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Coronavirus: a huge debt crisis in Europe

In 2012, at the height of Italy's sovereign debt crisis, Mario Draghi saved the euro by saying that the European Central Bank (ECB) would do everything possible to save the euro. Today, when Italy is at the epicenter of the coronavirus pandemic, the strength of the euro will again be tested by the full-blown Italian crisis.
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We can assume that for the sake of the Italian and world economy and despite the high financial costs, Europe will have the political will to do everything possible to save the euro. So we are waiting for the repetition of the scripts.

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🔥Market Watch🔥

💥Cheap money💥



The next financial crisis has already begun and it is still extremely difficult to assess its scale. A number of experts say that the economic consequences associated with this pandemic will be comparable with the consequences of the Second World War. At this stage, I would consider this forecast as pessimistic, although it cannot be ruled out.
Let me remind you that the vast majority of companies are forced to quarantine and, as a result, dismiss or send some employees on unpaid leave. During the first week of quarantine in the USA the number of initial applications for unemployment benefits increased by 3.3 million, while the usual number averages around 200 thousand. Of course, this news put pressure on the USD
Additional pressure on the US currency was exerted by information about the government’s readiness to allocate more than $ 2 trillion of financial assistance for business and the US population. On Friday, March 27, Donald Trump signed the corresponding act for the allocation of the $ 2.2, which caused the USD index to fall back to levels seen in the middle of the month. All these factors and some others have caused the USD to fall by more than 5% in just a few days.
I’ll draw your attention to the GBP / USD currency pair, which has strengthened by almost 9% over the same period. This growth was due not only to a weakening USD, but also a fairly strong strengthening of GBP against most currencies, including JPY and EUR.
Now let's move on to the oil market. The first trading day of the week started with a gap down - the open price of the market was below the closing price on Friday by about $ 1 or 5%. The reason for the latest wave of sales was information that oil companies are running out of storage. At the same time, demand for oil from businesses and an increase in physical demand for raw materials is not expected to pick up in the nearest future so there is a risk of a further decline in black gold prices.
Nevertheless, it is not necessary to believe that the price of American WTI oil will remain at $ 20, As a result, with every dip it may be an opportunity to open a long position at a lower price. At the same time, traders choosing this strategy should take into account the risk of a short-term decline.

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This week, the OPEC+ agreement will cease to exist, while the world continues to fight the coronavirus

Starting April 1, OPEC and its former allies will be free from obligations to reduce oil production. A number of large manufacturers have already announced their intention to increase supplies, but the coronavirus may make adjustments to their plans. Global oil demand is in free fall, and storage will soon be full.
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Weekly Calendar:
03/30/2020, Monday
- Meeting of finance ministers on the use of stabilization measures
03/31/2020, Tuesday
- #PMI manufacturing industries in China
- March EU #inflation
04/01/2020, Wednesday
- The cessation of the existence of OPEC +
- #NonFarmPayroll US labor market preliminary data
- US Crude Oil Reserves
- #unemployment in February, forecast 7,4%
04/02/2020, Thursday
- US #tradebalance
05/03/2020, Friday
- #NonFarmPayroll US labor market data

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China says manufacturing activity expanded in March, defying expectations of a contraction

PMI in China in March (data from the National Bureau of Statistics):
• Industry - 52.0 vs 35.7 in February
• Services sector - 52.3 vs 29.6
• Composite (industry + services) - 53.0 vs 28.9
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On Tuesday China announced that its official Purchasing Manager's Index for March was 52.0, which exceeded expectations for an economy affected by the outbreak of coronavirus. The growth is significant after the disastrous data from February (February PMI of China - 35.7).
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This only means that most companies, indeed, resumed their work. But it is obvious that Chinese business is now facing a serious collapse in external demand due to quarantines in the United States and Europe. Therefore, a return to the normal level of economic activity seems to be very smooth.
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Fed will launch a new credit line for foreign central banks

The repo mechanism for foreign central banks will be launched on April 6, and its duration will be at least 6 months.

The Fed has already launched a number of programs to provide dollar loans at close to zero interest rates to other central banks for up to 84 days to ensure sufficient dollar liquidity outside the United States.

