InvestMacro

By Admiral Markets

Source: Economic Events May 18, 2020 – Admiral Markets’ Forex Calendar

The DAX30 ended last week on a little roller coaster. After a sharp drop last Thursday, where the German index attacked the region around 10,200 points. It can hold that level, thanks to massive support and a sharp bounce in US Equities.

But when carefully looking at the short-term hourly picture, and assessing the sequence of falling highs and lows over the course of last week, the mode remains short-term bearish below 10,700 points.

While we have to wait to see whether there will be a volatile start to the week as there is a thin economic calendar, but we’d still be careful with long engagements. In fact, we’d consider Short engagements more attractive from a risk-reward perspective.

That is especially true after last Wednesday’s comments from Fed chairman Powell, where he noted that the recovery of the US economy may take time to gather momentum.

He could have said that a V-shaped recovery in the US (but also globally) is off the table.

And with expected earnings for the S&P 500 being 28% down from their peak, and 13% below realized earnings (which is way less than during previous recessions and can only be justified by a massive V-shaped recovery in earnings in 2021), US Equities, but also Equities in general including the German DAX, seem to be overvalued, and a next sharper leg lower stays a serious option.

Technically, the DAX30 CFD stays at least neutral as long as we can hold above 10,200 points, but a break lower activates 9,600 points as target on the downside in the days to come:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between April 27, 2019, to May 15, 2020). Accessed: May 15, 2020, at 10:00pm GMT

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between January 30, 2019, to May 15, 2020). Accessed: May 15, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.

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By Admiral Markets

By IFCMarkets

Global risks increase demand for precious metals

US retail sales in April showed a record drop of 16.2% (month to month) since 1992, when they were first calculated. This is worse than the forecast (-12%). In March, retail sales fell by 8.3%. This indicator reflects the economic situation and investors now fear that the decline in US GDP in the 2nd quarter of 2020 may be a record (up to -40%, according to various estimates) since the 30s of the last century, a period known as the “Great Depression” in the country.
Let us recall that GDP fell by 4.8 % in the 1st quarter. Another negative macroeconomic factor was the very weak data on the American labor market for April, published 2 weeks ago, as well as the statement by Fed Chairman Jerome Powell that the economic recovery will be long and painful. Another risk factor is the worsening of US-China trade relations as coronavirus pandemic fades. It should be noted that the United States industrial production indicator for April was better than expected. Earlier, China demonstrated a good pace of industrial recovery. This may have contributed to the rise in the silver price, which is both a precious metal, and is used in industry, in particular, when manufacturing electric cars. In turn, investors have long been buying gold. Its reserves in the world’s largest SPDR Gold Trust fund reached a 7-year high of 1104.7 tons.

Summary of technical analysis

Market Analysis provided by IFCMarkets

By Money Metals News Service

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Gold and silver markets are inching closer to achieving major upside breakouts.

On Thursday, gold rallied above a near-term consolidation pattern to close at $1,747 an ounce. That put the monetary metal about $30 away from making new highs for the year. As of this Friday recording, gold prices are marching higher again and come in at $1,761, up 2.5% for the week.

Turning to silver, the white metal gained nearly 3% yesterday to touch a major resistance line just above the $16 per ounce level and the momentum is carrying over into today. A strong weekly close above yesterday’s high could trigger a wave of technical buying that propels prices much higher in the days ahead – and it looks as though such a close is in fact going to happen.

The silver price currently trades at $16.70 after advancing nearly 4% so far today and is now up a healthy 6.7% for the week or just over a $1 an ounce since last Friday’s close.

As for the platinum group metals, they are showing mixed results. Platinum was lagging a bit but is now starting to join the party. The industrial metal is now showing a weekly advance of 2.4% to trade at $797. Meanwhile, palladium is still lagging and shows a weekly decline of 1.4% to bring spot prices to $1,943 per ounce.

Supplies of physical bullion products continue to be tight across most forms and sizes. Although market conditions are less frenzied than they were a few weeks ago, premiums do remain somewhat elevated, especially on a product like Silver Eagles.

Risks remain that shortages and price spikes could emerge in the tenuous supply chain for common gold and silver coins and rounds.

Normally, the bullion market is liquid, efficient, and well supplied. But these aren’t normal times.

Mines and mints can shut down at a moment’s notice over virus fears. And safe-haven demand can spike suddenly in response to financial turmoil.

Global supply chains are being stressed to the point of breaking when it comes to the delivery of essential economic goods including food. In recent weeks, prices consumers pay at the grocery store have skyrocketed – especially for meats, dairy products, and eggs.

Here’s how NBC News and France 24 reported on the situation:

NBC Report: These days, many families across the country are experiencing serious sticker shock at the grocery store. When stay at home orders went into effect in March, supermarket sales shot up 83% and apparently food prices climbed too. An across the board bump that’s actually setting records. The last time food prices jumped this much from one month to the next was way back in 1974, almost a half century ago. Federal figures reveal at least a one and a half percent price increase in all food groups in April, with meats, poultry, fish, and eggs leading the way, the cost of eggs alone skyrocketed 16%.

