Equities remained fairly well supported yesterday despite the concerning increase in virus cases in the US.  Trading was quiet overnight in Asia with the Hong Kong market closed. We are approaching month and quarter end so there is a general expectation for a move out of equities and into bonds given the asset price moves this quarter.  Therefore, from these levels we still prefer to play the commonwealth (AUD, NZC and CAD) from the short side against the USD as risk on/off moves continue to be USD centric

Texas has paused reopening as Houston’s intensive-care wards approached capacity.  US cases topped 35,000 for a third day and Apple closed more stores across the effected states.

Banks outperformed on the day as Volcker restrictions were eased with respect to swaps trading margin and investing in venture capital funds, however, the results of the Fed’s stress testing post-market are set to unwind these gains.  The central bank is moving to a position which requires all banks to cap their dividends to a share of their recent income.

US initial jobless claims were weaker than expected yesterday at 1.48m. Although Durable Goods orders were huge at 15.8%.

USDJPY – the yen has shown very mixed trading however, USDJPY has not really ventured much higher than 107.24 keeping below the 107.30/35 resistance area. There seems to be good exporter offers for now keeping it down but it lacks a sense of direction. 106.95/107.30 and 107.75 is the range for now and we advocate selling rallies towards the top of the band whilst above 108.00 will change our negative bias to neutral.

EURUSD – it was a pretty quiet day for the pair yesterday but still trading with a heavy feel, we did trade through 1.1200 but not for long and then basically sat around 1.1220 for the rest of the session. Today again we have another large expiry at 1.1200 so we could hang around this level for the rest of the day. Positioning in the pair is till pretty mixed with Real money being long and leveraged investors maintaining a negative positional skew. Our bullish view still remains as long as we can manage to hold above 1.1160 through here and we go lower towards 1.1130 and possibly 1.1080. On the topside a break above 1.1230 would open way for 1.1280 and alleviate the current downside pressure. As we have already mentioned today we have month end flows to contend with so we may see some strange price action around the London fix.

GBPUSD – similar to EURUSD we have traded sideways so far. 1.2400 has held for now and becomes a pivot point. A break opens up 1.2380 and then 1.2307. We still have Brexit rearing its ugly head but for now it’s too far out to have an immediate impact on the currency. One to watch however, is the Huawei story where the UK has given them a 1 bio GBP contract that the US is already complaining about and have warned the UK that this could be a high risk for the US-UK deal. On the topside in cable a break above 1.2450 would open way for 1.2480 and then the important 1.2515/20 area.

GOLD – edged slightly higher, ending yesterday’s session in the green while still trading in consolidation with 1767 resistance level suppressing upside momentum. On one hand, the US continued to hit new records for daily virus cases with Texas pausing re-opening plans. On the other, decreasing Continuing Jobless Claims and Fed stress test results deeming banks are healthy enough to withstand the virus crisis lifted market sentiment. Investors focus on consumer spending data to be released today as a pullback towards 1752 support level is looking favourable.

US OIL – WTI crude ends yesterday’s session higher, bouncing off our support level at 37.20, on the back of a surprise upbeat in Durable Goods Orders and assurances by White House Economic Advisor Larry Kudlow that the U.S. was not going to shut the economy down. With prices supported from below by the 20,50 and 200 period SMA, an hourly close above 39.27 resistance level will favor further upside with 40 as the next resistance target.

DOW JONES – our support level at 25,227 held as the Dow printed higher as bank stocks soared ahead of annual stress test results which helped offset investor jitters over Coronavirus cases hitting records in states like California, Florida, and Texas, with the later pausing re-opening as hospitals reached limits. As the index trades between our Support and Resistance levels at 25,560/25,797, investors look ahead to consumer data for further direction.

DAX – index closed higher as improving economic data and a surprise support from the ECB where it offered loans against collateral to central banks outside the Eurozone, helped lift market sentiment. Automakers and Financials lead gains, while Lufthansa shares surged after shareholders backed the bailout. Further stimulus with Air France-KLM receiving 3.4B euros from the Dutch government, should keep prints above the 200 period SMA and our support level at 12,200.

FTSE – Government data showing a drop in new virus cases by 41% and an announcement by the ECB that it would offer loans to central banks outside of the Eurozone lifted risk on sentiment as the index trades around the 200 period SMA and our resistance level at 6223. Our support level at 6162 should hold for upside momentum to continue, with downside risks looming as corporates continue to cut jobs.

 

Rony Nehme
Chief Market Analyst at SquaredFinancial

Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.

Disclaimer: This information is only for educational purposes and is not an investment recommendation. The information here has been created by SquaredFinancial. All examples and analysis used herein are of the personal opinions of SquaredFinancial. All examples and analysis are intended for these purposes and should not be considered as specific investment advice. The risk of loss in trading securities, options, futures, and forex can be substantial. Customers must consider all relevant risk factors including their own personal financial situation before trading.