Daily Market Outlook, September 15, 2020
Asian equity market is mostly higher, although Japan is down. August readings for China industrial production, retail sales and fixed investment all beat expectations suggesting that its post-lockdown economic rebound is continuing. The minutes of the Australian central bank’s last policy meeting said that the economy’s recovery was likely to be uneven. They regard the Aussie dollar as fairly valued but think that a lower rate would provide support to the recovery.
As expected the UK government won last night’s vote in the House of Commons on the Internal Market Bill despite a number of abstentions and two votes against the bill from Tory MPs. The legislation is likely to face further opposition next week when there will be a vote on an amendment to give MPs the final say on implementing key measures of the bill.
Just released data for the UK labour market showed a small fall in employment of12k in the three months to July and a modest rise in the unemployment rate to 4.1% from 3.9% previously. The timelier claimant count reading rose by 73.7k in August, suggesting that the unemployment rate is set to rise further. Many observers are expressing concern that unemployment may rise sharply in the autumn once the government’s furlough scheme expires. As a result there is growing pressure on Chancellor Sunak to consider a selective extension of the scheme. He is set to be quizzed on this and other matters in the House of Commons today.
The German ZEW survey will provide one of the first gauges of the strength of the Eurozone economy in September. As a survey of financial analysts it can be less useful than the PMI and IFO surveys due next week. However, it gets attention for its timeliness and the expectations component has often proved a useful leading indicator. Expectations rose to its highest since 2003 in August, expect some slippage in September reflecting concerns that the economy’s rebound may be slowing.
In the US, the New York Fed manufacturing survey for September and official industrial production data will both provide updates on the factory sector. Look for a rise of 0.8% in the official reading for August, down from 3.0% in July. However, the Empire State survey may rebound modestly in September after falling very sharply in August.
Early Wednesday, UK price data for August is expected to show a sharp drop in annual CPI inflation to 0.0% from 1.0% in July, with the risk of a negative result. The drop primarily reflects the impact of the temporary cut in VAT for the hospitality sector and the ‘Eat Out to Help Out’ scheme. Inflation is likely to pick up modestly in subsequent months as the impact of these initiatives start to fall out but it may stay below the government’s 2.0% target for many months.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1830 (823M), 1.1850 (2.4BLN), 1.1885 (1BLN), 1.1900-10 (1BLN), 1.1950-55 (500M), 1.1985-90 (600M), 1.2000 (881M)
- USDJPY: 105.00 (1.1BLN), 105.70 (535M), 105.95-106.00 (1.6BLN)
- AUDUSD: 0.7245-50 (440M), 0.7290 (324M), 0.7395 (300M)
Technical & Trade Views
EURUSD Bias: Bullish above 1.18 bearish below
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
Flow reports suggest downside bids into the 1.1740-60 congested sentimental area with increasing bids into the 1.1720-00 level weak stops on a dip through the 1.1680 area for the prospect of a deeper move through to the 1.1500 level before stronger bids start to appear and all that is available is possible congestive sentimental bids, topside offers light through to the 1.1850 level and beyond cleared by yesterday’s rush high will likely see offers beginning to build around the 1.1900-20 area with very little in the way of stops likely for the moment until testing the 1.1950 area where stronger offers start to appear and continue through to the 1.2000 level and the point where the EU start to make noises again.
GBPUSD Bias: Bearish below 1.3050
GBPUSD From a technical and trading perspective, test of the pivotal primary trendline support at 1.2830/50 stalls downside for now, however as 1.3050 acts as resistance look for renewed downside to target 1.26 next
Flow reports suggest light bids into the 1.2800 area with stronger bids appearing into the long term trend line around the 1.2765 area, with sentimental bids likely just through the area with limited bids then through the 1.2700 level and increasing on any attempt to dip through the level, topside offers light through the 1.2900 level with weak stops on a move through the level opening a return to the 1.3000 level and slightly stronger offers holding in the area.
USDJPY Bias: Bearish below 106.50 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.
Flow reports suggest topside 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 light through to the 105.50 level where congestion is building then stronger bids likely on any dip through to the 105.20 area and weak stops then putting in an appearance on a dip below the 104.80 level.
AUDUSD Bias: Bullish above .7250 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.
Flow reports suggest topside offers light through the 0.7300 level with very light stops on a push through the 0.7320 area and stronger offers starting around the sentimental 0.7340-60 area limited at best, stronger offers start to appear on a move through the 74 cents level and continue through to the 0.7450 area although some weak stops possible, downside bids into the 0.7250 level a little thinner however, once through the 0.7240 level the market is likely to increase in size particularly through the 0.7220 area and weak stops possibly tempered by stronger bids below the 0.7180 level.
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