Daily market analysis

JUL 15,2020

July 15, 2020
   

Daily Market Analysis

Market Focus

US stocks posted their biggest gain in more than a week amid a late session surge, led by rallies in the energy, materials, and industrial sectors. The dollar weakened to an almost five-week low and Treasuries were little changed.

After the close of regular trading, the SPDR S&P 500 ETF Trust (SPY) jumped on news that Moderna Inc’s Covid-19 vaccine produced antibodies to the coronavirus in all patients tested in an initial safety trial. The S&P 500 climbed as investors weighed earnings season and the economic hit of rising virus cases. Megacap tech shares were initially headed for the first two-day slide since mid-May, before rallying late in the session. Banks were mixed after JP Morgan reported strong trading results, while Wells Fargo tumbled after cutting its dividend and reporting its first quarterly loss since 2008.

 

JP Morgan Second-Quarter Earnings Takeaways:

  • Trading propelled earnings, just as it did in the first quarter. JP Morgan reported record markets revenue, with gains in fixed-income and equity trading. Each beat the average estimate from analysts, though CEO Jamie Dimon does not think this will last.
  • Some $10 billion in provisions for possible loan losses reflect a darker outlook for the U.S. economy than the bank had a few months ago, but there’s a good chance the company is being too cautious here. It reckons provisions will not be this high again.
  • The consumer outlook is fuzzy. Federal stimulus has clouded this bank’s ability to forecast the degree to which households will continue to pay their bills. Delinquencies are particularly low given the unemployment rate.
  • The bank has no plans to adjust its dividends, and Dimon did not rule out the possibility that the bank could buy back stock in the fourth quarter.
  • The bank expects the U.S. economy to continue shrinking this ear and next, and it sees the unemployment rate at 7.7% at the end of 2021.

Market Wrap

Main Pairs Movement

 

The financial markets continue to focus on sentiment instead than on data, with equities leading the way. Upbeat earnings reports overshadow coronavirus-related concerns, which in turn, push EURUSD to near June monthly high at 1.1422.

The USDJPY pair is ending Tuesday with modest losses in the 107.20 price zone, retreating from an intraday high of 107.43 achieved during London trading hours. The greenback enjoyed some temporal demand.

Despite the broad-based selling pressure surrounding the greenback on Monday, the USDCAD pair closed the day in the positive territory above 1.3600. Currently, the Loonie is entering the consolidation above the 1.3600 after advancing to the two-week highs.

COVID-19 Data (EOD):

Technical Analysis:

 

GBPUSD (H4)

The Cable started the day off quite weak as one of the most underperformed pair, but has currently picked up its price.The greenback is mixed against its G-10 peers as US equity futures turn higher following JP Morgan earnings and a stronger-than-expected US small businesses report. The UK pound, on the other hand, lags as the UK economy was weaker than expected in May. Looking at the indicators, the 200 Simple Moving Average suggests that the Cable is nearby and could reach a strong resistance area at 1.2565. On top of that, with the RSI moving away from the oversold point, we are expecting the pair to go back to a bearish run once the pair fails to penetrate the immediate resistance zone.

 

Resistance: 1.2565, 1.2637, 1.2673

Support: 1.2470, 1.2405, 1.2342

AUDUSD (H4)

On Tuesday, the Aussie pair rebounded intensively by first bottoming at 0.6920 then came back on top of 0.6970 range. AUDUSD pair staged its comeback during the American session, which is supported by an improved risk sentiment. Currently, a slide across the board as US equity markets turn to the upside, which in turn, boosted AUDUSD. The DXY is falling 0.20%, reaching 96.25, the lowest level in a month. On the 4-hour chart, the Aussie continues to zig zag its way through July between 0.6921 and 0.7000. In order to form a bullish run, the Aussie must first obtain traction above 0.7000; on the other hand, for the pair to post more losses, it must close under the 0.6920. With that being said, Aussie’s movement for the near-medium term depends on substantial economic data, and the upcoming Employment Change data this week should be one to anticipate for.

 

Resistance: 0.6980, 0.7000, 0.7060

Support: 0.6855, 0.6890, 0.6920

XAUUSD (H4)

Risk sentiment continues to drive the precious metal’s movement in the near-term. The safe-haven metal dropped down to 1790 in the early trading hours today but soon attracted some buying interests and staged an intraday bounce back to the 1810 region. Such constructive set-up further boosted the Gold’s already bullish trend. Looking ahead, with pharmaceutical giant, Pfizer, receiving a fast track status granted by the U.S. FDA for its Covid-19 vaccine, possible relief from the pandemic is implied. With that being said, if the news initiates a risk-on sentiment, a drop in Gold’s price can be expected. Nevertheless, by reflecting to the prior experiences that associate with vaccine development related news, if Gold pullbacks down to the 1790 or other lower levels, it is likely that the strong support, extensive buying power, and worsening economic outlook at that moment will continue to protect the downside.

 

Resistance: 1810, 1818

Support: 1799, 1792, 1787

Economic Data

Currency

Data Time (TP)

Forecast

JPY

BoJ Outlook Report 11.00  
GBP CPI 14.00

0.4%

CAD

Core CPI (MoM) (Jun) 20.30  

CAD

BoC Monetary Policy Report 22.00

CAD

BoC Interest Rate Decision 22.00

0.25%

USD

Crude Oil Inventories 22.30

-2.275M

CAD

BoC Press Conference 23.15