Sunday, November 29

Daily Market Outlook, September 3, 2020

Daily Market Outlook, September 3, 2020

Asian equity market is mostly higher following on from another record high in the US S&P 500. That was supported by the US Centers for Disease Control and Prevention (CDC) asking states to prepare for a Covid-19 vaccine to be ready in November. Chinese stocks underperformed, however, despite the Caixin August services PMI narrowly beating expectations at 54.0. Separately, it was reported in the media that ECB Governing Council members are becoming increasingly concerned about the strength of the euro.

Today’s final services PMI releases will reaffirm the divergence that may have opened up in August in the economy between the UK and the Eurozone. The UK flash services PMI increased to 60.1, the highest level since 2013, signalling a strong rebound in activity since the nadir in April. Somewhat in contrast, the Eurozone flash PMI fell back to 50.1, just above the key 50 level separating expansion and contraction, with renewed increases in coronavirus cases possibly affecting the level of economic activity.

Today’s final UK and Eurozone PMI releases are expected to confirm earlier flash estimates, and August figures for Italy and Spain will also be released for the first time which are forecast to fall back below 50. Also out is Eurozone July retail sales with markets looking for a 1.0% increase, although the risks are to the downside.

In the US, the most recent deceleration in new Covid-19 cases may help to reduce concerns about a stalling of economic activity. The final services PMI for August is expected to broadly confirm the flash estimate of 54.7. More attention, however, will be reserved for the ISM services survey which should show a small moderation to 57.5 (still a decent level) from 58.1 in July. Weekly jobless claims will continue to attract attention – look for initial claims at 995k, only slightly lower than 1,006k in the prior week.

In speakers’ corner, Bank of England Governor Bailey will talk about cryptocurrencies, while fellow MPC member Ramsden will chair a discussion on the digitalisation of money and the ECB’s Schnabel on the evolution of financial systems. More immediate relevance for markets will be the Fed’s Evans who will discuss the economy and monetary policy.

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

  • EURUSD: 1.1815 (500M), 1.1820-25 (250M), 1.1830 (500M)
  • USDJPY: 105.55 (250M), 106.45-55 (900M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.1950 targeting 1.17 

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 UPDATE 1.18 test underway, flow reports suggest congestion starts to appear through this level and stronger bids appearing could see price retest 1.1900/50 before reversing to test pivotal 1.1750/00

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. UPDATE as 1.34 acts as near term resistance look for a test of pivotal ascending trendline support to 1.32. Flow reports suggest the push through 1.33 does see some limited congestion down through the 1.3250-00 area however, it’s not until the 1.3150-00 sees stronger bids.

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. Flow reports suggest offers remain into the 107.00-20 area with congestion likely to be mixed with weak stops on a break of the level and that congestion likely to continue on any move into the 107.60 area where stronger offers are likely to appear, maybe another round of stops before stronger offers then appearing through to the 108.00 level. Downside bids light through to the 105.50 level where congestion is building then stronger bids likely on any dip through to the 105.20 area and weak stops then putting in an appearance on a dip below the 104.80 level.

AUDUSD Bias: Bullish above .7350 targeting .7500, Bearish below .7250

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 UPDATE breach of .7300 warns of potential near term local high in place and would set a  test of pivotal .7250. Flow reports suggest downside bids light through to the 73  level where stronger bids start to appear for any dip through to the 0.7200 level and possibly stronger bids into 0.7150

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Credit: Tickmill

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