Daily Market Outlook, August 12, 2020
Asian equity market is mostly lower this morning after Wall Street ended down yesterday. Some reports attribute the decline to concerns about the US ban on TikTok.
The New Zealand central bank left interest rates unchanged at 0.25% at its policy update but increased QE purchases. Its forecasts showed no cuts in interest rates through 2021Q1, however it said that it is preparing for the possibility of negative rates.
In the US, Democratic Presidential candidate Joe Biden has chosen California Senator Kamala Harris as his running mate.
In the UK, a media report highlights that Chancellor Sunak may postpone his Autumn Budget in the event of another wave of Covid-19 infections. UK GDP posted a stronger-than-expected gain of 8.7% in June. The acceleration from May’s more modest, but upwardly revised 2.4% increase reflected stronger growth in services (+7.7%) as more of the dominant sector emerged from lockdown. Construction (+23.5%) and manufacturing (+11%) also recorded more rapid growth in output. Despite the rebound in June, GDP still fell by 20.4% in Q2, the biggest quarterly decline on record.
Eurozone industrial production appears to have risen sharply for a second straight month in June. Already released data for France, Germany, Italy and Spain showed sizeable increases, and as a result, look for a gain for the region as a whole of 9.5% (down from 12.4% in May). Such an outturn would be a further confirmation of a strong rebound in the Eurozone economy from lockdown, although it should be noted that manufacturing is less inconvenienced by social distancing measures than some other sectors.
Annual US CPI inflation is expected to have accelerated modestly to 0.7% in July from 0.6% in June. This reflects the impact of a higher oil price as the ‘core’ measure (excluding food and energy) of inflation is expected to have eased slightly to 1.1% from 1.2%. Overall, today’s data is likely to support the view that inflation will remain well below the Fed’s target for some considerable time. As a result, it will not stand in the way of the US central bank’s intention to keep monetary policy growth supportive. Several Fed policymakers are set to speak today but it is unlikely that they will have anything new to say about the outlook. They will almost certainly echo comments made by other Fed officials about the downside economic risks and emphasise the need for more fiscal stimulus.
Early Thursday morning the July Australian labour market report will be released. As most ‘official’ Aussie data is quarterly this is one of their timeliest updates. The latest release is also of particular interest given concerns about a potential negative economic impact from the pickup in Covid-19 cases in Victoria. The consensus expectation is that the unemployment rate will move to a new cycle high of 7.8%.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1700 (386M), 1.1755-60 (400M),
- USDJPY: 106.00 (620M), 106.65 (200M)
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 UPDATE momentum divergence addressed, as 1.18 acts as as resistance look for a test of 1.1650
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. UPDATE as 1.13160 acts as resistance potential for 1.2860 before higher
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!