Earlier this month, the Fed reopened swap lines with five central banks in Canada, Japan and Europe, and began to provide loans of up to $60 billion to regulators in Australia, Brazil, Mexico and six other countries.

Many business transactions in the world are carried out in dollars, while international organizations issue dollar loans. The swap lines were actively used by the Fed in 2008 and 2009.

The Fed’s scale of action surpasses all that the regulator did during the 2008 global financial crisis and the debt crisis in the eurozone 2011-2012, since now dollar financing is available to a much larger number of central banks in developing economies.
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OPEC oil output only rises by 90,000 bpd in March

According to Reuters estimates, OPEC oil production changed slightly in March - an increase of 90 thousand bps.

The main contribution was made by Saudi Arabia (+100 thousand bpd), Iraq (+40 thousand bpd), United Arab Emirates (+60 thousand bpd), Nigeria (+30 thousand bpd), Angola (+20 thousand bpd).
The decline in production continued in Iran (-70 thousand bpd), Libya (-45 thousand bpd), Venezuela (-40 thousand bpd).
As we all recall, the agreement on the limitation of production under the OPEC+ transaction has ceased to be effective from today.
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On the first day of April, when the OPEC+ restrictions ceased to apply, Saudi Arabia began to fulfill the promise to increase oil supplies to the market, however, a number of tankers leave Saudi ports with oil without their final destination (which once again confirms that the oil wars actually occur in verbal form (in the media)).
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PMI: Is business activity growing?

The global PMI, which characterizes the business environment in world industry, rose from 47.1 to 47.6 points in March. Formally, this allows us to speak of a slowdown in the recession, but, in fact, the entire growth of the index was exclusively associated with China, while in all other countries the recession sharply intensified.

🇺🇸 US PMI fell to 48.5 in March, compared with 50.7 in February.

🇬🇧UK PMI fell to a three-month low of 47.8, compared with 51.7 in February.

🇪🇺Eurozone PMI fell to 44.5 in March, the lowest in 92 months, from 49.2 in February.

🇯🇵 Japan's PMI slowed the fastest after the 2011 tsunami - fell to 44.8 in March, compared with 47.8 in February.
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What we are witnessing is a global industrial recession, and in April its scale is likely to increase amid the introduction of quarantines in a wide range of countries.
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US Unemployment: new records

For the week, 6.648 million people applied for unemployment benefits in the United States - 30 times more than in ordinary weeks. A week earlier - 3.283 million.
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Ministry of Labor data provide insights into the severity of the economic crisis caused by the coronavirus pandemic. The COVID-19 outbreak led to the freezing of a large part of the economy in the United States and in dozens of other countries of the world.
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Global cost of coronavirus may reach $4.1 trillion

The cost of damage caused by the coronavirus pandemic can reach $4.1 trillion, or almost 5% of the global gross domestic product, depending on the spread of the disease in Europe, the United States and other large economies, the Asian Development Bank said.

A shorter containment period could limit the damage to $2 trillion, or 2.3% of world production. Developing countries in the Asian region, including China, will account for 36% of the total cost of the pandemic.

Meanwhile, on March 6, ADB believed that a virus outbreak would cost the world economy $347 billion, and growth rates would decline by as much as 0.4%. Since then, the epicenter of the epidemic has shifted from China to Europe and the United States, with the number of reported cases currently exceeding 1 million.

ADB lowered its growth forecast for Asia in 2020 from 5.5% to 2.2% last September. The forecast for China has been reduced from 6% to 2.3%. For comparison: last year, the country's economy grew by 6.1%. According to the report, this year there will be weak growth in all sub-regions of developing countries in Asia.

Countries dependent on tourism and raw materials, including Thailand, will suffer the most from the pandemic. If the epidemic can be stopped within three to six months, the economy will recover faster.

Inflation is likely to accelerate due to rising food prices, even despite declining economic activity; but low commodity prices will help smooth out price hikes, the ADB report said.
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🔥Market Watch🔥

💥Incredible rally in the oil market💥


We conclude the week with the issues surrounding financial markets which of course is a, lack of liquidity and, as a result, panic.
I will begin today's review with an event that occurred on Wednesday, April 1. Just before the opening of the American trading session which is also the end of the trading session in London, we observed incredibly strong growth of the AUD throughout the market. It is worth noting that the growth of the AUD/USD pair, which exceeded 130 points, lasted only 5 minutes, and over the next 5 minutes, the currency was sold off and more than half of the gains were lost.

