Thursday has been a mostly choppy, sideway session, with the US stock indices ending around 0.3% higher as the market struggles for direction after some mixed data. In the FX markets, the dollar took a break from its recent rally after the release of some disappointing weekly US jobless claims, which challenged the view that the US pandemic recovery will outpace that of Europe, where Wednesday’s uninspiring Markit PMIs and the ECB Bulletin, pointing to a continued rise in unemployment, have weighed on the Euro. The market though, is beginning to perceive that the US recovery could run out of steam in the absence of Congress being unable to come to any agreement on a fiscal rescue package, which would seem likely to hamper any near term upside for the stock markets and possibly the dollar as well. Thursday saw the Euro recover from a 2 month low (1.1626) and it may see further short term upside potential but the dailies are beginning to gain some downside momentum and I think a move to 1.1500/50 lies ahead at some stage. Sterling assisted the Euro recovery a little after the UK announced a new job support package, while UK data showed the best CBI retail sales growth rate since April 2019. At the same time, the UK also recorded its highest daily number of Covid cases on Thursday, following tightened restrictions announced on Tuesday and which will continue to weigh on the chance of any sustained recovery. The Aud$ remain particularly heavy as it seems that the RBA could well ease rates from 0.25% to 0.1% as early as the next RBA Meeting on Oct 6th.
In the commodities sector, Silver has bounced by 2% as it recovers a little of the sharp selloff of the previous 2 session while Gold put on 0.4% but overall it remains heavy, near 10 week lows. Oil managed to climb back above $40pb, where it remains in the middle of its recent range.
In terms of the data on Thursday, the US initial jobless claims rose 4k to 870k in the week ending September 19, above expectation of 850k, while the continuing claims dropped -167k to 12580k in the week ending September 12. Better news came from the monthly US New Home Sales which increased to their highest level in nearly 14 years in August, suggesting the housing market continues to gain momentum even as the economy’s recovery from the recession appears to be slowing.
Earlier in the session the Germany IFO Business Climate rose to 93.4 in September, up from 92.6, but slightly below expectation of 93.8. The Current Assessment rose to 89.2, up from 87.9, below expectation of 89.5, while the Expectations index rose to 97.7, up from 97.5, also below expectation of 98.0.
The SNB left its sight deposit rate unchanged at -0.75% as widely expected but did add that “In view of the fact that the Swiss franc is still highly valued, the SNB remains willing to intervene more strongly in the foreign exchange market”.
Friday is devoid of data apart from the UK Consumer Confidence, Public Sector Net Borrowing Requirements and BOE Quarterly Bulletin and then from the US the August Durable Goods Orders (exp +1.5%mm). It should be generally a quiet end to the week although the US data may produce some volatility and we may see a move to cut risk asset positions ahead of the weekend which could weigh on stocks and the commodity currencies. Have a good weekend.
Economic data highlights will include:
Fri: UK Consumer Confidence, Public Sector Net Borrowing Requirements, BOE Quarterly Bulletin, US Durable Goods Orders,
Market moves, in brief:
FX: DXY 94.32 (-0.02%)
Bonds: US10Y; 0.664% (-1.22%), German 10Y; -0.505% (-0.66%), UK 10Y; 0.212% (-4.04%), Australian 10Y; 0.812% (+0.22%), NZ 10Y; 0.470% (-3.71 %), China 10Y; 3.086% (-0.46%)
Stock Indices: DJI; +0.20%, S+P; +0.30%, NASDAQ; +0.37%, EUStoxx50; -0.64%, FTSE100; -1.30%, Shanghai Composite; -1.72%, ASX200SPI: +0.16%
Metals: Gold $1870 oz (+0.36%), Silver $23.24 oz (+2.04%), Copper $2.965 lb (-0.94%), Iron Ore $123.35 per tonne (NYMEX) (+0.80%),
Oil: WTI $40.15 pb (1.47%)
|INDICES / COMMODITIES|
Trend Table: September 25, 2020
It’s Friday so pretty uninspired.
I think the US$ could see some short term weakness as the majors attempt to recover but any rally in the Euro, Aud, Nzd and Gbp is probably a sell for lower levels to come next week. Steer clear of US$Jpy – Too hard – but it does look mildly bid.
AudNzd seems set to head lower.
Stocks are choppy but the table suggests lower levels ahead at some stage. Possibly not yet though.
With nothing on the agenda until the US Durable Goods Orders it should be mostly a rather quiet end to the week. Have a good weekend.
|1 Hour||Bullish Divergence||Turning Lower||Turning Neutral||Neutral – Turning Lower?||Up||Up|
|4 Hour||Possible Basing Formation||Up||Bullish Divergence||Up||Oversold – Turning higher?||Oversold – Turning higher?|
|1 Day||Turning Lower||Possible Basing Formation||Turning Lower||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Lower?|
|1 Week||Possible Topping Formation||Neutral – Turning Lower?||Turning Lower?||Possible Basing Formation||Possible Topping Formation||Possible Topping Formation|
|1 Hour||Turning Lower||Neutral – Turning Higher?||Turning Neutral||Up||Bullish Divergence||Neutral – Turning Higher?|
|4 Hour||Possible Topping Formation||Bullish Divergence||Turning Neutral||Oversold – Turning higher?||Oversold – Turning higher?||Neutral|
|1 Day||Turning Higher||Neutral – Turning Lower?||Neutral||Turning Lower?||Turning Lower||Turning Neutral|
|1 Week||Possible Basing Formation||Overbought – Turning Lower?||Turning Neutral||Overbought – Turning Lower?||Overbought – Turning Lower?||Turning Neutral|
|1 Hour||Neutral||Turning Neutral||Turning Lower||Turning Higher||Turning Lower||Turning Lower|
|4 Hour||Turning Higher?||Turning Neutral||Up||Possible Basing Formation||Up – Overbought||Neutral – Turning Lower?|
|1 Day||Turning Lower||Turning Neutral||Turning Higher||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?|
|1 Week||Possible Topping Formation||Turning Neutral||Turning Neutral||Possible Topping Formation||Turning Neutral||Neutral – Turning Lower?|