Daily Market Outlook, August 21, 2020
Asian equity market is higher this morning following modest gains on Wall Street yesterday. Pfizer earlier reported that its Covid-19 vaccine was on track for regulatory review in October. A number of European countries reported a daily rise in Coronavirus cases including France and Germany. Croatia was added to the UK’s list of countries from which countries face travel restrictions but Portugal was removed.
Former Vice President Biden was formerly confirmed as the Democrat’s candidate for November’s US Presidential election yesterday. He vowed to make combating Covid-19 his priority. Meanwhile, the Democratic leader of the lower chamber of Congress commented that the time was not yet right to compromise on a smaller coronavirus relief bill.
Just released UK retail sales for July posted an expectedly sharp rise of 3.6%. That is much smaller than the gains recorded in May and June but nevertheless may alleviate some concerns that spending has slowed sharply after an initial post-lockdown surge. Meanwhile, the GfK consumer confidence measure for August was -27, lower-than-expected and unchanged from July. Public finance data showed another big rise in borrowing in July, albeit smaller-than forecast by the consensus. The level of public sector debt moved above £2trn for the first time ever.
The rest of today’s data calendar is dominated by August PMI updates. In the UK, the services PMI should provide some indications of the initial impact on activity of the government’s temporary VAT reduction and also the effects from a further easing in lockdown restrictions. Consequently, look for a further rise in the services PMI to 58.0 (a five-year high) from 56.5 in July. Manufacturing is also expected to notch a fourth consecutive rise to 54.5 from 53.3.
Assessments of the Eurozone PMIs for August will probably be affected to some extent by the recent rise in Covid-19 cases in some countries across the region. It is almost certainly too soon for these to have had a significant impact on the data. However, the additional uncertainty means that markets may be wary of the potential for negative surprises ahead. Look for a rise in the manufacturing PMI to 52.5 from 51.8 but a modest fall in the services measure to 54.0 following last month’s surge, which took it to a two-year high of 54.7. The August Eurozone consumer confidence measure is also likely to have been collected too early to be affected by this month’s rise in coronavirus cases.
In the US, both weekly jobless claims data and the Philadelphia Fed’s activity index disappointed yesterday adding to concerns the economy’s rebound is stalling. Nevertheless expect the manufacturing PMI to rise to 51.5 (from 50.9 in July) and services to 50.5 (from 50.0). Both outturns would be consistent with the rebound in the economy continuing for now despite ongoing concerns about Covid-19.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1750 (534M), 1.1850 (450M), 1.1875 (720M) 1.1900 (434M), 1.1935 (231M) 1.1950 (352M), 1.2000 (546M
- USDJPY: 104.50 (910M), 104.65 (350M) 105.00 (551M), 105.95-00 (850M) 107.00-10 (1.0BLN), 107.65 (330M)
- AUDUSD: 0.72 (391M)
- GBPUSD: 1.3090 (201M)
Technical & Trade Views
EURUSD Bias: Bullish above 1.17 targeting 1.20
EURUSD From a technical and trading perspective, as.18 continues to hold as such stops above 1.19 are starting to look vulnerable en route to a 1.20 battle as discussed in last week’s live session. Only a closing breach of 1.17 would concern the bullish bias UPDATE first foray towards 1.20 meets some supply and potential option barrier protection. As 1.1800 supports then bulls will continue to try and erode the 1.20 offers and stops
GBPUSD Bias: Bullish above 1.3150 Bearish below
GBPUSD From a technical and trading perspective, as 1.30 is defended stops above 1.32 look vulnerable for a test and breach enroute to a 1.33 test. Only a closing breach of 1.30 would concern the bullish bias UPDATE target achieved, potential for profit taking pullback to 1.3150 before another base attempt targeting 1.3330 UPDATE Key reversal pattern yesterday on the Daily time frame as 1.3150 now acts as resistance look for a test of range support to 1.30
USDJPY Bias: Bullish above 105.50 targeting 107.50 Bearish below 105.30
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. UPDATE as 106.40 supports look for a grind higher to test symmetry swing resistance sighted at 108 UPDATE retesting support at 105.50 failure to find sufficient bids here will expose 104.18 again
AUDUSD Bias: Bullish above .7200 targeting .7300
AUDUSD From a technical and trading perspective, test of stops and offers above .7220 has delivered the anticipated corrective phase, as .7170/90 now acts as resistance look for a test .6950 as ascending support. UPDATE potential double top in place to deliver the test of ascending trend channel support now at .7000 UPDATE price retesting supply to .7220 through here opens a test of ending diagonal resistance at .7300 UPDATE reversal from the test of offers above .7250 finds support at .7150 as this contains the donside look for another run at .7300 before a more meaningful reversal
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