Forex Daily Market Analysis from ForexMart

GBP/USD. December 28, 2020 – Pound falls despite achieving Brexit trade deal

The pound sterling declines on Monday despite the successful completion of post-Brexit deal negotiations. The current quote for the EUR/USD pair is 1.3480.

The UK and the European Union have nevertheless managed to agree on the terms of a trade deal, according to which free trade between Britain and the EU countries will be preserved, as well as visa-free travel and balanced access to markets and marine resources.

Starting December 31 (the date when London officially leaves the EU borders), trade deals will go without quotas and tariffs, but this does not apply to services and financial offers. Experts note that reaching an agreement is an excellent sign for the pound sterling, however, the further exchange rate will adjust to the circumstances.

EUR/USD. December 28, 2020 – The pair is storming again in the last week of the outgoing year

At the beginning of the last trading week of the outgoing year, the EUR/USD pair continues to demonstrate multidirectional dynamics. In the morning the quotes reached the level of 1.2250, but immediately dropped to 1.2200.

Most of the factors that increase uncertainty in the markets have already ceased to be relevant, but the pair continues to storm. The UK was finally able to agree with the EU on Brexit, and Donald Trump in the US still approved a $2.3 trillion economic aid project adopted by Congress. These events imply a sharp rise in demand for risky assets, but the euro is in no hurry to storm resistance levels.

The fact is that many investors have gone on vacation or are waiting for new drivers, which can be taken into account in building a trading strategy for the next year.

In addition, market participants are very interested in the success of vaccination in the cut of the global economic recovery, as well as Joe Biden's policy to further stimulate the US economy. If the Fed maintains its plan to inject large amounts of money into the economy, the EUR/USD pair could rise to 1.30 early next year.

 

Brent. December 29, 2020 – Oil market demonstrates growth in the pre-New Year week

Oil prices are steadily growing during trading on Tuesday amid growing investor appetite for risky assets. A strengthening factor was the adoption of new stimulating measures in the United States. The cost of February futures for Brent rose to $51.65 per barrel, while the price of WTI reached $48.30 per barrel.

On Monday, the House of Representatives of Congress approved an increase in stimulus payments from $600 to $2,000 at the request of Donald Trump. Moreover, on Sunday, Trump signed the country's fiscal 2021 budget of $2.3 trillion. It is noted that the budget includes a package of measures to support the economy in a pandemic in the amount of $900 billion.

In addition, the general weakness of the US dollar also supports oil prices. However, experts believe that the growth of the oil market may be suspended due to concerns about a new strain of coronavirus and imposed restrictions on the movement of people between countries.

 

EUR/USD. December 30, 2020 – Dollar has updated two-year lows

On Wednesday, the dollar renewed multi-year lows in pairs with many currencies: paired with the euro, the dollar reached its lowest level in two years at around 1.2300. The pressure on the greenback was put on by the postponement of the immediate consideration of raising household payments to $2,000.

The dollar index fell to 89.711 against a basket of six major currencies, its lowest level in more than two years.

Earlier, the dollar also showed a decline, and risky assets – growth. The reason was the signing by Donald Trump of a bill to help the population and economy in the fight against coronavirus. And while the payout remains uncertain, many analysts predict that the US currency could weaken further next year, as newly elected US President Joe Biden is expected to push for even greater economic support.

Another negative factor for the dollar is the expectation that the US Federal Reserve will keep interest rates low for a very long time.

 

Brent. December 31, 2020 – What awaits the oil market in 2021?

In April 2020, Brent crude hit multi-year lows, falling to $16 a barrel amid the onset of the Covid-19 pandemic and the price war between Russia and Saudi Arabia. At the same time, the price for American WTI crude oil fell into the area of negative values.

Experts note that the consumption of crude oil and liquid fuels in the world for the year decreased by 9% (from 101 million barrels per day in 2019 to 92.4 million barrels). However, an agreement to cut oil production under OPEC + allowed oil to recoup most of the losses by the end of 2020. Today Brent quotes are holding at $51.50 per barrel.

However, it is possible that at the beginning of 2021, quotations may again fall to $30 per barrel amid the announcement of new lockdowns in many countries due to the further spread of coronavirus in the world. But, nevertheless, the market is now dominated by optimism. Analysts still expect the global economy to recover next year, which can support the demand for commodities. The oil price range is expected to be in the range of $40-65 per barrel over the next year.

On the last day of the outgoing year, Brent quotes settled at $51.40 per barrel.

