Daily Market Outlook, September 2, 2020
Asian equity market mixed in overnight trading, despite the US S&P 500 index closing at new record highs and further gains seen in the technology sector. Futures markets point to a positive open in Europe. In terms of economic data, Australia reported a 7.0% drop in Q2 GDP, more than the consensus forecast for a 6.0% decline. Also earlier this morning, German retail sales fell unexpectedly in July by 0.9%, while UK house prices rose for a second month, by 2.0% in August, according to Nationwide figures. The BRC reported UK shop price inflation fell to -1.6%y/y in August from -1.3% in July.
One aspect of this week’s economic calendar is the relative deluge of central bank speakers. Last week’s move by the US Federal Reserve towards a new policy framework has led to questions about whether other major central banks will eventually follow suit. The Fed announced it is adopting average inflation targeting, which will allow for inflation to overshoot its target to compensate for past undershoots – a step closer to price level targeting. This week’s speeches will also be the last ahead of policy decisions by the ECB next week and both the US Federal Reserve and the Bank of England in the week after.
Bank of England Governor Bailey and fellow MPC members Ramsden and Vlieghe will appear before the Treasury Select Committee today to answer questions. In a speech last week, a key message from Bailey was that the Bank is “not out of firepower by any means”. Separately, the MPC’s Broadbent will give a keynote speech at a conference, which will be followed by a panel discussion chaired by Chief Economist Haldane.
Over in the US, the Fed’s Williams is scheduled to discuss Covid-19, while Mester will speak on the economic and policy outlook, and Daly will discuss the economic framework. In Europe, the ECB’s Weidmann is also due to deliver a speech.
On the data front, the focus is on the US with the release of the ADP employment report and factory orders. The Fed Beige Book is also due. Look for the ADP to show a rise of 1.3m private sector jobs in August. That would support predictions for Friday’s official payrolls to rise by about 1.4m which would represent a further slowdown in jobs growth. However, with the number of US coronavirus cases starting to turn lower, the Beige Book will provide timely anecdotal evidence on how economic activity has fared recently.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1825-35 (900M), 1.1845-50 (600M), 1.1875 (1BLN), 1.1895 (527M), 1.1935 (413M), 1.1950-55 (400M), 1.1995-1.2000 (550M)
- USDJPY: 105.55 (830M), 105.65-75 (1BLN), 105.95-106.00 (800M), 106.50 (1.1BLN)
- GBPUSD: 1.3125 (390M)
- AUDUSD: 0.7315 (411M), 0.7350 (281M), 0.7400 (239M)
Technical & Trade Views
EURUSD Bias: Bullish above 1.17 targeting 1.20
EURUSD From a technical and trading perspective, the breach of previous cycle highs at 1.1964 has encourage some near term profit taking, as 1.19 acts as support lok for a test of offers and stops above 1.20 before a more meaningful correction to retest 1.1850 UPDATE target achieved anticipated profit taking pullback underway, as 1.1950 acts as resistance look for a test of 1.18
GBPUSD Bias: Bullish above 1.32 targeting 1.35
GBPUSD From a technical and trading perspective, as price sustains trade above 1.3250 look for a test of the primary trendline resistance sighted towards 1.35. Only a closing breach of 1.32 would concert the bullish thesis opening a retest of 1.3050 from above.
USDJPY Bias: Bearish below 106.50 Bullish above
USDJPY From a technical and trading perspective, as 106.50 acts as resistance look for another test of support at 105.50 failure to find sufficient bids here will expose 104.18 again.
AUDUSD Bias: Bullish above .7350 targeting .7500
AUDUSD From a technical and trading perspective, as .7350 now acts as support look for a test of psychological .7500. Only a daily closing breach of .7250 would concern the bullish thesis opening a retest of .7100
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