Daily Market Analysis From Forexmart

XAU / USD. December 10.2020 - "Absorption" from the EMA 60 line

At the end of yesterday's trading, the gold / US dollar trading pair formed an engulfing candlestick pattern on the daily chart based on the 60-day exponential moving average line - EMA 60.

The price of the trading instrument XAU / USD has renewed its maximum since November 23 at around 1874, after which it turned around, giving a signal to sell. We failed to consolidate at the level of 1860 and, most likely, the pair will start a new downward wave.

It makes sense to take a closer look at sales according to the specified candlestick pattern. The closest reference for the decline is at 1800, near the EMA 200 line.

 

NZD / USD. December 11.2020 - Growth to highs

The New Zealand dollar / US dollar currency pair bounced off the round level of 0.7000 in yesterday's trading and formed an engulfing candlestick pattern on the daily chart, giving a buy signal.

The NZD / USD price rose to the 0.7100 resistance level, which is located in the area of the highs since April 2018. Buyers were unable to overcome the resistance at the indicated level, and today the pair went into a slight correction.

In the medium term, I would like to see continued growth along the upward trend. At the same time, it is better to enter new deals after breaking through the level of 0.7100, the next target is at 0.7200.

 

EUR/USD. December 14, 2020 – Euro remains in local highs

Euro continues to feel confident in the area of local highs. The couple is stable, even despite the fact that there is no progress with vaccines as such, however, there is still a strong optimism on the market about an early vaccination, which supports interest in risky assets. The current quote for the EUR/USD pair is 1.2160.

Today the macroeconomic calendar is almost empty. Only the data on the volume of industrial production in the euro zone in October will attract attention: the forecast assumes an increase of 1.8% m/m against a decline of 0.4% m/m in September.

The ECB meeting last week did not please the bears either. The European regulator did not give any signals regarding further monetary policy and the high rate of the single currency. Moreover, the situation with Brexit no longer scares investors, which also allows the euro to remain in the highs.

Experts note that the meeting of the US Federal Reserve may become the only factor that can cool the ardor of sellers. It is known that the Fed is not going to launch a «twist», which, together with the lack of plans for fiscal stimulus, may provide visible support to the dollar.

Brent. December 14, 2020 – Oil returns to February highs

Brent crude oil prices rise on Monday, trading at $50.50 a barrel. The asset is supported by general market optimism regarding the imminent mass vaccination against coronavirus, which should restore global demand for fuel. Vaccinations are starting in the United States today, which gives hope for the lifting of quarantine restrictions in the near future.

Prices were further supported by an explosion on a tanker in a Saudi port, raising concerns about a possible disruption to supplies. Shipping company Hafnia reported an explosion on one of its tankers following an «external unidentified object strike» while unloading at the port of Jeddah.

However, the problem of falling demand is also exacerbated by an increase in supply. On Friday, Baker Hughes announced an increase in the existing oil rigs in the US by 12 units, to 258. Earlier, the OPEC + countries also agreed to increase oil production by 500 thousand barrels, starting in January 2021. Given that the threat of oversupply is becoming more real, a reversal in the oil market could occur at any time.

 

EUR/USD. December 15, 2020 – Euro is stable at 1.2170 area

The EUR/USD pair remains stable on Tuesday, trading in the highs just below the 1.2170 level.

Eurozone industrial output statistics for October released yesterday exceeded analysts' expectations, reflecting 2.1% m/m growth. The forecast implied an increase of 1.8%, while a month earlier the indicator rose by 0.1% m/m.

At the same time, the US dollar is under pressure from further actions of the American authorities in the issue of providing financial assistance to the economy. It is noted that a bipartisan incentive plan may be presented at the Congress level in the coming hours. We are talking about an amount of $908 billion, and the financing will most likely take place in 2 stages.

Today we should pay attention to the data on the volume of industrial production in the US for November, the degree of utilization of production facilities, import prices and the index of business activity in the manufacturing sector in New York. Experts predict that the rate of decline in American industry may slow down from -5.3% to -5.0%. And although the scale of the slowdown is extremely small, this data may be a reason for the dollar to strengthen by the end of the day.

 

Brent. December 16, 2020 – The oil market is growing despite a number of negative factors

Oil prices continue to remain stable above $50 a barrel, ignoring all the fundamental factors that could cause a corrective pullback.

First, according to the OPEC forecast, oil demand in 2021 will remain low, and oil consumption worldwide will average 97.3 million barrels per day in the IV quarter of the year. By comparison, in 2019, the same figure was recorded at over 100 million barrels.

