Daily Market Outlook, October 2, 2020
Risk sentiment in Asia was under pressure after President Trump and his wife Melania tested positive for Covid-19. It is not clear if upcoming Presidential debates will still go ahead and it raises questions on what might happen if a candidate becomes seriously ill.
A number of Asian markets were closed, but trading in Japan saw the Nikkei erase earlier gains. Futures markets point to a lower start to equity markets in Europe. Earlier, it was reported that there was no compromise on a US fiscal stimulus package. The House of Representatives passed a $2.2tn Democrat bill, but it is not expected to get through the Republican-controlled Senate.
The main focus today is the final US employment report before the election. It is also the last scheduled day of the UK-EU negotiations. Before the US data, this morning’s Eurozone flash CPI inflation figures for September are expected to be weaker than originally predicted following the release of national figures earlier this week. Having already fallen to -0.2%y/y in August, we now expect Eurozone headline inflation to decline further into negative territory to -0.4%y/y, driven to a large degree by a decline in core CPI (excluding food and energy) to just 0.2%y/y from 0.4%y/y. The ECB has already indicated that it expects headline inflation to be negative in the remainder of the year. Still, with risks to the economic outlook remaining tilted to the downside, there remains the possibility the ECB adds more stimulus, potentially later in the year.
In the US, despite concerns over the summer months that a rise in Covid-19 cases might lead to a sharp slowdown in the economy, so far activity appears to be holding up relatively well. Nevertheless, recent weekly unemployment claims data suggest that the rebound in the jobs market is slowing. Consequently expect a smaller rise in nonfarm employment in September to 920k from 1371k in August, and only a modest further fall in the unemployment rate to 8.2% from 8.4%. That still leaves the unemployment rate elevated compared to the spring.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1700 (1.3BLN), 1.1750 (2BLN), 1.1800 (1.7BLN)
- USDJPY: 104.50 (565M), 104.90 (410M), 105.50 (766M)
- GBPUSD: 1.2750 (161M), 1.2825 (150M), 1.2900 (201M)
- AUDUSD: 0.7140 (218M), 0.7160 (301M), 0.7250 (480M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.1750 Bullish above
EURUSD From a technical and trading perspective,test of 1.1750 trendline attracted fresh bids, as 1.18 now acts as interim support look for a test of offers and stops above 1.1950 UPDATE as 1.1700/50 acts as support expect continued rotation in 1.17/1.19 range, a breach of 1.17 would suggest a deeper correction underway to challenge bids at 1.16. UPDATE as 1.1750 now acts as resistance look a challenge of bids and stops below 1.16
Flow reports suggest downside bids limited through the 1.1620 area opening the downside through to the 1.1480-1.1500 level in the short, Topside offers likely to be limited now through the 1.1760 level but increasing in resistance into the 1.1780-1.1800 area with weak stops likely on a push through the 1.1820-30 area for a quick stab towards the 1.1850 area
GBPUSD Bias: Bearish below 1.2850 Bullish above
GBPUSD From a technical and trading perspective, test of the pivotal primary trendline support at 1.2830/50 stalls downside for now, however as 1.3000 acts as resistance look for renewed downside to target 1.2650 next UPDATE as 1.2850 acts as resistance look for a test of bids to 1.26/1.2570 UPDATE as 1.28 now acts as support lok for a test of 1.30, a breach of 1.2750 would suggest a false upside break and resumption of downtrend
Flow reports suggest topside offers light through to the 1.2900 level with offers congested through to the 1.2930 area before lighter offers begin to appear into the sentimental 1.2950 area stronger offers are then likely on any approach to the 1.3000 area with strong stops through the level and the market then opening for further gains. Downside bids light through the 1.2800 area with weak stops on a move through likely to be light and quickly absorbed on any dip through to the congested 1.2750 areas with stronger bids into the 1.2700 level.
USDJPY Bias: Bearish below 105.50 Bullish above
USDJPY From a technical and trading perspective, as 106.50 acts as resistance look for another test of support at 105.50 failure to find sufficient bids here will expose 104.18 again. UPDATE as 105.50 now acts as resistance look for a test of bids towards 103.80 as the next downside objective. UPDATE continued rotation around 105.50, as 105.10 supports look for a test of 106.00
Flow reports suggest offers strong into 106.00 area with stops on a break through the 106.20-30 area, offers remain into the 107.00-20 area with congestion likely to be mixed with weak stops on a break of the level and that congestion likely to continue on any move into the 107.60 area where stronger offers are likely to appear, maybe another round of stops before stronger offers then appearing through to the 108.00 level. Downside bids into the 104.20 light and then increasing on any dips to the 104.00 level and stronger stops through the 103.80 level, any break here opens the chance of a deeper move through to the 103.00 level before stronger bids start to appear with possible option related buyers.
AUDUSD Bias: Bullish above .7150 Bearish below
AUDUSD From a technical and trading perspective, as .7220 now acts as support, look for a test of psychological .7500. Only a daily closing breach of .7220 would concern the bullish thesis opening a retest of .7100. UPDATE as .7220 now acts as resistance look for a test of bids to .7050 UPDATE as .7150 acts as resistance look for a test of bids and stops below .7000 UPDATE breach of .7150 opens a retest of .7220 from below
Flow reports suggest downside light bids through to the 0.7020 area with stronger bids starting to make an appearance and possible option related bids coming into play, a push through the 0.6980 level should see weak stops appearing and the market running into congestion on any push to the sentimental 0.6950 area and likely to continue through to 69 cents area, Topside offers light through to the 0.7160 level before sufficient offers appear to slow any further rise however, strong offers through to the 72 cents level are likely to stymie any further movement however, weak stops through the 0.7220 level could help it run a little higher.
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!