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Intermarket:
- SP Futures 3288 (-0.02%)
- EUSTXX 3252 (+0.12%)
- Crude Oil 40.75 (-0.61%)
- US 10YR 0.56 (+0.27%)
- EurUsd 1.1771 (+0.08%)
- UsdJpy 106.07 (+0.11%)
- DAX 12663 (+0.07%)
Global risk appetite remained buoyant overnight, with Nasdaq notching up another record (with Apple at a record high) supported by a positive manufacturing ISM print of 54.2 (highest since March 2019) and President Trump’s suggestion he may take executive action to halt evictions even with the Congressional impasse.
Newsflow wasn’t all positive however, with Trump delivering an ultimatum to TikTok’s US operations to be sold by September 15 in exchange for a substantial payment. Also, US/China tit-for-tat may now shift to Chinese journalists in the US vs. US journalists in Hong Kong.
There is also a possibility that UK officials may lockdown London under the “Contain Strategy” in preparation for a resurgence of Covid-19 in the months ahead. This came after teh UK saw almost 1000 new cases on Monday, the largest rise since June.
USD is more mixed into today but despite the recovery into yesterday’s close, a modest bullish bias remains. Interestingly enough, CAD is also showing signs of strength into the week. No change from RBA and no effect on AUD. SOMP later this week to be more influential.
Focus today will continue to be on the negotiations on the next US stimulus bill. To note, the previous unemployment benefits have expired and the risk is that it results in a setback in the recovery.
Matters that Matter:
- Japan Aso: Seeing people move out of Hong Kong for Taiwan; there’s a chance people may relocate to Japan, Singapore; Hong Kong plays a valuable role as financial hub, market
- AU: Victoria confirmed 439 new cases from yesterday’s 429; introduced an AUD 4900 on the spot fine for isolation breach; more than 500 additional Defence Force personnel will head to Melbourne in coming days
- Global Times Hu: China prepares for the worst on journalist visa issue; China could target US journalists based in Hong Kong on visa issue
- Fauci: Agree with Birx that the US has entered a new phase of the coronavirus pandemic
MAJORS 1-DAY VIEW:
USDJPY
• Rising prices have already attracted sellers, sentiment closing little changed yesterday. The pullback is mildly negative, but until yesterday’s low is broken the outlook for Tuesday is cautious and is to sell rallies.
• Offers touted around 106.40, stops above 106.60-70. Bids around 106.00 with more at 105.50-80.
• Opex today 106.00-10 for 1 Bln approx.
EURUSD
• Sentiment traded sideways yesterday after posting 5 lower daily highs/lows in a sequence. Yesterdays’ pause, alongside gains in Asia on USD weakness suggests a cautious buy-dip stance.
• Offers touted at 1.1800 with stops above. Reminder that the trend is still up.
• Some rumours that M&A flows are behind the recent drop.
AUDUSD
• Yesterday’s losses attracted buyers and although this should be temporary, for Tuesday it keeps the negative outlook more cautious and the call is to stay square on the open and to sell on the rally.
• No reaction to RBA’s “rather positive” outlook despite Covid-19 resurgence and Victoria situation.
• Equities & Iron Ore supportive
GBPUSD
• Friday’s failed rally & yesterday’s failed sell-off highlight investor indecision and the immediate outlook is unclear. On balance though there remains a cautiously negative bias and we prefer to sell rallies.
• Rumour of London Lockdown coming soon enouogh - might throw a wrench in Cable recovery.
• UK yields continue lower with Gilts below 0.1%.
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: With some caution, EUR,GBP, AUD weakness are pronounced against USD. Cad is also showing strength.
FX Relative ATR
Key: 1 Day vs 13 Day ATR. Values > 100% mean Day ATR expansion. Values < 70% mean Day ATR contraction.
Comment: Ranges remain healthy into Tuesday.