 

EUR/USD. January 04, 2021 – Dollar falls against most currencies

At the beginning of the first trading week of the new year, the US dollar depreciates against many competing currencies. In a pair with the euro, the greenback fell again to the level of 1.2300. The US currency is under pressure from growing appetite for risky assets amid continued optimism about the global economic recovery in 2021.

The incidence of coronavirus in the world and the beginning of vaccination of the population in many countries remain the main topics of discussion by analysts. Bloomberg experts note that without widespread vaccine distribution, the dynamics of the foreign exchange market will strongly depend on the dynamics of the spread of Covid.

The economic calendar for today is not very diverse. Germany presented data on the index of business activity in the manufacturing sector: the indicator came out worse than expected (58.3 against expectations of 58.6 points). A similar release of data from the euro area also reflected a decrease in the indicator: from 55.5 to 55.2 points.

But the business activity index in the UK came out better than expected: the index rose to 57.5 (forecast 57.3 points). In the evening hours, the US will also release its business activity figures.

 

Fundamental Brent analysis for January 5, 2021

On Tuesday afternoon, world oil prices shifted to growth amid expectations of an OPEC+ decision to further cut oil production in February. The current quotation of the asset is $52.05 per barrel.

The meeting of all OPEC+ countries was supposed to end yesterday, but the participants in the meeting failed to reach an agreement on the volume of reductions next month, and the debate will continue today. The meeting participants are discussing two proposals: to increase production in February by 500 thousand bpd or to keep production at the January level. Russia and Kazakhstan are in favor of increasing production by 0.5 million bpd from February, while the rest of the countries are in favor of extending production at current levels.

Oil prices are also supported by continued optimism related to the recovery in demand. The start of coronavirus vaccination in many countries gives hope for the early lifting of restrictions on movement, which, in turn, will contribute to the growth of demand for raw materials.

However, despite vaccinations, the world today is still seeing an increase in the incidence of Covid-19, which suggests that in the short term, the increase in demand will still slow down.

 

EUR/USD. 06.01 | Euro has renewed its maximum at 1,2340

The euro is trying to gain a foothold above the 1.34 level. The current quote for the EUR/USD pair is 1.2340, which has become the next maximum since the beginning of 2018.

At the moment, investors are awaiting the election results from Georgia. As you know, Donald Trump continues to fight for the presidency, accusing the Democrats of rigging elections. However, the result of the recalculation should in no way affect the Fed's ultra-soft policy and monetary stimulus. Moreover, Democrats’ victory (with their stimulus plan) will only strengthen the upward impulse of the S&P 500 and lead to further weakening of the US dollar and a rise in risky assets.

During the day, the dynamics of the EUR/USD pair will also be influenced by the publication of business activity indices in Europe and the US, data on consumer prices in Germany and statistics on the number of people employed in the non-agricultural sector in the US from ADP. FOMC minutes will be published late in the evening.

 

EUR/USD. January 07, 2021 – Democrats won the Senate, the dollar went up

The Democrats won the Senate election, which greatly increases the likelihood of continued full stimulus and expansion of US infrastructure spending. However, at the same time, it is possible that taxes will increase and regulation will be strengthened.

The completion of the elections reduced market uncertainty and led to the strengthening of the US dollar. The current quote for the EUR/USD pair is 1.2245. Now the demand for risky assets can only increase with the escalation of the trade war between the United States and China or with a strong deterioration in macroeconomic indicators in the United States.

The minutes of the US Federal Reserve meeting were published yesterday evening. The document confirmed the regulator's plans not to abandon the super soft policy for a long time, until inflation steadily grows to target levels and significant improvements in unemployment statistics. Also, the volume of asset purchases ($120 billion per month) will not change.

Today you should pay attention to the ECB meeting and the decision of the regulator on monetary policy. The first this year Non-farm Payrolls report in the USA will be published tomorrow, experts expect very weak indicators.

 

GBP/USD. January 11, 2021 – The sterling starts the year weakening

The GBP/USD pair continues to decline, reaching 1.3460. The sterling is under pressure from the negative fundamental background. In particular, due to the nationwide lockdown announced in the UK back on January 4, the blow to economic growth in the country will be more severe than in other European countries.

Experts expect that GDP will fall by 2.7% in the first quarter of the year, and this may lead to a decrease in the interest rate by the Bank of England in February. Earlier it was expected that the regulator would cut the rate only by the end of the year. And even the adoption of the Brexit agreement will not be able to allay the concerns of the Central Bank, since a number of questions remain on the deal.

However, if the mass vaccination is successful, the pound could recover somewhat in the second quarter. In the meantime, the British currency will continue to decline.

