Market Watch review. 03.03.2021

In today's release, we’ll cover the following topics:

• RBA leaves main interest rate unchanged.
• Unemployment in Germany.
• Correction in the oil market.

On Tuesday, the Reserve Bank of Australia left the main interest rate, as well as key monetary policy conditions unchanged, thereby providing moderate support to the Australian currency. As a result, the quotes of the AUD/USD currency pair remained above the uptrend line. This indicates the potential growth of the Australian dollar in the medium term.

Now let’s shift to the European trading session. According to the German labor market report, the unemployment rate remained unchanged in February, while the number of unemployed increased. This release put short-term pressure on the EUR/USD pair, which led to a slight decline in the exchange rate of the single European currency. However, the demand under the psychological support level of 1.2000 kept the quotes from developing a more powerful wave of decline, which may also be due to the publication of a moderately positive report on inflation in the eurozone.

Moving on to the oil market. At the beginning of this week, oil continued the downward correction, which began on Friday last week, and dropped by another $1.5. However, this decline is assumed to be short-term, as economists from Goldman Sachs expect a commodity boom and, as a result, a long-term rise in oil prices. It is important to note that a bullish scenario is only possible if oil production is further limited by all OPEC members and allies. Let me remind you that on March 4 it will become known whether the OPEC+ members are ready to cut oil production by another half a million barrels per day, as well as whether Saudi Arabia will continue to voluntarily limit its own production by 1 million barrels per day.

Of course, such a scenario can contribute to the growth of oil prices, but already a number of experts doubt its realism. The reason for this is that now oil is held at the maximum levels of 2020, despite the fact that oil reserves are still higher than the average value for 5 years. Therefore, without an additional strong growth driver for the black gold market, the risk of a deeper correction remains elevated.

In conclusion, I would like to draw your attention to the publication of the final data on changes in the level of business activity in the service sector in most European countries. A strong market reaction to this release is possible only if there is an unexpected deviation from the preliminary data. The growth of indicators will have a positive impact on the euro exchange rate.

It is also necessary to pay attention to the upcoming publication of the index of business activity in the service sector for the United States. Even a moderate increase in the current indicator in relation to the previous value can support the US dollar. And, of course, let’s not forget about the publication of the report on changes in oil reserves in the United States. A sharp decline in oil reserves will give a signal to buyers to enter the market.

Closely monitor the news background and be prepared for all the surprises of the market.