Daily market analysis

JUN 22,2020

June 22, 2020
   

GOLD

The price of gold has traded to fresh yearly highs during every single month so far in 2020, and it remains to be seen if the bullish behavior will persist as the rebound from the monthly low (1671) fails to produce a break of the monthly high (1746), which took place during the first week of June. This extended bullish trend can be referred to the continuum of different risky events that took place in each and every month of 2020.

Additionally, this week’s risk-on sentiment tone is boosting the prices of safe-haven metal and crude oil into the end of the trading week. The change in the market mood is possibly led by concerns over the re-escalation of a potential US-China trade war. The concerns rose after Beijing said that it will step up purchases of US agrilcultural products after negotiators from the two sides met in Hawaii.

The precious metal enters a bullish momentum as cyclical currencies and commodities as optimism dulls demand for the safe-haven US dollar, pushing the greenback lower and lifting the antifiat alternatives. Therefore, if the uncertainty that hovered the global economy persists, it is likely to see the precious metal go into another rally next week.

GBPUSD

        Sterling gains the good one in the first day of week while mixed week before the last week. However, poor Average Earning Index and employment situation slap sterling in the face and left uncertainty to the market.

        On the other hands, U.K. prime minister repeated that his government is deeply concerned about the impact of the coronavirus crisis on the local economy. He also said that when the Brexit transition period ends, the government will respond to the U.K.’s economic needs in a creative way.

        On Thursday, sterling had a short-term boost by BoE’s left benchmark interest rate 0.1% unchanged but quickly change course and fell to low. Moreover, BoE expanded its bond-buying program to counter the coronavirus slump but kept some of its powder dry should the labor market worsen more than expected. Other than this, policy makers voted to boost QE by 100 billion pounds.

However, the central bank surprised investors by saying it will slow its purchase pace because stress in financial markets has eased, while reserving the option to accelerate them up again if needed, Bond fell. On the end of this week, sterling has been dragged to fresh three-week lows.

        Heading to next week, we pay close attention to keep support at first mid-term support around 1.23545 and 1.20915 would be a proper secondary support. We believe forex market is cooling down after pandemic event world wild, sterling as well. So the blue range would be the most probably path in next couple month

EURUSD

The Euro initially rallied in the beginning of the week; however, when the EUR/USD pair broke the 1.1372 level, it gave back the gain, and now pulling- back to test levels below 1.1186.

As a growing number of second wave pandemic infections in many countries and the geopolitical tensions between India and China, the Dollar strengthened due to the risk-off market sentiment. The demand for the safe haven Dollar is boosted against the Euro this week. At the same time, the Dollar is supported by the May retail sales report and the Philadelphia Fed’s Manufacturing index; the 18% increase of the retail sales report and the 162% change in the Manufacturing index was essentially helping economic reopening optimism. As a result, the U.S. Dollar Currency Index rises approximately 0.8% this week.

On the other side, ECB announces to lend out 1.5 trillion euros cheap loan, ensuring banks keep providing credit to companies and households to bolster the economic recovery from the pandemic. The massive QE essentially pulls the Euro down, causing the EUR/USD pair to do down.

Looking ahead to next week, the Euro may tries to rally a bit from the general vicinity if the second wave pandemic situation has a turning point, and becomes more optimistic; if not, the Euro might start to unwind down towards the 200 days EMA because the Dollar is a safety currency, and investors will continuously buy the Dollar.

AUDUSD

In the opening of this week, Aussie got a tough start. Not only the fears of second wave of the coronavirus seem to have swept the market since last Thursday but the risk sentiment was also still under pressure. When the market opened on Monday, the Australian dollar fell about 0.50% to 0.6830, and then benefited from the Fed’s actions. The Fed decided to increase the purchase of corporate bonds, which adds strength to the upside momentum. Further, the US government’s permission of four Chinese flight week entry to Beijing airlines and the expectations of the US-China talks in Hawaii during the week also push Aussie to the week high. However, after rising 2.8% in early trading on Monday and Tuesday, the pair retreated, the weaker-than-expected data confirms concerns that the economic recovery from the coronavirus-induced recession will be slow. Therefore, the Australian dollar have extended the downside break of a near-term key support.

After the fluctuations in the earlier part of the week, the pair gets struggle between 0.6840 and 0.6900. Although the decline in the Australian dollar against the US dollar has taken a breather due to Friday’s optimistic retail data, it may be difficult to show strong returns if global stocks trade in red.

 

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