Risk Aversion has been the name of the game on Monday, with global stockmarkets leading the way lower in falling heavily, ahead of a partial recovery late in the day, led by a bounce in Apple and Microsoft, which has allowed the US indices to erase some of their earlier declines. The field is very crowded with conflicting news headlines right now, driving markets and making it difficult to have a decent grip on the direction of the various asset classes. Alongside the growing concerns over a 2nd wave of the pandemic and the upcoming US election, traders are also attempting to find clarity from the politics of replacing Ruth Bader Ginsburg’s position in the US Supreme Court, the news that the major global banks are heavily involved in facilitating money laundering on an industrial scale and growing unease over the outlook for the US economy as the prospect of an additional fiscal-stimulus package looks increasingly remote.
As far as the markets are concerned, the European stock indices led stocks sharply lower (Dax -4.6%, FTSE -3.4%), as banks fell heavily on the back of reports alleging that many major banks continued doing business with customers despite suspecting money-laundering activities. The US indices followed suit but then recovered late in the day, although both the DJI and the S+P still posted loosed in excess of 1% on the day. The Nasdaq ended up pretty much unchanged.
In the FX markets, the US DXY rallied by 0.5%, its best day in 3 months, as traders sought refuge from the riskier currencies, and both the Euro and the Aud$ traded to a new 1 month+ low, while Sterling also took a beating. The Kiwi, which has been a strong performer since the pandemic lows as the NZ Government has performed well in keeping the virus under control, was hit hard as the US$ recovered, pushing the Kiwi down from 0.6775 to 0.6650. The dollar made gains on all fronts, with US$Jpy actually recovering from a new 6 month low of 104.00, shrugging off the need for further safe haven buying of the Jpy – although it should be noted that Monday and Tuesday are both Japanese holidays, so interest and liquidity in the Jpy is somewhat diminished early in the week.
Commodities were sold heavily as traders grow increasingly concerned over the prospect of a new lockdown in Europe coming on top of the critical Covid conditions in the US. Silver in particular felt the heat, down 7.5% on the day, which was actually a decent result given that the daily high/low range was down 11.2% at one stage. Likewise, Gold saw heavy falls in trading down to 1882, ahead of a bounce to finish at 1912. Oil was down by 6.3% at its lows before ending the day down by 3.25%, currently at 39.80.
Tuesday will kick off with a series of central bank speakers in the Asian time zone, including the Fed’s Brainard, Bostic and Williams – who will be speaking at any time now, to be followed by the RBAs Guy Debelle, who will be speaking to Australian Industry Group on the ‘The Australian Economy and Monetary Policy’. Later on in the day, the BOE Governor, Bailey will be participating in British Chambers of Commerce webinar in London, while ECB Chief Economist Philip Lane will chair the policy panel at the ECB/CompNet online event in Frankfurt. That aside there is very little on the agenda through the session aside from the August US Existing Home Sales and Richmond Fed Mfg Index. Most trasders will sit on their hands while awaiting Jay Powell’s Testimony to Congress which begins today and goes thorugh to Wednesday. Have a good day.
