Daily Market Outlook, July 06, 2020
The equity market in Asia have made a positive start to the week led by Chinese indices which are up around 3-4% on the day. This continues the risk-on mood that dominated markets last week as signs of improving economic conditions, and some positive reports about progress in developing a Covid-19 vaccine, have helped lift risk assets. Meanwhile, over the weekend, the UK government announced a £1.57bn support package for the arts and entertainment sector, ahead of the Chancellor’s economic update on Wednesday.
The initial impact of the further loosening in UK restrictions will be a key focus in the coming week. Over the weekend, pubs, cafes, restaurants, museums, art galleries and a range of other businesses were allowed to re-open. Markets will be looking for a similar bounce in activity to that seen when nonessential retailers started to re-open. However, a key question is whether consumers will have the confidence to immediately start using leisure services. The government will be monitoring these developments with the response of consumers likely to play a key part in shaping the update set to be provided by the UK Chancellor, Rishi Sunak to the House of Commons on Wednesday. In a speech last week, PM Johnson said that the focus policy will be on stimulating economic growth and that there would be no early return to austerity despite the escalation in the government’s budget deficit. There has been considerable speculation that the Chancellor will announce measures to boost growth. However, Mr Sunak is reported to have been playing down the likelihood of immediate big tax cuts, including a temporary reduction in VAT. Instead the emphasis for now seems to be on more targeted measures to help sectors under particular pressure.
For today, the UK construction PMI for June is expected to match its manufacturing and services equivalents and post a second consecutive monthly pickup from April’s all-time low. Look for a rise in the headline index to 46 (from 28.9 in May). That will still leave it below the 50 level that is supposed to signal expansion but there are indications that PMI data may be underestimating the pace of the turnaround in the economy. In the US, the June ISM non-manufacturing index is also expected to post a sizeable pickup. Its manufacturing equivalent rose to a 15-month high of 52.6 in June and we expect a similar rise in the data for the largest part of the economy. Look for a June outturn of 51.5, up from 45.4 in May and 41.8 in April. In the Eurozone, already released numbers for some of the larger economies point to a big increase in May retail sales and we look for a 15% rise.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1200-05 (475M), 1.1210-15 (1.1BLN), 1.1250 (301M) 1.1385-1.1400 (1BLN)
- USDJPY: 106.60 (450M), 106.70-75 (375M), 107.00 (210M), 107.60-65 (300M)
Technical & Trade Views
EURUSD Bias: Bullish above 1.1150 targeting 1.15
From a technical and trading perspective, as symmetry swing support at 1.1170 supports there is a window for fresh demand to take prices higher again to retest cycle highs above 1.14 enroute to an ultimate retest of year to date highs at 1.15. Price is testing intraday range resistance at 1.13 a failure to close above here could see a move back to test range support at 1.12 before attempting another run at 1.1350
GBPUSD Bias: Bullish above 1.24 targeting 1.2650
GBPUSD From a technical and trading perspective, 1.2324 equality downside objective achieved, buyers have stepped in again as of writing to defend the equality objective. The close back through 1.2440 suggests a more meaningful low is in place for another attempt to take out stops above 1.2650. On the day only a close back through 1.24 would negate the bullish bias
USDJPY Bias: Bullish above 107.50 Bearish below
USDJPY From a technical and trading perspective, anticipated test of the equality objective at 108.13 saw bearish reversal patterns, setting up a move for another test of 106 enroute to a pivotal 105 test
AUDUSD Bias: Bullish above .6830 targeting .7100)
AUDUSD From a technical and trading perspective, as 6830 attracts buyers there remains scope to retest and break prior cycle highs en route to a .7100 test. On the day expect bids towards .6900 to act as intraday support
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 70% 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!