Daily Market Outlook, May 07, 2020
A number of Asian equities are closed for holidays this morning but those open are predominately down modestly. However, the European and US equity futures market point to a positive start.
The Fed’s Bullard said that the US economy needs to gradually reopen to avoid deeper harm and risk going into "a financial crisis or even a depression scenario".
In China, the April Caixin services PMI rose to 44.4 from 43.0 in March below expectations of a move above 50. April trade data showed an unexpected annual rise in exports of 3.5% but imports fell by 14.2%. German industrial production fell by 9.2% in March and French output slipped by 16.2%.
The Monetary Policy Committee of the Bank of England left policy unchanged at today’s update. There was a 9-0 vote to leave interest rates unchanged but two policymakers wanted to immediately increase QE purchases by a further £100bn. The BOE noted that GDP may decline by at least 14% in 2020 but said that after a “temporary” fall the pickup in the economy may be “relatively rapid”. Nevertheless, risks are seen as skewed to the downside. New BoE Governor Bailey and colleagues will give a briefing on the MPC’s latest policy decision which will not be streamed live but will be reported on the Bank’s website at 10am. The opening remarks which were published at 7am said the BoE stands ready to offer more support to the economy if necessary.
The rest of today’s data calendar is light on probable market moving updates. In the US, weekly initial jobless claims continue to climb at an unprecedented pace which reflects the huge impact that the lockdown is having. We expect another 3 million new applications for the week of 2nd May down from 3.8 million previously.
UK markets are closed on Friday but in the US the April labour market report may receive a lot of attention. It is predicted to show a monthly fall in employment of over 20 million, which will push the unemployment rate to a multi-year high above 16% (compared to a peak rate in the last recession of 10%)
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.0750 (673M), 1.0775-80 (1.4BLN), 1.0800 (2.3BLN) 1.0805-10 (1BLN), 1.0875-90 (1.5BLN), 1.0900 (1.1BLN)
- USDJPY: 105.25-40 (1.1BLN), 105.75-85 (900M), 106.00 (450M), 106.25 (315M) 106.50 (1.1BLN), 106.65-75 (1.1BLN), 107.00 (1.1BLN)
- AUDUSD: 0.6300 (1.6BLN), 0.6400 (700M), 0.6415 (1.2BLN), 0.6530 (1.3BLN)
Technical & Trade Views
EURUSD Bias: Neutral within 1.09/1.09 range
From a technical and trading perspective, 1.09 remains pivotal for the achievement of the interim (1.1050) and primary (1.1240) upside objectives. As prices test the interim objective we could see profit taking pullback to retest support back to 1.09/1.0850 but as this area attracts bids we can see a base develop for another run towards 1.1240. A daily closing breach of 1.0850 would be detrimental to the bullis thesis opening 1.0730 again UPDATE DTCC data shows massive EUR 5-billion EUR/USD option expiries Thursday. They are evenly split between 1.0800-10, and 1.0875-1.0900 Expiry is 10-am NY cut Thursday. On Friday 1-bln 1.0850, 2-bln 1.0885-1.0910 Without a renewed catalyst - expiries can help define 1.08-1.09 range.
GBPUSD Bias: Bullish above 1.2350 targeting 1.28)
GBPUSD From a technical and trading perspective,the bullish thesis is under pressure and a close today below 1.2440 would flip the daily chart bearish and open a deeper decline to retest the range base back at 1.2160. UPDATE Daily chart has flipped bearish price continues to rotate around the Daily VWAP, bulls need a move back through 1.25 to encourage the bullish bias continuation, failure to achieve this opens a deeper declining to test the range base back to 1.2350 before higher again UPDATE bids emerge at the range support as the trendline is defended bulls will for the 1.25> close to flip the daily chart bullish and open the move to the 1.28 target
USDJPY Bias: Bearish below 107.50 targeting 1.0465)
USDJPY From a technical and trading perspective, range contraction persists,albeit with a downside bias, a breach of 106.80 should inject downside momentum. A topside breach of 108 would delay donside objectives opening a retest of range resistance above 109 before lower again
AUDUSD Bias: Bullish above .6330 targeting .6700)
AUDUSD From a technical and trading perspective, the decline back though .6450 concerns the bullish bias, a breach of .6350 would suggest a more meaningful top is in place opening a deeper decline to test support back towards .6150 before another base attempt. On the day a close back through .6500 will be needed to re-engage bullish spirits UPDATE price testing pivotal .6450/70 area if sufficient supply is seen here look for another leg lower to test trend support back to .6330 UPDATE as .6520 contains upside attempts .6330 should be see before another attempt to base and make another run towards the .6700 primary upside objective
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