10 Sept: Stocks, commodities bounce; US$ heavy. ECB Meeting in focus Thursday; US PPI, Jobless Claims later.

10 Sept: Stocks, commodities bounce; US$ heavy. ECB Meeting in focus Thursday; US PPI, Jobless Claims later.

10 September 2020

Stocks have rebounded strongly on Wednesday and the sea of red that has dominated trade for the last 3 days turned green, as can be seen on the trend table below, once again led by some wild swings in Tesla (+11%) and Apple (+ 5%) where traders piled back in ahead of its new iPhone launch currently expected at some stage this autumn. The Nasdaq had its strongest session since April in rising by 2.7%, with all the FAANG stocks strongly higher, while the S+P and the DJI were not far behind, up by 2.0% and 1.6% respectively.

The FX markets were mixed, with the US$ generally weaker on Wednesday with the DXY retreating by 0.25% although Sterling had another rough ride and fell sharply again, to a six week low, in a volatile session, with traders increasingly concerned at the prospect of a no-deal Brexit and the news that the UK government has unveiled plans to give ministers sweeping powers to “disapply” part of the Brexit deal that was signed in January. UK Cabinet ministers have admitted the bill breaks international law and even caused the speaker of the US House of Representatives Nancy Pelosi, , to warn there will be “absolutely no chance” of a US/UK trade deal if the UK presses ahead with the move. Cable fell to a low of 1.2880 ahead of a bounce, to end the day at 1.2990. Elsewhere the US$ was under pressure with the Euro bouncing back above 1.1800 ahead of today’s ECB Meeting, while the Aud$ and NZ$ also held on to support and bounced, in line with a firmer day for commodities on the back of the bounce in the stock markets.

The metals were roughly 1% higher, underpinned by the softer US$, while WTI put on 2.8% as it recovered some of the sharp falls seen over the last couple of days.

In terms of data, the US JOLTS job openings rose by 6618 in July (vs 6000 expected, 6001 prior), with the report generally consistent with the improvement seen in other labour market indicators.

The Bank of Canada left policy unchanged as was widely expected. While citing recently improved activity, a bounce in household spending and better housing activity, this was put down to a post-lockdown rebound and the bank sees disinflationary pressures remaining for some time, with the need for continued policy support during the economic recovery.

Thursday will be rather thin in terms of data until the most important event of the week; the ECB Meeting, where expectations are for a very dovish outlook but probably with no change this month to Monetary Policy, with the benchmark  rate widely expected to remain on hold at 0.00% and the deposit rate to be unchanged at 0.50%. Of greater interest will be what ECB President Christine Lagarde has to say on the level of the Euro. The ECB chief economist, Philip Lane, already sounded the first hint that the Bank is becoming upset with the recent rally in the Euro, which could have the effect of dampening any inflation growth and would hurt EU economic growth by stifling their export competitiveness. Several banks’ economists are suggesting that the rhetoric against the stronger Euro is likely to increase, and that the downside may be the path of least resistance on Thursday if Christine Lagarde adds to those concerns. We shall see.

In other data due today, the main interest will lie in the US August PPI (exp +0.2%mm) and weekly jobless claims (Initial +846K/Continuing 12.9mio) along with the July Wholesale Inventories (exp -0.1%mm). The NZ, the August electronic retail spending will be released and are likely to reflect the drag on spending from the mid-August lockdown, which may prove to be a weight on the Kiwi (exp -8.0%mm vs prior of +1.1%mm). Have a good day.

Economic data highlights will include:                                      

Thur: NZ Electronic Card Retail Sales, Australian Consumer Inflation Expectation, China New Loans,, ECB Meeting/Interest Rate Decision/Monetary Policy Statement/ Press Conference, US PPI, weekly jobless claims, US Wholesale Inventories, EIA Weekly Crude Stocks Change

Market moves, in brief:

FX: DXY 93.26 (-0.27%)

Bonds: US10Y; 0.703% (+3.87%), German 10Y; -0.462% (+6.38%), UK 10Y; 0.237% (+26.86%), Australian 10Y; 0.906% (-7.58%), NZ 10Y; 0.575% (-2.41 %), China 10Y; 3.09% (-1.12%)

Stock Indices: DJI; +1.6%, S+P; +2.01%, NASDAQ; +2.71%, EUStoxx50; +1.76%, FTSE100; +1.39%, Shanghai Composite; -1.86%, ASX200SPI: +0.80%

Metals: Gold $1946 oz (+0.77%), Silver $+26.98 oz (+1.16%), Copper $3.055 lb (+0.99%), Iron Ore $126.5 per tonne (NYMEX) (+0.44%),

Oil: WTI $37.77 pb (+2.84%)

