Weekly Analysis (07-06-2021)
Last Week’s Market Overview
The Australian dollar rallied after plummeting for three consecutive weeks. It rose 0.39% last week.
There was a monetary policy meeting by the RBA on last Tuesday. Despite the economy returning to pre-pandemic level, the RBA persisted its dovish attitude, refusing to tighten the policy before year 2024. All the monetary policy remained unchanged, so the rate stayed at 0.1% and the inflation target was kept between 2%-3% range. RBA also reiterated that the wage of employees would be the main indicator when setting interest rates. Surprisingly, the AUD surged after the meeting.
There was a sharp decline on Tuesday and its driver was the rally of the USD attribute to the better-than-expected ADP labor statistics. However, the slump was recovered on Friday, the AUD as a result printed a green bar for last week.
The oil performed extremely well in the previous week as it made a 4.18% rally and refreshed the two-and-a-half-year high.
The surge was catalysed by the good news from the 17th OPEC and non-OPEC Ministerial Meeting (ONOMM), which held on last Tuesday via videoconference. During the meeting, the participating oil suppliers reconfirmed to ease the production cut gradually. It also discussed the potential addition of Iranian barrels and concluded it would not cause concerns.
Since the vaccination plan is well on track in the US, China, the UK and the EU etc., the world economy is expected to recover fast, the demand for oil is likely to boost in next half year and year 2022. The optimism on the fundamentals continued to support for oil price.
Market Change Last Week
Market Focus This Week
Monetary Policy Meeting of European Central Bank (ECB)
The European Central Bank (ECB) is going to hold its Monetary Policy Meeting on the upcoming Thursday (10 June, 2021).
The pace of recovery was relative slow for the EU. Its quarterly GDP growth has not yet return into positive zone after the economic downturn caused by the pandemic. Luckily, the contraction reduced gradually, the GDP declined by less than 2% in Q1.
The outlook for the EU economy is positive thanks to its rapid vaccination progress. Its vaccination rate becomes one of the highest in the world. Some of the containment measures have been lifted and some of them are going to be relieved too. On the other hand, its core CPI is just 0.9%, which is much lower than ECB’s Target and the inflation of other developed countries like the US. Therefore, the ECB is unlikely to adjust its monetary policy so fast, it is highly possible to remain current policy unchanged in the upcoming meeting.
USD Index (D)
The greenback has been fluctuating around the psychological support at 90.00 for three weeks. Its price did not make a significant change in the previous week.
From technical perspective, both two-line MAs and the RSI are indecisive. First, the mouth of the golden cross is almost close. Second, the RSI is lying near the 50-mark. Nonetheless, its price has already broken out the upper bound of the downtrend channel. Therefore, there is a potential trend reversal in the near term.
The USD is resting slightly above 90.00 now. It is possible for the dollar to retain the sideways movement and confirm the breakout above 90.00 in next few days. It may be an end of the downtrend if the price can stay firmly above the support in the coming week.
Support: 90.00, 89.65, 89.30, 88.20
Resistance: 91.35, 92.00, 93.40
It was an excellent week for oil as it had a sharp rise and surpassed the strong resistance at 67.50 finally.
In terms of technical analysis, the golden cross formed by the two-line MAs and the RSI with readings above 50-mark support for the continuation of the current uptrend. Additionally, the prices of the oil are confined very well within the uptrend channel.
As a result, the outlook for the black gold remains optimistic. Please be reminded that the breakout has just occurred and the RSI has just entered the overbought zone, it is usual to see a temporary retracement in the coming week or the next week.
Support: 67.50, 63.50, 57.50
Resistance: 71.50, 77.00
After making a breakout, the offshore Renminbi pulled back by 0.43% because of the selling pressure from the bears.
The RSI is staying within the neutral zone above 50-interval. Moreover, the golden cross started since mid-April persists on the chart. Furthermore, the prices of the Yuan are lying between the upper and lower bound of the uptrend channel. Therefore, the price movement of CNH tends to be positive in the technical aspect.
All in all, the Chinese Yuan may extend its pullback in the upcoming few days. However, it is currently close to the significant support at 0.15580. Therefore, the retracement is unlikely to last for long time. It may be resisted around 0.15580 support and then resume its uptrend.
Support: 0.15580, 0.15440, 0.15350
Resistance: 0.15780, 0.15990
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