 

EUR/USD. January 12, 2021 – The dollar stopped his rally at the level of 1.2130

On Tuesday, the dollar suspended its growth in the area of 1.2130. The EUR/USD pair has been hovering at 1.2150 for the second session in a row. The euro received some support after the release of data on the consumer confidence index in the euro zone from the Sentix institute in January: the indicator rose by 1.3 points against a decline earlier by 2.7. However, these statistics turned out to be worse than the forecast of 2.0 points growth.

The dollar continues to receive support from the election of a new president in the United States (Joe Biden will take office on January 20). Global markets are optimistic about the Democrat's plans to allocate additional trillions to fight the coronavirus pandemic.

Markets are usually a little nervous when it comes to stimulus processes as they can accelerate inflation and negatively affect the US currency. However, now in the foreground is the yield on 10-year government bonds, which keeps the US dollar afloat.

Today the macroeconomic calendar is not rich in publications, so the pair will continue to trade near the level of 1.2150. Attention should be paid only to the data on new vacancies (JOLT) for November in the United States. A job overview will give you an idea of what is happening in the labor market in relation to recruitment. Analysts point out that 6.652 million vacancies were recorded in October.

 

EUR/USD. January 13, 2021 – The pair cannot determine the movement vector

The EUR/USD pair continues to trade in different directions, fluctuating within the range of 1.2130-1.2230. The current quote for the euro is 1.2165.

Yesterday the dollar weakened across the entire spectrum of the market amid declining yields on US government bonds. Today, the US currency has turned around and is showing corrective growth.

Today you should pay attention to the publication of inflation data for December. Analysts predict that the CPI added 0.1% mom after gaining 0.2% mom in November. Experts note that the more neutral the statistics are, the better for the dollar, since inflation surges would now be a high risk (in anticipation of the imminent introduction of a new stimulus package).

In the evening, the US Federal Reserve Beige Book will be published. Usually the market does not react to such publications, but they are important for understanding the general picture of what is happening in the American economy.

 

January 14, 2021 – Why is the oil market declining?

Yesterday, Brent quotes updated an almost annual maximum at $57.38 per barrel, but today the asset has dropped to $55.77.

The pressure on prices was exerted by data on changes in US oil product inventories. According to a report by the Energy Information Administration (EIA) of the US Department of Energy, crude oil inventories in the country fell by 3.2 million barrels for the week, while analysts predicted a decline of 3.8 million. A day earlier, API released a similar report, according to which oil reserves decreased by 5.8 million

The report from the EIA also showed that gasoline inventories rose by 4.4 million barrels, and distillate stocks by 4.8 million barrels, which was worse than forecasts (3.2 million and 2.8 million barrels, respectively).

Additional pressure on Brent came from the recovery of the US dollar in the Forex market. The USD Index, which measures the US currency against a basket of six major foreign exchange competitors, rose 0.3% on the day. The new US President Joe Biden will speak today. The head of the White House may announce new measures to support the economy, which will put pressure on the dollar and, as a result, lead to an increase in oil prices.

 

GBP/USD. 15.01 | Consolidation in the 1.36-1.37 price range

The GBP/USD pair continues to trade within the range of 1.36-1.37. The current quote is 1.3655.

Currently, the epidemiological situation in the UK continues to deteriorate. Moreover, on the eve of the country's Ministry of Transport announced the cancellation of flights with a number of South American states and Portugal after the discovery of a new strain of coronavirus in Brazil. Despite this, the British currency continues to trade in the area of the recent two-year highs. The fact is that market participants still take into account the high probability of the introduction of negative rates by the Bank of England.

At the same time, the dollar is under pressure from the decline in Treasury yields and the weak report on claims for unemployment benefits, published yesterday. According to the US Department of Labor, the number of Americans who filed initial applications for unemployment benefits amounted to 965 thousand, more than the forecast of 795 thousand. During the day, the movement of the pair within the current price range will continue.

 

EUR/USD. January 18, 2021 – Euro continues to decline

The euro continues to decline against the dollar on Monday, reaching 1.2060. Weak economic statistics from the US, as well as uncertainty in the timing of the discussion of Joe Biden's stimulus program put pressure on risky assets.

It is noted that the package of measures to support the economy proposed by Biden includes direct payments to Americans in the amount of $1,400, a temporary increase in payments to the unemployed, and an increase in the minimum wage at the federal level to $15 per hour. However, experts believe that the new president will not be able to pass the stimulus plan in this form through Congress.

This week, all the attention of the markets will be drawn to the speech in the Senate of the former chairman of the Federal Reserve System Janet Yellen on Tuesday. Market participants expect that the country's new finance minister will make it clear that they are taking an approach in which the dollar should be determined by the market. This will mean that the Ministry of Finance does not intend to interfere with the dynamics of the national currency.

