan and promised to avoid credit risks and defaults, the EUR/USD pair extended its last week’s bullish trend. Meanwhile, the majority of European countries seem to have a better handle on COVID-19 than the U.S. does; coronavirus cases and deaths remain depressed in Europe, thus being one of the factors to favor the Euro dollar.

Following the U.S. Federal Reserve Monterey policy announcement this week, the Fed decided to maintain the current rates until 2022, sounding the alarm of continuously weak economy. As a result, the three major U.S. stock indexes fell more than 5% on Thursday, the biggest one- day drop since March. At the same time, as the situation of COVID-19 does not seem to ease up in the U.S., the fear of a second COVID-19 wave can potentially hamper the U.S. economy. Consequently, all those factors drag the USD down.

Nonetheless, due to the risk-averse market environment, investors seek safety in the safe- haven greenback, driving the USD higher against the Euro later this week. Despite of losing the strength, investors prioritize the USD as the safety of principal over the Euro as the possibility of a higher return. As a result, the EUR/USD is down 1.56% to 1.12418 on Friday.

Moving ahead, Eurozone Industrial Production Data for the month of April is due to release; the data will essentially play a key role in determining the strength of the Euro next week.

AUDUSD

Aussie tried to regain 0.7 handle throughout this week, but failed to achieve so. Risk-on mood dominated trading earlier this week, demand for safe-haven dollar is being unwind. Market shrugged off astonishing upbeat Non-Farm Payroll figures, partially due to the data misclassification, May’s NFP was being overstated.

The Antipodean currency touched 0.7058, the highest price in 6 months, right after Fed decided to leave interest rate unchanged near zero. Powell promised to hold current interest rate until 2022, and expressed his pessimistic outlook on American labor market. Despite all the dovish comments from Federal Reserve, yet, it is too premature for Aussie to advance beyond 0.7 amid concerns of second wave of COVID-19 infection.

Risk appetite turned sour as market did not like Powell’s message of prolonging low interest rate. US stock market registered for the largest decline since March 12th, and hopes for a sharp V-shaped economic recovery are fading. Commodity currencies like Australian dollar was particularly vulnerable, furiously plunged 2.04% during Thursday’s trading session.

Moving forward, RBA will release June meeting minutes next Tuesday, followed by Employment Change on Thursday and Retail Sales on Friday.

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