Global Market Analysis July 1, 2020

Recent market conditions:

In the foreign exchange market, the US Dollar Index rose to a maximum of 97.77 and then came under pressure to close at 97.33.

For non-US currencies, the EURUSD closed slightly lower than 1.1233; the GBPUSD recorded a rebound to yesterday’s high since closing down on the 4th, closing at 1.2399; the USDJPY surged up to 107.91; NZDUSD and AUDUSD closed moderately up about 40 points at 0.6452 and 0.6902; USDCAD fell back with resistance and recorded a decline of more than 0.6% at 1.3574; USDCHF basically gave up yesterday’s gains and closed at 0.9471.

The precious metal market demand is heating up again. Spot gold rose above the 4-day high and recorded a maximum of $1785.72. As of the close, it was reported at $1780.30 per ounce. Spot silver recorded an increase of more than 2% and closed at $18.17 per ounce.

In the oil market, API crude oil inventories in the United States recorded a decrease of 8.156 million barrels and the largest decline since 2019 in the week to June 26, which was much better than the expected reduction of 950,000 barrels. US crude oil continued to stabilize and recorded US$39.70 per barrel.

Recent key events:

The basic wording of the Powell and Mnuchin hearings will remain unchanged. In the future, the PPP plan may be restarted and the threshold of the Main Street loans lowered.

At 00:30 Beijing time today, Fed Chairman Powell and US Treasury Secretary Mnuchin gave testimony to the House of Representatives Financial Services Committee on the “Bailout Bill.” Powell once again emphasized the uncertainty of the economic and employment prospects caused by the new coronavirus pandemic. As companies continue to close down, the US GDP growth rate in the second quarter fell to hit a record, and more and more Americans will face the unemployment crisis. Today, the epidemic is getting worse in the US. According to the latest data, the number of new cases in California and Texas in the United States reached record highs and recorded 7,418 and 6,545 cases, respectively. With as many as 11 confirmed cases rebounding and announcing a delay in restarting the economy, the US job market remains highly uncertain.

In view of this, Mnuchin said that he may provide additional support to industries that are severely affected by the epidemic. These industries mainly include manufacturing and service industries. Although the initial value of the June Markit manufacturing PMI announced last week shows that the contraction rate of US business activities has slowed down, the deterioration of the epidemic may bring new impact to the economy again. Therefore, Mnuchin also pointed out that the two parties may reuse the PPP fund, which is expected to be approved by the end of July.

On the other hand, Powell also mentioned that the policy measures introduced earlier have been relatively successful for the temporary economic recovery. Currently, the Federal Reserve is reviewing the credit standards of municipal liquidity instruments to expand the scope of borrowers. Not only that, Powell also pointed out that as many as 300 banks have registered for the Main Street project, and emphasized that the minimum loan threshold under the Main Street loan project should be reduced in the future or according to the situation.

Finally, the hearing basically did not cause much volatility in the market. As of the close, the US Dollar Index held steady at the 97 mark at 97.33.

Trend analysis of main markets

Dollar index

(Source of the daily chart of the US Dollar Index: HotForex)

The daily chart shows that the US Dollar Index continues to be under pressure at 97.55 resistance and trend line resistance. From the MACD perspective, the fast and slow lines are moving upwards, while the red kinetic energy bar is running smoothly. The trend of the index is basically consistent with the change of the kinetic energy bar.

EUR/ USD

(Source of EUR/USD daily chart: HotForex)

The daily chart shows that the euro is oscillating within a narrow range against the dollar, and the current trend is not clear. From the MACD perspective, the fast and slow lines are running downwards, and the green kinetic energy bar is slightly converging. The exchange rate trend is basically consistent with the change of the kinetic energy bar.

GBP/ USD

(Source of GBP/USD daily chart: HotForex)

The daily chart shows that the pound has rebounded against the dollar at a low level, and it is currently testing the resistance of the 1.2380 range. From the MACD perspective, the fast and slow lines are running downwards, and the green kinetic energy bar is slightly converging. The exchange rate trend is basically consistent with the change of the kinetic energy bar.

USD/ JPY

(Source of USD/JPY daily chart: HotForex)

The daily chart shows that the USDJPY is rising slightly, currently closing close to the previous high of 107.65. From the MACD perspective, the fast and slow lines are forming a golden fork, and the red kinetic energy column is increasing moderately. The exchange rate trend is basically consistent with the change of the kinetic energy bar.

