Daily market analysis

JUL 08,2020

July 8, 2020

Market Focus

Despite board members from Bank of Japan see continued high uncertainty surrounding the economy, no major change to the current monetary tools is considered. BOJ officials want to continue to closely monitor effects of previously implemented policy as the financial markets remain relatively stable and companies are not facing significant funding problems. Quarterly projections for prices and growth will be published on July 15.

 

The White House wants Congress to pass another $1 trillion stimulus package by the first week in August before summer recess, which is scheduled to be August 3rd. They are set to intensify talks regarding the new package as they return to Washington after the Independence Day holiday.

 

RBA kept interest rate unchanged as widely expected. Key takeaways from RBA monetary policy statement:

  • Will not raise rate until progress made to full employment
  • Prepared to scale up bond purchases if needed
  • 3-year yield target unchanged at 0.25%
  • Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s

 

Market Wrap

Main Pairs Movement

 

GBPUSD was up in three-consecutive days, the strong intraday bounced seemed unaffected by resurgent of US dollar demand. The uptick in cable lacks significant fundamental catalyst and could be solely associated with intraday short-covering move. Negotiation between UK and EU will carry on, despite not much progress being made, speculators seem to lighten their bearish bet on Brexit compared to 2019.

 

Gold has reached new highs, hitting a peak of 1797 during US trading session, a price not seen since late 2012. The precious metal is benefiting from central bank’s expansion of their balance sheets, and constantly injecting liquidity into financial market. US 10-year bond yield also dropped 5.8%, indicating some risk aversion mood.

 

COVID-19 Data (EOD):

Technical Analysis:

 

GBPUSD (H4)

Cable continued to climb upward without looking back, currently trading at 1.2548. Bull takes the pound to a four-week high, and yet failed to surpass 61.8% Fibonacci at 1.26 handle.   MACD on the four-hour chart is showing a bullish signal, if bullish histogram continues to build up, then it could look pass 1.26 and move to challenge 71.4% Fibonacci, which meets perfectly with key resistance level at 1.267.

 

Resistance: 1.26, 1.267,1.275

Support: 1.247, 1.2395, 1.2268

 

USDCHF (H4)

USDCHF was kept below SMA50, price rose and fell, and stayed unchanged on Tuesday. The precious correction has been interrupted and it is now back to big down trend built from early June. Resistance of SMA50 needs to be overcome for the current downside pressure to be alleviated, otherwise the pair looks pass 0.9391 and potentially reach 0.9325 in the medium term.

 

Resistance: 0.946, 0.9535, 0.9603

Support: 0.9391, 0.9325, 9252

 

XAUUSD (H4)

Gold conquered $1786 resistance, closed the day up 0.61%. The yellow metal touched the uptrend bottom line, then bounced furiously. There is not much horizontal resistance level above the current price, which makes $1800 handle a good pivot point. RSI was right beneath 70 overbought line, thus price could possibly continue to move upward until hitting $1800 and RSI breaching 70 before retreating to $1786.

 

Resistance: 1800, 1819, 1836,

Support: 1786, 1761, 1742

 

Economic Data

Currency

Data Time (TP) Forecast

Exposure

(Our side)

GBP

BoE MPC Treasury Committee Hearings Tentative

 

OIL

Crude Oil Inventories 22:30

-3.114M

 

 

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