Given the nature of the price movement, I can assume that the reason is the lack of liquidity at the time of opening of one trading session while the other session was closing
Another strange factor this week was the sudden rise in oil prices. We are talking about a record daily growth in the price of American WTI grade oil, which exceeded 30%. At the same time, a significant part of the upward movement occurred in less than an hour and exceeded $ 5. In this case, the driver of such a rally was Donald Trump's statement where he is confident that Russia and Saudi Arabia will reduce oil production by 10 million barrels, and possibly more.

Since this is almost half of the total production by these countries, the likelihood of such a scenario is slim. Accordingly, I assume that we are talking not only about Russia and Saudi Arabia, but about the whole OPEC cartel and its allies, which produce more than 40 million barrels per day. Given the current oversupply of oil, which is already estimated at 35%, I believe that OPEC+ will find a compromise to support the oil market and its own economies.
Moving to the American trading session, I will draw your attention to the upcoming publication of the latest labor market statistics. Given the disastrous figures on the initial applications for unemployment benefits, there is a risk the latest figures will be below analysts’ expectations and I expect weakness in the USD.

We will conclude this issue with an overview of the EUR/USD currency pair.
After a false breakdown of resistance at 1.0950, it was decided to open a short position when retesting this level. A Stop Loss was set at the previous maximum, and A Take Profit at 1.0850. As we can see now, the pair collapsed under the psychological level of 1.0800, which allowed the trader to earn $1000 with minimal risk.

The above review is not a direct guide to trading, and can only be classed as recommendations.

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Saudi Arabia calls for OPEC emergency meeting

Saudi Arabia called for an urgent meeting of OPEC+ member countries, Saudi Press Agency reported April 2.
The purpose of the meeting is to conclude an agreement between OPEC+ countries that will restore the "desired balance" in the oil market.
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This news is contrasting with the background of the previous position of Saudi Arabia - rejection of anyone’s position in general, conversation from a position of strength, etc.

Moreover, OPEC will invite the Texas oil regulator to participate in the OPEC+ meeting, which will take place on April 6 via teleconference.
- “We invite the United States as the main producer of oil in the world” (c)
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📆Economic calendar for the week 📆

Trends of the current week are undoubtedly oil events:

▪OPEC + is mobilizing: the OPEC + meeting should be held on April 9. However, there are some disagreements that may delay this meeting for at least 1 day.
According to Bloomberg, oil diplomats are trying their best to convene a meeting of G20 energy ministers on April 10 to attract the United States to an agreement on oil.
The transfer of negotiations on the oil market from the OPEC+ format to the G20 will not only be a political victory for Russia, and indeed Saudi Arabia (the degree of independence of the kingdom from the United States will increase). This will be a practical step towards multipolarity.

▪#coronavirus
A sharp decrease in the number of cases:
After a sharp take-off the day before (more than 100K new cases per day), today there is an equally sharp decrease in this indicator (about 70K), in almost all countries. Total: 1,278,993 / 69,723
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Weekly Calendar:

04/06/2020, Monday
🇺🇸 The new wave of QE from the US Federal Reserve for the Central Bank of the world (launch of a temporary repo mechanism for foreign central banks).
🇬🇧 UK Construction #PMI.

04/07/2020, Tuesday
🇦🇺 RBA Interest Rate Decision.
🇪🇺 EU Coronavirus Emergency Ministerial Meeting.
🇨🇦 Canada Ivey #PMI.

04/08/2020, Wednesday
🛢US Crude Oil Reserves;
🇺🇸 US Federal Open Market Committee (FOMC) Meeting Minutes.

04/09/2020, Thursday
🛢OPEC meeting + (+ USA).
🇪🇺ECB Publishes Account of Monetary Policy Meeting;
🇺🇸 #PPI US Producer Price Index.

