Daily Market Outlook, June 2, 2020 

Asian equity market is largely up this morning following modest gains on Wall Street yesterday. Another night of demonstrations in the US and threats from President Trump to use troops if necessary to establish order seems not to have had a major impact on markets. However, equity futures currently point to a likelihood of the US market opening down. 

In Australia, the latest central bank policy meeting as expected left monetary policy unchanged. RBA Governor Lowe said that it was possible the downturn would be shallower than previously expected but policy support would likely be required for some time. 

In the UK, reports suggest that the government is looking at ways to relax the 14-day quarantine requirement for entrants from abroad.  

Today is scheduled to see the start of the last set of talks between the EU and the UK on their future relationship before we reach the end-June deadline to extend the transition period beyond year end. The current round of talks are expected to focus on fisheries, “a level playing field for open and fair competition” and on “governance” of a deal. Reports suggest that the two sides are still some way from agreement on some key issues. Nevertheless, the UK government has said that it will not ask for an extension. Despite that negotiations will likely continue in the second half of 2020. Meanwhile, reports suggest that UK PM Johnson is planning to hold talks with Ursula von der Leyen later this month. 

EU leaders are likely to discuss the talks at the European Council meeting on 19th June, although their focus will probably be primarily on the EU’s response to Covid-19. 

Today’s data calendar is very light with nothing of note in the Eurozone or the US. In the UK, Bank of England money and lending data for April are likely to show a very substantial negative impact from the Covid-19 crisis. Mortgage approvals and lending secured on dwellings are likely to be down sharply reflecting stagnation in the housing market and consumer credit is also forecast to have slipped. However, the wider measures of the money supply may have been partially boosted by some forms of emergency lending. 

Overnight China’s ‘Caixin’ services PMI will be watched for further signs of a post lockdown rebound in activity. The measure has picked up from its February low over the past two months but unlike the other China readings it has so far remained below the 50 level (which signals an expansion in activity). The consensus expectation is for it to have remained below 50 in May.

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

  • EURUSD: 1.1010-15 (1.5BLN), 1.1100 (1.1BLN)
  • USDJPY: 107.00-05 (500M), 107.40 (250M), 107.55-60 (600M)
  • AUDUSD: 0.6525 (1.2BLN), 0.6550 (1.1BLN), 0.6700 (315M)

Technical & Trade Views

EURUSD Bias: Bullish above 1.10 targeting 1.1235

From a technical and trading perspective, as 1.10 now acts a s support bulls will target a test of the equality objective at 1.1235, which also represents the monthly R1 and weekly R1, from here expect profit taking for another test of 1.10

 

GBPUSD Bias: Bullish above 1.2475 targeting 1.2650

GBPUSD From a technical and trading perspective, price tested and overcale symmetry swing resistance sighted at 1.2475. As price continues to trade above 1.2475, look for a test of cycle highs at 1.2650 before a potential correction could develop to test bids back to 1.2350

USDJPY Bias: Bearish below 108.50 targeting 1.0465)

USDJPY From a technical and trading perspective, as 1.0850 contains the upside drift, look for a move back through 1.07 to develop downside momentum,however, a topside breach of 108.50 would delay downside objectives opening a retest of range resistance above 109 before lower again

AUDUSD Bias: Bearish below .6800 targeting .6600)

AUDUSD From a technical and trading perspective, price testing offers and stops towards .6800 as this area contains the squeeze higher look for a corrective move back to test ascending trend channel support towards .6600. Sustained price action above .6800 will likely see the grind higher persist opening a test of the psychological bit figure at .7000

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