Daily market analysis

JUN 03,2020

June 3, 2020
   

Daily Position Report

Market Focus

U.S. stocks rose alongside equities in Europe and Asia amid new bouts of stimulus and positive economic signal as coronavirus lockdowns ease. Dollar slumped for a fourth consecutive day.

Stock are hovering near their highest in three months as businesses reopen around the world and manufacturing gauges show economies stabilizing following coronavirus shutdowns. That is despite a slew of risks still on the horizon, including tense U.S.-China relations that may jeopardize a hard-won trade deal.

At the same time, violent demonstrations across U.S. cities over the killing by police, are not yet seen as a major drag on the economy and corporate profits.

 

Market Wrap

  • Dow Jones up05%, S&P500 up by 0.82% and Nasdaq down by 0.12%
  • WTI July increased by $1.37 to $36.81, and Brent Oil July up $1.25 at $39.57 while near closing.
  • Dollar Index down 0.22%.
  • Gold dropped 0.9% and sit around $1728
  • AUDUSD up 1.46% to 0.68832
  • EURUSD up 0.36% to 1.1174
  • GBPUSD up 0.60% to 1.254
  • NZDUSD up 1.12 % to 0.6350
  • USDCAD drop 0.59% to 1.35155
  • USDJPY up 0.92% to 108.696

 

Main Pairs Movement

Greenback and havens pair declined as risk premium from the pandemic continued unwind, pushing some higher beta currencies into overbought territory as investors focused on reopening and constructive economic data. So far, dollar contained a very large safe-haven premium that was inconsistent with the improvement condition in economic environment, risk appetite and low volatility. U.S. 10 years Treasuries was higher to 0.68%.

For RBA, it kept its interest rate and yield objective unchanged as an abatement of the health crisis allows and economy to begin reopening.

Key takeaways from RBA rate statement:

  • The Central bank sharply tapered bond buying in May as financial markets calmed and Covid-19 infection dwindled.
  • However, the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy.
  • In April, total hours worked declined by an unprecedented 9% and more than 600k people lost their jobs. Notwithstanding these developments, it is possible that the depth of downturn will less then earlier expectations. And there are signs that hours worked stabilized in early May, after earlier very sharp decline.

 

COVID-19 Data (EOD):

Technical Analysis:

EURUSD (H4)

EURUSD reached it highest level since March against the dollar, with Germany reportedly lining up a second stimulus package of as much as 100 billion euros. This comes ahead of the ECB’s decision Thursday, when policy makers are expected to boost a relief fund made to combat the virus fallout. Some market participants are expecting the ECB to increase its PEPP asset purchases.

 

Resistance: 1.1145, 1.1163, 1.1180

Support: 1.1030, 1.0986, 1.1066

 

USDCAD (H4)

Loonie had another consecutive drop to the lowest since March 9 at 1.348, support is widely expected at 1.3465. A large number of puts struck at 1.35 expire on Friday according to DTCC data.

Loonie like other commodities-linked peers that outperformed is driven by unwinding of pandemic fears and is taking account of a optimistic retaliatory consumption demand while economies gradually boost. At the same time, oil remained upwind giving prospect to CAD as well.

 

Resistance: 1.4006, 1.3856, 1.3735

Support: 1.35, 1.3465, 1.3385

 

USDJPY (H4)

USDJPY has clinched a multi-week high beyond 108.500 today. The move took place despite a decline of demand for the greenback. The overall risk-on appetite across the market has fueled the investors to take on riskier assets and neglect the Japanese Yen (a safe-haven currency). Moreover, optimism about the economy recovery not only boosted the US equity market and offset the ongoing social unrest in America, but it also further weighted down on the JPY. We expect the pair to stay above the immediate support of 108.30 and continue to test the 108.75 resistance.

 

Resistance: 108.750, 109.035, 109.240

Support: 108.30, 107.900, 107.750

 

Economic Data

Currency

Data

Time (TP)

Forecast

Exposure

(Our side)

AUD

GDP(QoQ) (Q1) 09:30

-0.3%

 

EUR

German Unemployment Change (May) 15:55 200k

GBP

Composite PMI (May) 16:30

28.9

 

GBP

Service PMI (May) 16:30

28

 

USD

ADP Nonfarm Employment Change (May) 20:15 -9000k

USD

ISM Non-Manufacturing PMI (May) 22:00 44

CAD

BoC Interest Rate Decision 22:00 0.25%

CAD

BoC Rate Statement 22:00

 

Oil

Crude Oil Inventories 22:30

3.038M

 

 

 

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The information provided is of a general nature only and the advice has been prepared without taking account of your objectives, financial situation or needs.