Daily Market Outlook, August 4, 2020
Market risk appetite increased in Asia helped by new record highs in the technology-focused US Nasdaq Composite index. Yesterday saw the US July ISM manufacturing rise again to 54.2, while the final reading for the Eurozone manufacturing PMI was also unexpectedly revised higher. Investors also took solace from reports of progress in talks between politicians on further US fiscal stimulus.
The Reserve Bank of Australia, meanwhile, left policy settings unchanged earlier this morning, including keeping interest rates at 0.25%. Governor Philip Lowe said accommodative policy would be maintained as long as it is required.
Factory orders for June is the only notable release today. They are expected to have risen for a second straight month. After the 8.0% increase in May, look for a further gain of 5.3%. This week’s more important US data will be tomorrow’s ADP employment report and ISM non-manufacturing survey, followed by Friday’s official employment report.
The focus is likely to be on negotiations in the US, which are expected to resume today, to agree a new fiscal stimulus plan. In particular, some existing measures such as additional unemployment benefits have already expired, representing a financial cliff edge for millions of Americans. House Speaker Nancy Pelosi said talks yesterday were productive, while President Trump indicated he may take unilateral action if Congress is not able to agree a deal before its scheduled recess at the end of this week.
In the UK, markets will look ahead to the Bank of England policy announcement on Thursday. While policy is expected to be unchanged, expect the BoE to use the occasion to provide its assessment of the economic recovery so far and the likely path from here, and to reiterate its commitment to do more to support the recovery.
Chinese June Caixin services PMI will be released early Wednesday. The manufacturing survey surprised on the upside on Monday, rising to 52.8. For services, markets are looking for the headline index to edge down to 58.0 from the already elevated level of 58.4.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1650 (1.6BLN), 1.1770 (700M), 1.1750 (827M), 1.1825 (455M)
- AUDUSD: 0.7050 (250M), 0.7200 (250M
- USDJPY: 105.75 (400M), 106.00-10 (1BLN)
Technical & Trade Views
EURUSD Bias: Bullish above 1.1820 Bearish Below
EURUSD From a technical and trading perspective, as 1.1810 acts as resistance anticipate another corrective leg lower to test bids back towards 1.16. A daily close back through 1.1820 would negate the corrective thesis, opening a retest of 1.19
GBPUSD Bias: Bullish above 1.30 targeting 1.3250
GBPUSD From a technical and trading perspective, price tested pivotal trendline resistance at 1.3166, anticipated profit taking pull back playing out. As 1.30 continues to attract buying interest look for a test of 1.3250.
USDJPY Bias: Bullish above 105.50 targeting 107.50
USDJPY From a technical and trading perspective, anticipated test of the equality objective at 104.50 attract big bids, printing a key reversal pattern on Friday, as discussed in today’s Chart Hit, as 105.50 acts as a support look for a test of the equality objective to 107.50.
AUDUSD Bias: Bearish below .7170 targeting .6950
AUDUSD From a technical and trading perspective, test of stops and offers above .7220 has delivered the anticipated corrective phase, as .7170 now acts as resistance look for a test .6950 as ascending support.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!