Daily Market Outlook, August 7, 2020
Asian equity market is down this morning led by a decline of more than 2% in China’s indices. Reports attribute the weakness to President Trump’s signing of executive orders targeting TikTok and WeChat. This would mean that US residents must stop doing business with the Chinese companies within 45 days.
China posted a wider than-expected July trade surplus as exports rebounded strongly but import growth remained weak. The UK government has announced that travellers from Belgium, the Bahamas and Andorra must quarantine in the UK due to a rise in Covid-19 cases. Some media sources are reporting that France may soon be added to the list.
Just released German industrial production data showed an 8.9% rise in June following May’s 7.8% gain. That still leaves output almost 12% below its level of a year ago. However, a 27.9% rise in June German factory orders points to further increases ahead suggesting that some parts of the German economy is initially rebounding strongly from lockdown. Italian industrial production also surprised on the upside in June. French and Spanish data are also due this morning and are predicted to provide further indications of a sizeable initial post-lockdown pickup in factory activity in the Eurozone.
In the US, the latest monthly labour market report (for July), which is usually seen as an important bellwether of economic conditions, will be watched for indications whether the post lockdown rebound in economic activity is stalling. The latest weekly initial jobless claims, which fell to a pandemic low following two weeks of rises, provided a positive surprise yesterday. Some other data, including both of the July ISM surveys have also surprised on the upside this week. Nevertheless, Fed policymakers continue to point to concerns about recent developments and the July ADP employment indicator highlighted downside risks for today’s report. Look for a smaller rise of 1.5m in payrolls after last month’s 4.8m gain and modest further drop in the unemployment rate to 10.6% from 11.1%. Those numbers would be indicative of a deceleration but not yet a stalling in economic activity.
What happens with regard to a new US fiscal stimulus package will have a significant impact on expectations of near term economic growth. Reports earlier this week suggested that a deal would be agreed before the end of today allowing Congress to vote on it next week. However, some media sources are now saying that talks have stalled. If that is the case President Trump has said that he will use his executive powers to pass some measures including an eviction moratorium, a boost to unemployment benefits and a temporary suspension of the payroll tax. It is unclear, however, that he has the legal authority to do so.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: .1765-70 (600M), 1.1800 (426M), 1.1850 (1.2BLN), 1.1890 (390M) 1.1900 (1.5BLN), 1.1925 (644M).
- AUDUSD: 0.7100 (467M), 0.7220 (280M)
- USDJPY: 104.85-90 (600M), 105.00 (480M), 105.50 (800M) 105.80 (750M), 106.00 (485M)
- USD/CAD: 1.3175-80 (1BLN), 1.3200 (1.5BLN), 1.3250-55 (600M), 1.3300 (435M)
Technical & Trade Views
EURUSD Bias: Bullish above 1.1820 Bearish Below
EURUSD From a technical and trading perspective, as 1.1810 acts as resistance anticipate another corrective leg lower to test bids back towards 1.16. A daily close back through 1.1820 would negate the corrective thesis, opening a retest of 1.19 UPDATE 1.19 retest played out now there is a potential for a double top to develop, will need to see a H4 close sub 1.1850 to open a retest of 1.17 support
GBPUSD Bias: Bullish above 1.30 targeting 1.3250
GBPUSD From a technical and trading perspective, price tested pivotal trendline resistance at 1.3166, anticipated profit taking pull back playing out. As 1.30 continues to attract buying interest look for a test of 1.3250.
USDJPY Bias: Bullish above 105.50 targeting 107.50
USDJPY From a technical and trading perspective, anticipated test of the equality objective at 104.50 attract big bids, printing a key reversal pattern on Friday, as discussed in today’s Chart Hit, as 105.50 acts as a support look for a test of the equality objective to 107.50.
AUDUSD Bias: Bearish below .7170/90 targeting .6950
AUDUSD From a technical and trading perspective, test of stops and offers above .7220 has delivered the anticipated corrective phase, as .7170/90 now acts as resistance look for a test .6950 as ascending support. UPDATE potential double top in place to deliver the test of ascending trend channel support now at .7000
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!