The International Energy Agency (IEA) has similar views, which has lowered its forecast for a recovery in demand in 2021 by 170 thousand barrels per day – to 5.7 million barrels per day.

Secondly, an increasing number of countries in Europe and states in the US are tightening coronavirus restrictions during the Christmas and New Year periods, which will also negatively affect oil demand.

Today we should pay attention to the data on changes in US oil reserves last week. Analysts predict a drop in US oil inventories by 1.9 million barrels, an increase in gasoline inventories by 2.6 million barrels and an increase in distillate stocks by 1.1 million barrels.

EUR/USD. December 16, 2020 – Euro broke through the level of 1.22 on expectations of the results of the US Federal Reserve meeting

The European currency continues to renew its multi-year highs, breaking the 1.22 mark. The currency was supported by the news that Germany from December 23 will issue a permit for the use of vaccines from Pfizer and BioNTech, as well as strong statistics from the euro area.

The main event of the day today will be the announcement of the results of the US Federal Reserve meeting. Market participants are almost sure that after a large-scale expansion of the ECB's quantitative easing program, it is highly likely that the Fed will take similar steps. And this is an extremely negative factor for the US currency rate.

Moreover, the situation on the labor market in the United States is noticeably worsening: the current indicators indicate not only a slowdown in the pace of its recovery, but also an increase in unemployment.

From the economic reports today it is worth highlighting the data on the index of business activity in the manufacturing sector in Germany: the indicator came out better than forecast (58.6 points against the forecast of 56.4). The similar index in the service sector also increased (47.7 against the forecast of 44.0 points). Moreover, business activity throughout the eurozone also showed an increase in all indicators, which was another positive factor for the euro exchange rate.

 

Brent. December 17, 2020 – Oil has updated the maximum in 9 months after the US Federal Reserve meeting

Brent crude hit a 9-month high on Thursday after the Energy Information Administration (EIA) reported declining US inventories last week. The current Brent price is $51.80 per barrel.

According to yesterday's statistics, crude oil inventories in the United States fell by 3.135 million barrels over the week (to 500.1 million barrels), which was better than the forecast for a decrease of 1.9 million.

Additional support to the asset is provided by some progress in the discussion of the issue of fiscal stimulus in the US Congress, as well as strong demand for oil in Asia. American lawmakers yesterday came close to an agreement on measures to support the economy in the amount of $900 billion.

At the same time, the US dollar was again under pressure. This time, the driver of the weakening of the currency was the results of yesterday's meeting of the US Federal Reserve: the regulator kept the rate at 0-0.25% per annum, while predicting that the rate would remain at this level until 2023.

GBP/USD. December 17, 2020 – Sterling has renewed its maximum in 2.5 years

The British currency continues to update maximum after maximum. The current quote for the GBP/USD pair is 1.3570. The last time such values were recorded in mid-May 2018.

The pound is growing amid weakness in the US dollar and strong business activity in the UK. Manufacturing activity in the country in November rose to 57.3 points after rising to 55.6 in October. At the same time, activity in the service sector was in the red zone.

Further support for the pound is provided by the progress in negotiations between the UK and the EU on the controversial Brexit issues. The head of the European Commission, Ursula von der Leyen, said that there is «a way to an agreement» and in fact, the deal could be concluded in the next few days. Moreover, Britain has signed a customs agreement with the United States, ensuring business continuity.

At the same time, the results of yesterday's meeting of the US Federal Reserve System exerted strong pressure on the dollar rate. The US regulator kept the target range for the federal funds rate at 0-0.25% and said it intends to maintain this range until conditions in the labor market reach peak employment levels and inflation approaches 2%.

 

EUR/USD. December 18, 2020 – Euro continues the «northern campaign»

The continuing weakening of the US dollar and rising stock indices continue to provide strong support for the EUR/USD pair. The current quote for the pair is 1.2270. However, the higher the quotes rise, the more painful it will fall, especially since the main factors supporting the euro (successful Brexit and fiscal stimulus) may not be implemented.

It became known yesterday that negotiations between the EU and the UK are again at a deadlock, and the issue of fishing is again not the only controversial point. Not all is well in the US Senate either: the parties cannot come to a final agreement on the scope of the incentive program.

And even if the other day Congress approves the aid package, which, together with the vaccination of the population, can become a strong driver of US GDP growth, investors may recall the «dollar smile theory». If the United States soon begins to show a better economic recovery than other countries, the greenback will inevitably go up the hill.

The economic calendar is practically empty today. Only the data on the IFO business climate index in Germany will be of interest: the indicator came out better than forecast (92.1 against 90.9 points), which also supported the European currency today.

