JUL 16,2020

   

Daily Market Analysis

Market Focus

 US equity index are riding on positive news from biotech company Moderna Inc., where it reported promising trial result. The vaccine developments brought a rush of optimism to the financial markets that have struggled to make headway recently in the face of record high outbreak figures. However, stocks were faded during mid US session as Chinese foreign ministry said it would take necessary measures including sanctions against American entities and individuals as a mean to retaliate US signing the “Hong Kong Autonomy Act”.

OPEC is confident that it can start easing deep production cuts next month without hurting the rally in oil prices. OPEC and its allies will reduce 7.7 million barrels a day in August as scheduled, down from the current 9.6 million cuts. “As we move to the next phase of the agreement, the extra supply resulting from the  scheduled easing production cuts will be consumed as demand continues on its recovery path,” Prince Abdulaziz said at the start of an OPEC+ video conference, and insisted that OPEC+ wasn’t targeting any particular oil price, but signaled that current levels aren’t high enough.

Bank of Canada kept the interest rate unchanged at 0.25%. Highlights from BoC:

  • The bank expects a 7.8% drop in output this year, followed by a 5.1% rebounded in 2021 and growth of 3.7% in 2020.
  • Anticipating localized virus flareups, not a “widespread” second wave.
  • Will keep overnight lending rate unchanged until inflation returns to 2% target at a sustainable level.
  • The border shutdown and travel bans will also have an impact on Canada’s hospitality and travel industries.

 

Market Wrap

Main Pairs Movement

 

US dollar demand was hampered by another positive headline from Moderna, the dollar index was down 0.22% as of writing. Investors continued to look past surging confirmed cases worldwide and put faith on potential vaccine development by various drug makers instead. Swiss Franc had the worst performance among its G-10 peers, down 0.46% on Wednesday, speculators were adjusting their position ahead of the European Council’s summit that is schedule to take place during this weekend. The pressure is mounting for EU countries to gather consensus on the proposed enormous recovery fund.

 

Cable has been benefiting from dollar weakness despite the escalating tension between China and Britain as Beijing accusing UK’s ban on Huawei is political manipulation. The British government decided to terminate their business relationship with Huawei due to cyber security concerns about the company having backdoors to the Chinese army. The pound was also encouraged by upbeat Consumer Price Index, rose to 0.6% from previous 0.5%.

 

COVID-19 Data (EOD):

Technical Analysis:

 USDCHF (H4)

Swiss Franc was on the defensive against US dollar during Wednesday’s trading, lost 0.46% intraday. Bulls have advanced beyond SMA50, and is currently hovering slightly above SMA100 on the four-hour chart. The descending trend line was unable to withstand bull’s attack, but further confirmation is needed to prove this is not a false breakout. MACD bars favor the bull as well.

 

Resistance: 0.9535, 0.9603, 0.9647

Support: 0.9391, 0.9325

EURUSD (H4)

Euro-dollar was maintaining its bullish stance, gaining 0.11%. Price has been clinging to Bollinger’s upper region, and RSI was wandering between 60-70 for the past few days. The nearest resistance sits around 1.147, the highest point in the past 17 months. With the existing strong bull run, this resistance level should be challenged within a short period.

 

Resistance: 1.147, 1.1544, 1.16

Support: 1.1394, 1.1334, 1.1287

 

USDCAD (H4)

USDCAD has been rejected four times within two weeks and is now ready to test horizontal support at 1.3494.  Bear’s pull was powerful as seen from RSI’s drop from 63 to 30 without any backtracking. If 1.3494 fails to hold, then price will accelerate downward extension to 1.3377 before any significant rebound could take place.

 

Resistance: 1.3628, 1.3739, 1.3865

Support: 1.3494, 1.3377, 1.3215

 

Economic Data

Currency

Data Time (TP) Forecast
NZD CPI (Q2) 06:45

-0.5%

AUD

Employment Change (June) 09:30 112.5 K

CNY

GBP (Q2) 10:00 2.5%

CNY

Industrial Production (June) 10:00 4.7%
GBP Average Earning Index + Bonus (May) 14:00

-0.4%

EUR ECB Interest Rate Decision & Monetary Policy Statement 19:45

0%

USD

Core Retail Sales (June) 20:30

5%

USD

Initial Jobless Claims 20:30

1,250 K

EUR ECB Press Conference 20:30

NA

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