AUD/ USD

(Source of AUD/USD daily chart: HotForex)

The daily chart shows that the Australian Dollar rebounded slightly against the US Dollar, currently testing 0.6900 resistance. From the perspective of MACD, the fast and slow lines are slightly narrowed, and the green kinetic energy column is gradually shrinking. The exchange rate trend is basically consistent with the change of the kinetic energy bar.

NZD/ USD

(Source of NZD/USD daily chart: HotForex)

The daily chart shows that the New Zealand Dollar has stabilized against the US Dollar, and currently wants to test the 0.6440 resistance. From the perspective of MACD, the fast and slow lines are slightly narrowed, and the green kinetic energy bar has slightly converged. The exchange rate trend is basically consistent with the change of the kinetic energy bar.

USD/ CAD

(Source of USD/CAD daily chart: HotForex)

The daily chart shows that the US Dollar fell against the Canadian Dollar and is currently under pressure at 1.3670 resistance and trend line resistance. From the perspective of MACD, the fast and slow lines are slightly narrowed, and the red kinetic energy column is contracting slightly. The exchange rate trend is basically consistent with the change of the kinetic energy bar.

USD/ CHF

(USD/CHF daily chart source: HotForex)

The daily chart shows that the USDCHF is under pressure and is currently back testing the 0.9455 support. From the MACD point of view, the fast and slow line gold fork remains the same, and the red kinetic energy bar is running smoothly. The exchange rate trend is basically consistent with the change of the kinetic energy bar.

Gold

(Source of Gold Daily Chart: HotForex)

The daily chart shows that the gold price is oscillating stronger, and currently testing the resistance of the wedge trend line and the resistance of 1787.60. From the MACD perspective, the fast and slow lines are moving upwards, while the red kinetic energy bar is running smoothly. The trend of gold price and the change of kinetic energy bar are slightly different.

Silver

(Source of Silver Daily Chart: HotForex)

The daily chart shows that the bullish momentum of the silver price has intensified, and the current test is to break the 18.10 resistance. From the MACD point of view, the fast and slow lines are forming a golden fork, and the green kinetic energy column is shrinking. The silver price trend is basically consistent with the change of the kinetic energy bar.

US crude oil

(Source of US crude oil daily chart: HotForex)

The daily chart shows that the range of US crude oil is volatile, and the current kinetic energy is slightly slower. From the perspective of MACD, the fast and slow lines are running downwards, and the green kinetic energy bar is running smoothly. The trend of oil prices is basically consistent with the change of the kinetic energy column.

Holidays closed during the day: Hong Kong Special Administrative Region Establishment Day

The Hong Kong Stock Exchange is closed for one day July 1.

Daytime macro focus:

  1. The Fed announced the minutes of its June monetary policy meeting.

On Thursday 2 at 02:00 Beijing time, the Fed will announce the minutes of its June monetary policy meeting. The Fed may release more specific deadlines for keeping interest rates close to zero. Last week, Powell also explained that “maintaining current interest rates close to zero at least until the end of 2022” and the Fed may adjust in time to the development of the US economy. In addition, the Fed may express its views on the purchase of corporate bonds, the Main Street loan plan and the Volcker rules, which deserves investors’ attention.

Key events within the day:

Time ( GMT+8 ) Key data Potentially affected currency commodities
14:00 United Kingdom June Nationwide House Price Index Monthly Rate and Annual Rate GBP/USD
15:50 French manufacturing PMI final value in June EUR/USD
15:55 Germany’s June manufacturing PMI final value
Unemployed in Germany after June seasonal adjustment (ten thousand people)
Germany’s adjusted unemployment rate in June
16:00 Eurozone manufacturing PMI final value in June
16:30 UK June Manufacturing PMI GBP/USD
19:30 Number of layoffs from Challenger companies in June (10,000 people) Dollar currency
20:15 US ADP employment in June (ten thousand people)
21:45 US Markit manufacturing PMI final value in June
22:00 US June ISM Manufacturing PMI
U.S. monthly rate of construction expenditure in May
22:30 EIA crude oil inventories from the United States to June 26 (10,000 barrels) US crude oil

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Larince Zhang

Market analyst

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