France 24 Report: When meat giant Tyson Foods placed full page ads in various U.S. newspapers, six words stood out most, the food supply chain is breaking.

On Thursday, President Donald Trump suggested the United States might move to cut economic ties with China and re-center manufacturing supply chains closer to home. The coronavirus outbreak certainly exposed the dangers of depending on Chinese factories for critical hospital equipment and life-saving prescription drugs.

On the other hand, outsourcing to China and other countries that can produce things very cheaply has helped keep a lid on consumer prices. Most of the products that fill Walmart, for instance, shelves would cost a lot more if they were all made in the USA. Our labor costs are much higher and so are our environmental standards.

China willingly absorbs hundreds of billions of our excess fiat dollars every year in exchange for real goods. It will be difficult for Americans to give up that relationship even if it is ultimately a toxic one.

China may also be questioning the prudence of acquiring and holding ever more U.S. Federal Reserve notes. The Quantitative Easing campaign now underway is unprecedented in scale. And more stimulus schemes are being devised every day.

Congress is pushing forward a new $3 trillion stimulus bill and another round of $1,200 stimulus checks. So where will the money come from one might ask? Well, it will simply be created out of thin air and added to an already ballooning national debt.

All this currency creation will do nothing to stimulate an economy that is being intentionally locked down. It will perhaps help some of the millions of people who are out of work with no savings get by for another month. But it will also exacerbate the problem of food inflation at grocery stores.

Even as many businesses fail, price inflation can also be expected to show up at restaurants, shops, theaters, airlines, and other businesses that are slowly being allowed to operate under “social distancing” guidelines.

Some politicians and journalists have even expressed outrage over scenes of crowded planes and newly reopened bars and restaurants that aren’t practicing social distancing.

It’s easy to demand that airlines not fill middle seats or that diners spread out their tables and serve fewer customers. But businesses that had already operated with low margins and heavy fixed costs for floorspace are only viable if they can fill that space with paying customers on a regular basis… or else charge a lot more per customer than before.

That’s why going out to eat or flying on a plane in a post-COVID world could become a lot more expensive. And it will be a luxury that many people simply choose to forgo.

More fake stimulus from Washington will only help enable and exacerbate consumer price hikes. It will also add more fuel to the fire being lit under precious metals markets.

Well that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

By Han Tan, Market Analyst, ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By Dmitriy Gurkovskiy, Chief Analyst at RoboForex

The major currency pair is starting the third week of May in the same position: it is obviously stuck inside a sideways channel. Fundamental background supports this movement, although here one can find something to base upon.

The US Federal Reserve Chairman Jerome Powell spoke earlier this morning and said that the country’s GDP might lose up to 20% in the second quarter of 2020, while the Unemployment Rate is expected to reach 25%. At the same time, he believes that such huge negative numbers won’t result in a protracted crisis, because the country’s economy gets a lot of support from all angles.

The US government is planning to support households and the economy for a long time, from 3 to 6 months according to Powell, to help them overcome the consequences of the Covid-19 pandemic. Actually, this support might as well continue until the end of the year.

The US economy is expected to recover slowly – no one says anything about upsurge because the country’s population will need time to regain its feet. For the American Dollar, this news is moderately negative.

In the H4 chart, after completing the correction at 1.0836, EUR/USD is forming another descending wave towards 1.0777. Possibly, the pair may break this level and then continue forming the third descending wave to reach 1.0700. Later, the market may correct to return to 1.0777 for a test from below and then resume trading inside the downtrend with the target at 1.0600. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving below 0. Considering that the market may yet continue downtrend, the line also expected to continue moving downwards.

As we can see in the H1 chart, the pair has completed the descending impulse at 1.0803 along with the correction towards 1.0827. Possibly, today the price may fall to return to 1.0803 and break it to the downside. After that, the instrument may form a new descending structure with the target at 1.0777. From the technical point of view, this scenario is confirmed by Stochastic Oscillator: its signal line is moving to break 80 and may continue falling to reach 50. Later, the line may break 50 as well, thus boosting the price chart decline.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

By Han Tan, Market Analyst, ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By CentralBankNews.info

