Daily market analysis

Aug 12,2020

August 12, 2020
   

Daily Market Analysis

Market Focus

President Donald Trump is considering a tax cut on capital gains and American hospitalization for coronavirus fell to their lowest in a month. “We’re considering a capital tax cut, which could create a lot more jobs,” Trump said on the White House news conference. The president has to issue an executive order to bypass the Congress in order to bring the 20% long-term capital gains rate cut. US sets to sell record $112 billion in notes and bonds in this week’s refunding auctions. Heavy corporate debt issuance and a surge in investor risk appetite are sending stocks higher around most of the world.

White House economic adviser Larry Kudlow said China is fulfilling its phase-one trade obligation on commodity prices, and commented the deal is still valid with China. Producers from both sides would be happy to see the trade deal is not compromised by the recent China-US diplomatic tension, which could lift some of the pressure on the Yuan and US dollar.

Russia registered its first coronavirus vaccine, although the registration is conditional and further trials will continue. In the US, severely damaged states such as New York, California and Texas reported falling hospitalizations. Meanwhile, coronavirus infections surpassed 20 million globally.

 

Market Wrap

Main Pairs Movement

EURUSD failed to capitalize on the upbeat German ZEW Economic Sentiment for August, which soared to 71.5 from previous 59.3. The printed figure far outperformed market expectation of 58, the rally in consumer’s confidence has been boosted by the landmark rescue fund. Money managers are said to be the most optimistic on the outlook for the common currency in almost a decade, the previously agreed 750 billion euros rescue package has lifted concerns over the bloc’s structural risks.

GBPUSD edged marginally lower on Tuesday as BoE deputy governor Dave Ramsden says the central bank is ready to step up QE if economy slows. Ramsden expects UK economy to slowly recover from pandemic’s damage, and commented BoE is fully committed to buy as much as it needs.

Gold’s biggest drop in seven years is triggered by massive profit-taking from huge funds, the precious metal plunged 5.69% ($115) as of writing. The US 10-year Treasury yield jumped the most since June ahead of an expected flood of government and corporate debt issuance, up 11% as of writing.

 

COVID-19 Data (EOD):

 

Technical Analysis:

USDCAD (H4)

USDCAD is well kept below the downward sloping trendline, dropped 0.3% near the closing hours. The bears are capping any extension beyond 1.34, but price looks to contest 1.3342 resistance before declining further south. If temporary rebound could find supportive momentum to overcome 1.3342, then bidders may have a chance to break the descending trend and turn the course around. Otherwise, the pair will be eyeing 1.3215, then 1.3133 horizontal support line.

Resistance: 1.3342, 1.3494, 1.3628

Support: 1.3215, 1.3133

 

EURGBP (Daily)

EURGBP has been rejected by resistance of 0.9042, and traveled south towards the neckline of the double top highlighted in the daily chart. Downward momentum may not be strong enough to create a sharp breakthrough, as seen from the previous hump that buyers and sellers were not committed to take price to either ways. That being said, price could be stuck around the 0.895 support, possibly forming a double bottom followed by the double top.

Resistance: 0.9042, 0.9141, 0.9317

Support: 0.895, 0.8834, 0.87

 

GOLD (Daily)

Gold relentlessly plunged 5.69%, sending price back to July 27, and closed the day around $1912. Price settled near 23.6% retracement, which is constructed from lowest $1381 to highest 2075 between July 01 2019 to August 07 2020, and could act as potential support. If the precious metal breaches the retracement support line, then it should look to contest the trendline support as highlighted in purple. Conversely, $1976 could be capping any upward surge if the bulls attempt to reclaim its position.

Resistance: 1976, 2075

Support: 1810, 1729

 

Economic Data