Daily Market Outlook, August 11, 2020
The US futures market has spent most of the overnight session in positive territory and currently shows a small gain. However, underneath the surface the market has a much more positive tone, with some evident sector rotation out of big tech and growth stocks and into value and smaller cap stocks. The Russell 2000 index of smaller cap stocks is up 1.3%, following its 1.6% gain on Friday. Over the past two days the S&P500 has barely increased.
There has been no fresh news on the fiscal stimulus bill up for negotiation between the Republicans and Democrats. The weekend announcement by President Trump to sign an executive order that would fill a gap in the meantime is seen as an overreach and questionable from a legal perspective. The market is still taking the view that a deal will soon be reached. Treasury Secretary Mnuchin told CNBC that a compromise could be reached with Democratic leaders this week.
The rolling 7-day average for new cases of COVID19 in the US continues to trend lower, with that metric down to around 54k compared to 67k three weeks ago.
China said that it will sanction 11 US officials in retaliation for the US sanctioning 11 Chinese officials, including Hong Kong Chief Executive Carrie Lam. The list includes four Senators and a Congressman but doesn’t include any members of the Trump Administration, so is really just a symbolic gesture. The market took this news in its stride, with more focus on the meeting at the end of the week between key US and Chinese trade officials on a progress report on the phase 1 trade deal.
The British Retail Consortium’s measure of like-for-like retail sales posted a 4.3% annual rise in July. Food, furniture and other homeware sales were reported to be up strongly. Meanwhile, UK labour market data published this morning for the 3 months to June showed the unemployment rate surprisingly holding at 3.9%, despite a 220k fall in employment. However jobless claims rose by 94.4k in July.
Today’s German ZEW survey will provide one of the first gauges of Eurozone economic activity in August. As a survey of financial analysts it is often seen as less reliable than the PMI or IFO surveys, both due in the next two weeks. However, due to its timeliness and expectations component it has sometimes proved to be a useful leading indicator. The headline ZEW measure has picked up sharply since March, although expectations slipped modestly in July for the first time in four months. Markets will be watching for evidence that what appears to be an initial strong pickup in the German economy (and that of the Eurozone as a whole) from lockdown is continuing.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1800 (673M)
- AUDUSD: 0.7200 (286M)
- USDJPY: 105.15-20 (922M), 106.00 (766M), 106.15 (230M), 106.40-50 (500M)
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 actas 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!