The USD Remains Strong, While Gold and Stock Indices Rise (Weekly Review)

The volatility in the foreign exchange market remained predominantly low last week. The influence of the coronavirus epidemic in China is weakening, as evidenced by the next surge in bullish sentiment on the stock exchanges. Though it should be noted that gold is relentlessly approaching the highs of this year, contrary to the traditional market “logic” - the growth of stock indices is accompanied by a decrease in gold, and vice versa. Perhaps the growth of gold "hints" at an early correction of the indices, although one cannot be 100% sure.

We should also mention that gold maintains a positive attitude, while the CHF and the JPY - other “safe haven assets” - are under a steady pressure of the USD, which is stubbornly trying to break the resistance of 110.00 paired with the JPY and rose to the level of 0.9826 paired with the CHF. As long as stock indices remain dominated by bulls, pressure on the CHF and the JPY will remain.

The EUR continues to decline against the USD, as well as against the GBP, which received an incentive to grow amid a reshuffle in the British government. Weak statistics for Germany and the Eurozone leaves the EUR no chances for a reversal, but it should be borne in mind that in technical terms it looks oversold, which increases the risks of correction. Perhaps the level of 1.0800 will be convenient for taking profit on short positions, although under the extremely low EUR/USD volatility, the pair's recovery may be quite sluggish.

Schedule for this week:

Monday, February 17
10:00 GMT - Eurozone. Construction Output;
USA. Presidents' Day.

Tuesday, February 18 
00:30 GMT - Australia. Reserve Bank of Australia Meeting Minutes;
09:30 GMT — United Kingdom. ILO Unemployment Rate (3M) (Dec);
09:30 GMT - United Kingdom. Average Earnings (3M) (Dec);
10:00 GMT - Germany. ZEW Economic Sentiment;
10:00 GMT  - Eurozone. ZEW Economic Sentiment.

Wednesday, February 19
21:50 GMT - Japan. Machinery Orders;
21:50 GMT - Japan. Trade Balance;
21:50 GMT - Japan. Import/Export;
09:30 GMT - United Kingdom. Consumer Price Index (CPI);
09:30 GMT - United Kingdom. Core Consumer Price Index (CPI);
13:30 GMT - Canada. Core Consumer Price Index (CPI);
13:30 GMT - Canada. Consumer Price Index (CPI);
13:30 GMT - USA. Housing Starts;
19:00 GMT - USA. Federal Open Market Committee (FOMC) Meeting Minutes.

Thursday, February 20
00:30 GMT - Australia. Employment Rate;
00:30 GMT - Australia. Unemployment Rate;
01:30 GMT - PRC. People's Bank of China Loan Prime Rate;
07:00 GMT - Germany. GfK Consumer Climate;
09:30 GMT - United Kingdom. Retail Sales;
12:30 GMT - Eurozone. ECB Publishes Account of Monetary Policy Meeting;
13:30 GMT - USA. Initial Jobless Claims.

Friday, February 21
23:30 GMT - Japan. National Consumer Price Index (CPI);
08:30 GMT - Germany. Markit Composite Purchasing Managers Index (PMI);
08:30 GMT - Germany. Markit Manufacturing Purchasing Managers Index (PMI);
09:00 GMT - Eurozone. Markit Composite Manufacturing Purchasing Managers Index (PMI);
09:30 GMT - United Kingdom. Markit Services Purchasing Managers Index (PMI);
10:00 GMT - Eurozone. Consumer Price Index (CPI);
10:00 GMT - Eurozone. Core Consumer Price Index (CPI);
13:30 GMT - Canada. Retail Sales;
14:45 GMT - USA. Markit Manufacturing Purchasing Managers Index (PMI).

Author: Anthony Porter, IAFT Analyst