 

Brent. December 21, 2020 – Oil starts to decline on news of Covid mutation

At the beginning of the week, Brent crude oil shows a decline from the $52.30 area to $49.25 per barrel. The current Brent price is $50.30 per barrel.

The decline was driven by the return to the market of fears regarding the mutation of the coronavirus in the UK. The British authorities said that a new strain has been identified in the country, the spread of which is several times higher than previous indicators. The same mutation of the Covid-19 virus has been found in the Netherlands, Denmark and Australia, according to WHO.

Oil market participants fear that a new mutation will call into question the economic recovery in the world and again negatively affect the demand for hydrocarbons.

Another factor in the weakening of the asset is the potential growth of the world oil supply, which may increase by 1 million barrels already in January due to additional supplies from OPEC+ countries, Libya, the United States and Iran.

EUR/USD. December 21, 2020 – Euro started a protracted correction

As predicted by last week's forecasts, the euro rate has moved to a retreat from the highs. The current quote for the EUR/USD pair is 1.2168. The dollar is on the side of a whole set of factors: here and the mutation of COVID-19 in the UK, and Brexit, and the vote in the US Congress on fiscal stimulus.

Despite the fact that lawmakers were able to agree on the volume of a new stimulus package in the United States, it is too early to talk about a complete solution to the issue. Now the bill must pass a vote in two chambers of the US Congress. And it is possible that a failure is possible here.

News from Britain that a new Covid-19 stamp has been opened, the spread of which is several times higher than previous indicators, exerted strong pressure on the euro. Epidemiologists fear that recently developed vaccines may be powerless against the new threat, and economists are already questioning economic growth next year.

In the UK, there is another factor of pressure on the pound and the euro – Brexit, the issues and disputes of which have not yet been resolved. The risks are high that instead of one big agreement, the parties will have to sign several different agreements.

Thus, the downward correction of the euro is only gaining momentum. The forecast for today assumes further strengthening of the dollar below the level of 1.2150.

 

EUR/USD. December 22, 2020 – Euro strengthens again on fundamental background

During morning trading, the EUR/USD pair showed some weakening, dropping to the level of 1.2200. Both houses of the US Congress approved a $892 billion fiscal stimulus package, which could slightly improve US economic performance in the first quarter of the new year.

However, almost immediately, the euro began to strengthen again amid positive news on Brexit. The current quote for the pair is 1.2230. Today it became known that the UK and the EU may agree on fishing quotas, which brings back hopes for a full Brexit deal before the end of this year.

EUR/USD was also supported by statements from the WHO, which announced that the new Covid strain found in the UK is less transmissible than other infections. This means that existing vaccines can handle it as well.

Thus, the decision of Congress and the breakthrough in the Brexit negotiations provided strong support for the bulls on EUR/USD. The next target for the asset is 1.2250 and above.

 

Brent. December 23, 2020 – Oil declines for the third day in a row

Oil quotes are declining during Wednesday morning trading: the current price of Brent is $49.90 per barrel. The asset was pressured by data from the American Petroleum Institute (API), according to which US oil reserves rose by 2.7 million barrels over the week (to about 497.7 million), while analysts predicted a decline of 3.2 million barrels.

Additional pressure on Brent continues to be exerted by concerns about a further drop in demand for hydrocarbons amid prolonged lockdowns in many countries.

In addition, US President Donald Trump threatened yesterday not to sign a bill on measures of financial assistance to the US economy in the amount of $892 billion, calling for an increase in the amount of payments to citizens from $ 600 to $ 2 thousand. It is worth noting that if Trump does not approve the new law by the end of this year, a recession for the United States will become almost inevitable.

EUR/USD. December 23, 2020 – Euro returns to 1.22 level after decline a day earlier

The US dollar on Wednesday again declines against the euro after some strengthening a day earlier. The day before, the American currency received support amid growing demand for safe assets after the news of the coronavirus mutation appeared. Then the dollar managed to strengthen to the level of 1.2950. The current quote for EUR/USD is 1.2190.

Today the pressure on the dollar is exerted by the approval of the US Congress of a new stimulus package. The adoption by the American authorities of measures to support the economy, as well as the expectation of an early vaccination, support the optimism of investors regarding the future prospects of the global economy. And this, in turn, leads to a weakening of the greenback.

American lawmakers have agreed on a program to support the economy, including direct payments to citizens in the amount of $600. However, Donald Trump demanded that Congress increase payments to $2 thousand or $4 thousand for spouses.

The euro is growing today also due to a breakthrough in the Brexit negotiations. The fishing issue has not yet been resolved, but sterling (and after it the euro) is showing significant growth, which suggests that investors still believe in the signing of a trade agreement.