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Intermarket:
- SP Futures 2645.75 (+0.05%)
- EUSTXX 2786 (+0.61%)
- Crude Oil 27.00 (+3.43%)
- US 10YR 0.68 vs 0.63 Monday
- EurUsd 1.0828 (+0.33%)
- UsdJpy 108.78 (-0.38%)
- DAX 10159 (+1.11%)
The Covid-19 is back on the radar, as numbers in the US have started growing once again, and the market is anticipating further delays in reopening and lower levels of economic activity. This echoes FED Chair Powell’s warning of “a long road to recovery”.
There are many narratives that can attempt to justify the drop in stocks, but let’s not forget that this recovery was overdone and the world is nowhere near in the same place as it was in December/January.
At the same time, tensions continue to rise between the US and China with TSC Mnuchin saying the US may restrict capital flows through Hong Kong. Australia, Europe and UK are also amongst the countries going down the protectionist route.
Finaly, there was a story in Bloomberg that UK Cabinet Minister Michael Gove will formally rule out extending the Brexit transition period in talks with EU officials today. The Pound may remain under pressure still. We have UK data out shortly but there shouldn’t be much impact, and the data is still expected to show weakness.
Bottom line is that we remain in a risk-off mode into Friday with USD and CHF strength vs. weakness elsewhere. Ranges are extended into Friday however so any plays are best taken on pullbacks.
Matters that Matter:
- Morrison: More Australian virus outbreaks are anticipated
- Singapore expects entire economy to be open in phase 2; on track to enter phase 2 by end of month; mass travel will take some time; more scope for more work pass holders to return
- UK Gove: Will formally rule out Brexit deadline today; plans to temporary light-touch customs checks with EU from 2021
- North Korea: US remains a long-term threat; aims to build up ability to deal with US threat
- New Zealand May BusinessNZ Manufacturing PMI rose to 39.7 from revised 25.9
- ‘This is about livelihoods’: U.S. virus hotspots reopen despite second wave specter
MAJORS 1-DAY VIEW:
USDJPY
• Thursday posted a 4th lower daily high & low in a row and losses of just over ½ Big Fig. However, buyers have returned to the market in Asia this morning ahead of May’s lows so selling rallies today is the better play.
• Opex close by: 635 mln 107.35-50
• USDJPY bid but crosses weigh.
EURUSD
• Sentiment deteriorated by almost 1 Big Fig on Thursday, and while the pullback is probably temporary profit taking, intraday signals are weakening and the outlook for Friday remains cautiously bearish.
• EurJpy selling weighing.
• Key support 10DMA at 1.1276, more at 1.1246.
AUDUSD
• Yesterday saw losses of over 1 Big Fig but intraday sentiment is now oversold and there is there is the potential for bounces. The call is to sell rallies today.
• AudJpy in focus on risk-off
• Stops are tipped below .6775
GBPUSD
• After yesterday’s 1 Big Fig drop, buyers returned to the market from the 100 DMA. The bias remains negative but the recovery may extend further and as such we suggest selling rallies.
• Brexit talks in focus, no progress made.
• Offers at 1.2300, and 2350/70. Bids 1.2200
FX Relative Strength Grid
Key: Week Bias up (down) if there has been a daily close above (below) prior weeks’ high (low).
%-Location is whereprice is, relative to the prior week range. Above 100% means we passed prior week high. Below 0% means we passed prior week low.
%-Change: change in %-location since yesterday at 07.00 CET.
Comment: Risk off is evident into Friday with strength in CHF and USD, with weakness elsewhere.
FX Relative ATR
Key: 1 Day vs 13 Day ATR. Values > 100% mean Day ATR expansion. Values < 70% mean Day ATR contraction.
Comment: Ranges are diminishing slightly, which is logical as weekly ATR is exhausted. More caution is advised today.