04/10/2020, Friday
🥳 Good Friday: day off in the UK, France, Germany and other countries, US markets are closed.
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🔥Market Watch🔥

💥OPEC+ deal💥


Today, the oil market has opened with a fairly strong bearish gap, but by the opening of the European trading session, the situation has changed significantly.

Recall that on Thursday, Donald Trump announced that Saudi Arabia and Russia could reduce oil production by as much as 10 million barrels. There was also information about the OPEC+ meeting to discuss the introduction of quotas for oil production. All this provided additional support for oil, which last week pushed the price of WTI American crude oil above $30.0 per barrel.

All information coming out from Russia regarding the “oil deal” indicates a high probability of reaching an agreement. Nevertheless, the activity of buyers remains moderate near the $30 a barrel mark. Therefore, only further action from the United States and Saudi Arabia can return buyers to the market.

I’ll draw your attention to the USD/CAD currency pair, which has fallen by 180 points. At the same time, demand around the support level of 1.4100 remains strong, which limits the selling pressure. I’ll also draw your attention to the fact that on the way to 1.3990 there is a support level of 1.4060, which should provide additional support. Given all this, only another strong rise in oil prices can lead to a collapse of the pair to 1.3990.

Moving to the American session, the economic calendar is looking pretty empty. At the same time, trading activity should remain active amid clear uncertainty regarding short-term prospects, due to the spread of the COVID-19 virus.

Given the difficult economic situation in the eurozone and especially in Italy and Spain, compared with the United States, I expect a prolonged weakening of the EUR and, as a consequence, the EUR/USD currency pair. The immediate target for sellers is the 1.0770 mark, while there is a risk of a pair falling to 1.0720 and further to 1.0650. This scenario remains a priority until the quote returns above 1.0890.

The above review is not a direct guide to trading, and can only be classed as recommendations.

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💧Oil is cheaper than water: what happens if the new OPEC+ deal fails? 💧

🚩 The risks of a possible disruption of the OPEC+ meeting, scheduled for April 9, remain high. Last weekend, Russia and Saudi Arabia exchanged "taunts" at each other about the collapse of the oil market, and the United States, which actively joined in the discussion of the current situation, did not put forward any concrete proposals.

🚩 At the end of last week, oil prices showed significant growth during two consecutive trading sessions on reports that the alliance will discuss the possibility of reducing oil production by 10 million barrels per day in total. On Monday, April 6, prices started to decline after information on the postponement of the OPEC+ meeting from April 6 to April 9.

🚩 The OPEC + meeting on Monday lost its meaning, as the United States so far does not want to participate in the deal. Last weekend, Russia and Saudi Arabia exchanged accusations against each other over the collapse of the oil market. However, the problem is not in the positions of traditional manufacturers, but in the intentions of the United States, the expert believes. At the end of last week, Trump spoke about the readiness of Russia and Saudi Arabia to reduce production by 10 million barrels, but Washington, for its part, has not put forward any proposals.

🚩It is still very early to take the decline in production for granted, the probability of failure of the negotiations is still quite high. If the United States is not ready to participate in the deal, the market will follow the path of a longer period of low prices that shale companies will ruin. By the way, this process has already begun ...
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⛔ RBA rate: Bank of Australia maintains interest rate at 0.25% ⛔

At its April afternoon meeting, the RBA voted to keep interest rates unchanged, a few weeks after they were cut from 0.5% to 0.25% during an unscheduled meeting in mid-March, as a result of the escalation of the coronavirus crisis.
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#AUDUSD responded with a powerful wave of growth in the national currency. However, one should not take the decision to keep the rate unchanged positively, as the main drivers of the foreign exchange market are now in a slightly different plane:

🔹Yesterday, we saw a most powerful rise in stock: the S&P500 index added 7%. Positive sentiments persist today in Asia. Oil prices on the eve of the expected OPEC+ meeting on Thursday are held at high levels. Bloomberg reports that the United States will not participate in this meeting.

🔹Analysts at #FiboGroup believe that the bottom phase has passed and a full reversal is brewing, in all types of markets. The return of the economy to normal will not have a “V” shaped character and will be stretched and smoother - due to global quarantine, recovery will be constrained by negative macro statistics, which for another 2-3 months will reflect the consequences of massive stops in state economies, “U” - figurative character.
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