Today is a day off in the United States to celebrate Martin Luther King Day, so the pair will continue to trade weakly around 1.2080.

Brent. January 18, 2021 – The oil market continues to decline on Monday

On Monday, oil prices continued to decline, reaching $54.50 per barrel. Such dynamics was a consequence of the strengthening of the US dollar, as well as a decrease in traders' optimism amid an increase in the incidence of Covid in the world. However, statistics from China, showing GDP growth of 2.3% (more than forecast) and an increase in industrial production in December by 7.3%, limit the decline in oil prices today.

Experts note that the oil market has grown strongly lately, and the current decline is giving it some respite. The key event for the market in the near future will be the inauguration of the US President-elect Joe Biden and his further economic program.

Brent was also under pressure at the end of last week with data from the American oil service company Baker Hughes. The report reflected an increase in the number of operating oil rigs in the US last week by 12 units to 287 rigs. The number of work units has been increasing for eight consecutive weeks.

The current Brent quote is $54.80. During the day, we expect a slight recovery in the price to the $55 per barrel area.

 

EUR/USD. January 19, 2021 – The pair is awaiting Biden's inauguration

On Tuesday, the major currency pair started recovering from the 1.2050 area. The current quote EUR/USD is 1.2135.

Today the macroeconomic calendar is empty, but market participants have something to think over. For example, the results of the Reuters poll showed that the new stimulus package from the ECB is unlikely to have a positive impact on the European economy. In particular, we are talking about the already agreed PEPP package of 185 trillion euros, which was extended for another 9 months. Against the backdrop of such pessimistic opinions, the economic outlook for the eurozone looks rather bleak.

As for the United States, not everything is smooth here either. Former head of the Federal Reserve System Janet Yellen said that the US economy could find itself in a long and rather severe recession if Congress does not agree on additional support measures. Today, attention should be paid to Yellen's speech, which, as expected, Joe Biden intends to appoint the new head of the Federal Reserve System.

The inauguration of the new US President-elect Joe Biden will take place tomorrow. Market participants are waiting for this event, so the dynamics of trading today will not differ in activity.

January 19, 2021. Fundamental analysis of the oil market

The oil market, which has been growing steadily since the beginning of November last year (when the first news of successful trials of coronavirus vaccines appeared), is gradually losing its impetus. Having managed to rise from the $40 per barrel area to $57 from October to January, today oil is traded near the $55 per barrel level.

The January 2021 high at $57.5 was reached after Saudi Arabia unexpectedly announced its decision to unilaterally cut oil production in February and March (by 1 million barrels per day). Then the pandemic and its consequences on transportation and fuel demand again began to put pressure on quotations.

At the same time, some support for the prices of «black gold» is provided by the approval of Joe Biden as the new US president. Market participants expect that its measures to support the economy will raise inflation, which has increased the demand for oil from speculators and investors.

Taking into account the current fundamental background, it can be concluded that oil prices are unlikely to grow significantly in the near future. We believe that the range of fluctuations in Brent quotes will be represented by a corridor of $50-55 per barrel.

Today prices are rising slightly from the $55 level in anticipation of a report from the International Energy Agency (IEA). The experts of the organization intend to share their forecasts for the further dynamics of the market, taking into account the new lockdowns in many countries.

 

EUR/USD. January 20, 2021 – Euro continues to rise above 1.2150

On Wednesday, the euro continues to rise, reaching 1.2150. Yesterday, ex-head of the Federal Reserve System and future US Treasury Secretary Janet Yellen made a speech, which market participants were looking forward to.

Yellen calmed the markets by assuring them of additional fiscal stimulus and promised not to interfere with the dynamics of the dollar. The politician also noted that in the post-crisis period, the United States needs a weak currency in competition and said that the Treasury Department will fight against attempts by other central banks to manipulate the exchange rates of national currencies.

Now, in order to reduce the rate of the single European currency, the ECB will have to somehow outplay the FRS, but the European regulator has long since exhausted the entire arsenal of stimulating instruments. The expansion of the QE program is unlikely to spur inflation, analysts say. Thus, with the strong weakening of the dollar and the ECB's inability to influence the euro rate, the EUR/USD pair has only a way up.

Today we should pay attention to the data on inflation in the eurozone. Deflation has been raging in Europe for four months now. And the final data on consumer prices should reflect their continued decline at the level of -0.3%, which will put significant pressure on the euro rate and allow the bears to return quotes to the level of 1.21.

An important event today will be the inauguration of Joe Biden and his first appearance as the new president of the United States.

 

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.