By CentralBankNews.info

Ghana’s central bank left its monetary policy rate steady at 14.50 percent due to elevated risks to inflation after an exaggerated rise in food prices following two episodes of panic buying of food before fumigation of markets across the country and the partial lockdown in the two largest cities.
The Bank of Ghana (BOG), which cut its policy rate by 150 basis points in March and the primary reserve requirement, said the combination of the COVID-19 pandemic, which has reduced economic growth, and petroleum revenue shortfalls from lower oil prices had put a severe strain on the government’s budget and the current conditions in domestic debt markets would not allow financing of the gap without significantly raising interest rates.
Under the bank’s emergency financing provisions, which permits it to increase the limit of purchases of government securities, BOG said it had purchased the government’s COVID-19 relief bond with a face value of 5.5 billion cedi at the monetary policy rate with a 10-year tenor and a 2-year moratorium of principal and interest.
BOG added it was ready to continue with its asset purchase program up to 10 billion cedi in line with the current estimates of the financing gap from the pandemic.
In addition, BOG said it would lower the primary reserve ratio for savings and loan companies, and rural and community banks to 6 percent from 8 percent and the reserve ratio for micro finance companies to 8 percent from 10 percent, helping release liquidity to the SDI sector, or the specialized deposit-taking institutions which provides financing to small households and businesses.
Ghana’s inflation rate jumped to 10.6 percent in April from 7.8 percent in March, beyond BOG’s inflation target band, as food and non-alcoholic beverages rose to 14.4 percent while non-food inflation rose to 7.7 percent.
But BOG, which targets inflation at a midpoint of 8.0 percent within a range of plus/minus 2 percentage points, said it expects this rise in inflation peak in the second quarter and then return to the disinflation path in following quarters, settling within its target range by the end of the year.
“On the growth outlook, baseline projections show a sharp downturn in GDP growth with the economy operating below capacity in the medium-term,” BOG said.

The Bank of Ghana released the following statement:

Washington, DC – April 13, 2020. The Executive Board of the International Monetary Fund
(IMF) today approved the disbursement of SDR 738 million (about US$1 billion) to be drawn
under the Rapid Credit Facility (RCF). The disbursement will help address the urgent fiscal
and balance of payments needs that Ghana is facing, improve confidence, and catalyze
support from other development partners.
The COVID-19 pandemic is already impacting Ghana severely. Growth is slowing down,
financial conditions have tightened, and the exchange rate is under pressure. This has
resulted in large government and external financing needs. The authorities have timely and
proactively responded to contain the spread of the COVID-19 pandemic in Ghana and support
affected households and firms.
The IMF continues to monitor Ghana’s situation closely and stands ready to provide policy
advice and further support as needed.
Following the Executive Board’s discussion of Ghana, Mr. Zhang, Deputy Managing Director
and Chair, issued the following statement:
“The COVID-19 pandemic is impacting Ghana severely. Growth is projected to slow down,
financial conditions have tightened, and the exchange rate is under pressure. The budget
deficit is projected to widen this year given expected lower government revenues and higher
spending needs related to the pandemic. The Fund’s emergency financial assistance under
the Rapid Credit Facility will help address the country’s urgent financing needs, improve
confidence, and catalyze support from other international partners.
“The authorities’ response has been timely, targeted, and proactive, focused on increasing
health and social spending to support affected households and firms. The Central Bank has
recently taken steps to ensure adequate liquidity, preserve financial stability, and mitigate the
economic impact of the pandemic, while allowing for exchange rate flexibility to preserve
external buffers.
“The uncertain dynamics of the pandemic creates significant risks to the macroeconomic
outlook. Ghana continues to be classified at high risk of debt distress. The authorities remain
committed to policies consistent with strong growth, rapid poverty reduction, and
macroeconomic stability over the medium-term.
“Additional support from other development partners will be required and critical to close the
remaining external financing gap and ease budget constraints.”

feb 3 Ghana’s cedi, the world’s best-performing currency against the dollar this year, extended its advance on Monday as investors await a Eurobond salethat would bolster the government’s coffers.

By CentralBankNews.info

Pakistan’s central bank cut its key interest rate for the fourth time this year in light of a further improvement in the outlook for inflation following the government’s cut in fuel prices, which together  with a coordinated and broad-based policy response should provide support for economic recovery as the coronavirus pandemic subsides.
The State Bank of Pakistan (SBP) cut its policy rate by 100 basis points to 8.0 percent and has now cut it 525 points this year following two cuts at emergency monetary policy committee meetings in  March and then one further cut in April.
SBP noted the Covid-19 pandemic had created unique challenges for monetary policy due to its non-economic origin and the temporary disruption of economic activity required to combat it.
And while monetary policy can neither affect the rate of infection transmission nor prevent the fall in economic activity due to lockdowns, it can provide liquidity to households and businesses to help them through the temporary economic disruption through rate cuts and cheap leans.
These measures have also helped maintain credit flows, bolster the cash flow of borrowers and support asset prices, containing the tightening financial conditions that would otherwise have amplified the initial necessary contraction in activity, SBP said.
The government’s decision to cut petrol and diesel prices by 30-40 percent in response to the continued fall in global oil prices has improved the outlook for inflation, and SBP said it now expects inflation to fall close to the low end of its expected range of 11 to 12 percent for the current 2019/20 fiscal year, which ends July 1, and then to between 7 and 9 percent in 2020/21.
Inflation in Pakistan fell to 9.5 percent in April from 10.7 percent in March.
SBP said earlier volatility in domestic financial markets and foreign exchange markets had subsided in recent weeks despite a “considerable” tightening of global financial conditions but this had helped restore its foreign reserves to close to a pre-coronavirus level of over $US 12 billion.

The State Bank of Pakistan released the following statement:

By Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com