CURRENCIES
EURUSD: 1.1804
Res  1.1835  1.1865  1.1900
Sup  1.1780  1.1750  1.1720
USDJPY: 106.18
Res  106.30  106.55  106.80
Sup  105.90  105.65  105.40
GBPUSD: 1.3000
Res  1.3020  1.3050  1.3080
Sup  1.2970  1.2940  1.2915
USDCHF: 0.9121
Res  0.9145  0.9170  0.9195
Sup  0.9105  0.9080  0.9055
AUDUSD: 0.7283
Res  0.7300  0.7315  0.7330
Sup  0.7265  0.7250  0.7235
NZDUSD: 0.6685
Res  0.6700  0.6720  0.6740
Sup  0.6665  0.6645  0.6625
INDICES / COMMODITIES
S&P.fs: 3395.93
Res  3415.00  3445.00  3475.00
Sup  3365.00  3335.00  3305.00
DJ30.fs: 27945.00
Res  28075.00  28220.00  28395.00
Sup  27810.00  27640.00  27445.00
SPI200.fs: 5936
Res  5960  5990  6020
Sup  5915  5890  5865
XAUUSD: 1947.01
Res  1955.00  1970.00  1985.00
Sup  1935.00  1920.00  1905.00
XAGUSD: 26.99
Res  27.10  27.30  27.50
Sup  26.85  26.65  26.45
WTI.fs: 37.73
Res  38.50  39.50  40.50
Sup  36.85  35.80  34.50

Trend Table: September 10, 2020

EURUSD USDJPY GBPUSD USDCHF AUDUSD NZDUSD
1 Hour Neutral – Turning Higher? Turning Neutral Turning Higher? Down Up Turning Higher
4 Hour Turning Higher? Turning Neutral Possible Basing Formation Turning Lower Turning Higher Turning Higher
1 Day Turning Lower? Turning Neutral Turning Lower Turning Higher Neutral – Turning Lower? Turning Neutral
1 Week Possible Topping Formation Turning Neutral Possible Topping Formation Possible Basing Formation Up Turning Higher
DXY S+P ASX200 GOLD SILVER OIL_WTI
1 Hour Turning Lower Possible Topping Formation Neutral – Turning Higher? Turning Higher Neutral – Turning Higher? Turning Higher?
4 Hour Turning Lower? Turning Higher Turning Higher Neutral – Turning Higher? Turning Neutral Oversold – Turning higher?
1 Day Turning Higher Turning Lower? Neutral Turning Lower Turning Lower Neutral – Turning Lower?
1 Week Possible Basing Formation Up Up Overbought – Turning Lower? Up Turning Neutral
EURJPY EURGBP GBPAUD AUDJPY EURAUD AUDNZD
1 Hour Neutral – Turning Higher? Turning Lower Oversold – Turning higher? Turning Higher? Turning Lower Turning Neutral
4 Hour Turning Higher? Overbought – Turning Lower? Down Turning Higher Turning Neutral Turning Neutral
1 Day Turning Lower Neutral – Turning Higher? Neutral – Turning Lower? Turning Neutral Turning Neutral Turning Neutral
1 Week Turning Higher Turning Neutral Turning Neutral Turning Higher Turning Neutral Possible Topping Formation

Yesterday’s sea of red has turned green, with a sharp bounce in the stockmarkets which in turn has allowed a rebound in commodities and the commodity based currencies. The US$ is generally heavy today, although Sterling still looks rather precarious on the charts. The Euro will be the main focus today, with the ECB Meeting likely to produce some exaggerated volatility.

S+P: Has bounced back to 3400 on Wednesday (high; 3423) after a brief dip earlier in the session, to 3290. While the short term momentum indicators are constructive, the daily charts still point lower, so it looks as though we are in for some extended choppy trade around current levels. While I suspect that the downside correction is not yet over, we need to be cautious in our outlook and for today, 3350/3450 should cover it, but I prefer to look for levels to sell into for the time being. Below 3300, the target would be at 3247 (23.6% of 2165/3586)

EurUsd: The Euro has held on to the support level at 1.1750/60 ahead of today’s ECB Meeting and has bounced to a high of 1.1835. Trading from the short side, with a SL above 1.1870 today is preferred, in looking for a downside break of 1.1750, targeting 1.1690/1.1700. Below that sees a bigger decline towards 1.1600 and possibly to 1.1535. Back above 1.1870 would then probably see a return to levels above 1.1900. Wait for the ECB to find out.

GbpUsd: The daily charts look increasingly heavy was we approach the rising trend support at 1.2850. The price action is volatile and dependent on the latest political soundbites relating to Brexit, but selling rallies seems to be the plan and 1.3110 (38.2% of 1.3481/1.2884) would seem to attract sellers with a SL placed above 1.3180 (50%).

AudUsd: has bounced for a low of 0.7191 to currently sit back at Monday’s levels at 0.7280. The short term momentum indicators doo look positive and a run back to 0.7300/10 may follow although I do prefer to use levels above there to get short, with a SL placed above 0.7330. On the downside, support will be seen at 0.7240 and again at 0.0.7190/0.7200, a break would open the way to 0.7165 (38.2% of 0.6808/0.7413).

Oil: WTI has bounced strongly from the low of 36.07 and currently sits at 37.80, right at the resistance level that we  mentioned yesterday.  The short term momentum indicators look positive, so shorts should have a SL placed near 38.50 as a move beyond there could revisit 40.00. The daily momentum indicators however look heavy and a return to the downside should not be ruled out, where support will lie at 37.00 and against at 36.00/10.  Beyond there would hint at a run back to the neckline support, seen on the daily charts, at 34.50.

EurUsd

AudUsd

GbpUsd

GbpUsd – Daily

S+P

WTI

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