Economic data highlights will include:
Tue: RBA’s Debelle Speech, Japan Holiday, UK Inflation Report Hearing, BOE Governor Bailey Speech, CBI Distributive Trade Survey – Orders, US Richmond Fed Mfg Index, Existing Home Sales, API Weekly Crude Oil Stock Inventory , Fed Chair Powell Speech
Market moves, in brief:
FX: DXY 93.52 (+0.56%)
Bonds: US10Y; 0.668% (-4.25%), German 10Y; -0.526% (-8.36%), UK 10Y; 0.158% (-11.18%), Australian 10Y; 0.866% (-3.67%), NZ 10Y; 0.537% (-2.75 %), China 10Y; 3.100% (-0.50%)
Stock Indices: DJI; -1.84%, S+P; -1.16%, NASDAQ; -0.13%, EUStoxx50; -3.74%, FTSE100; -3.38%, Shanghai Composite; -0.63%, ASX200SPI: -1.45%
Metals: Gold $1912 oz (-1.94%), Silver $24.72 oz (-7.66%), Copper $3.0395 lb (-2.46%), Iron Ore $123.87 per tonne (NYMEX) (-0.48%),
Oil: WTI $39.56 pb (-3.22%)
|INDICES / COMMODITIES|
Trend Table: September 22, 2020
Risk off seems to be the name of the game for coming sessions – see charts below. Long US$, short equities seems to be the theme
|1 Hour||Oversold – Turning higher?||Turning Higher?||Oversold – Turning higher?||Possible Topping Formation||Neutral – Turning Higher?||Oversold – Turning higher?|
|4 Hour||Turning Lower?||Oversold – Turning higher?||Neutral – Turning Lower?||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Lower?|
|1 Day||Neutral – Turning Lower?||Turning Lower||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Week||Possible Topping Formation||Neutral – Turning Lower?||Possible Topping Formation||Possible Basing Formation||Possible Topping Formation||Possible Topping Formation|
|1 Hour||Overbought – Turning Lower?||Oversold – Turning higher?||Oversold – Turning higher?||Oversold – Turning higher?||Oversold – Turning higher?||Turning Higher?|
|4 Hour||Turning Higher?||Down – Bullish Divergence||Down||Neutral – Turning Lower?||Turning Lower||Down|
|1 Day||Neutral – Turning Higher?||Turning Neutral||Neutral||Turning Neutral||Turning Lower||Turning Neutral|
|1 Week||Possible Basing Formation||Overbought – Turning Lower?||Turning Neutral||Overbought – Turning Lower?||Overbought – Turning Lower?||Turning Neutral|
|1 Hour||Turning Higher?||Turning Neutral||Turning Neutral||Oversold – Turning higher?||Possible Topping Formation||Neutral – Turning Higher?|
|4 Hour||Oversold – Turning higher?||Turning Neutral||Turning Neutral||Down||Neutral – Turning Higher?||Turning Higher|
|1 Day||Turning Lower?||Turning Neutral||Possible Basing Formation||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Week||Possible Topping Formation||Turning Neutral||Turning Neutral||Possible Topping Formation||Turning Neutral||Possible Topping Formation|
EurUsd: The Euro did briefly trade down to a new 6 week low (1.1731) on Monday, ahead of a mild bounce, although the longer term price action remains confined to the sideways range, with decent support still intact at 1.1685/1.1715 area. With the momentum indicators generally looking heavy, I think that this is going to be tested, with a break likely to see a run towards 1.1625 (minor), 1.1580 (minor) and then towards 1.1500 although that remains some way off. On the topside, resistance will be seen at 1.1800, 1.1830 and at 1.1850/60. Selling rallies is preferred.
GbpUsd: Sterling had another rough day in falling from a high of 1.2996 to a low of 1.2775 ahead of a dead cat bounce to 1.2815. The momentum indicators look heavy and a test of the 55/100 WMAs (1.2740) and the 200/100 DMAs, converging at around 1.2720, would seem possible. The hourlies are oversold so a bounce may be due but I think I would be looking to sell towards 1.2860/70, with a 50 point SL.
AudUsd: The Aud was unable to hold on to the levels above 0.7300, and after reaching 0.7323 on Monday it has been one way traffic down to a low of 0.7198, which should provide decent support on Tuesday. The momentum indicators are heavy though and a break of 0.7190 would allow for a run towards 0.7165 (38.2% of 0.6808/0.7413), below which would open the way for a grind towards 0.7100. On the topside, resistance will now be seen at 0.7240 (minor) and at 0.7290 (200 HMA). Selling rallies with a SL placed just above 0.7300 is preferred. It may end up being a choppy session near current levels, but any direction will be taken from the stock markets. The RBA’s Guy Debelle will be speaking today. – Asian lunchtime.
S+P: The Index recovered from its lows but, as with all stock indices, the longer term momentum indicators are looking rather precarious. The S+P currently sits at 3275, holding on above the Monday low of 3217 and the 100 DMA at 3200 although I suspect that these will be tested in the days ahead, with further downside targets, if we see them, likely to arrive at 3160 (23.6% of 1803/3586) and then at 3100 (200 DMA). Selling rallies towards 3300/50, with a 70 point SL is preferred.