Daily Market Outlook, October 26, 2020
Equity markets began the week in Asia on the back foot, as investors assess prospects of a vaccine to tackle the resurgence in Covid-19 cases and continue to await a US fiscal package. Global infections surpassed 43 million as the World Health Organization Director General Tedros said northern hemisphere countries are facing a “dangerous moment” and that there is “still a long haul ahead”.
Sterling markets remain focused on Brexit negotiations. Intensified EU/UK talks were supposed to switch to Brussels today, but the EU’s chief negotiator Michel Barnier will reportedly remain in London until Wednesday, which the UK’s Northern Ireland Secretary Brandon Lewis said is “hopefully a good sign” for a deal. Major sticking points remain, however, notably on state aid and fisheries. The German IFO business survey for October will be closely watched for signs that confidence may have fallen for the first time in six months. Expect the headline index to have declined to 93.0, in line with the market consensus, from 93.4 in September, driven by a weaker expectations component. Last week’s ‘flash’ PMI for Germany – a separate business survey – showed resilience in manufacturing activity, but a further decline in services on escalating concerns about a second wave of coronavirus infections. Amid this backdrop, the ECB will announce its latest policy decision on Thursday – it is expected to keep policy unchanged for now, but prepare the ground for more stimulus in December as the outlook darkens.
US data releases include September new home sales and the October Dallas Fed manufacturing survey. The Chicago Fed will release its national activity index for September, which is expected to show a further moderation. Hence, US GDP growth is set to slow in Q4 after a strong Q3 rebound forecast in figures to be published later this week (Thursday).
Today’s Options Expiries for 10AM New York Cut
- EURUSD: 1.1800 (523M), 1.1835-40 (1BLN)
- USDJPY: 104.00 (2BLN), 104.20 (481M), 105.00 (918M), 105.30-35 (1.3BLN)
- AUDUSD: 0.7040-45 (460M), 0.7085 (273M), 0.7100 (667M) , 0.7205-15 (600M)
Technical & Trade Views
EURUSD Bias: Bullish above 1.1687 targeting 1.19
EURUSD From a technical and trading perspective, as 1.1687 supports look for a test of the primary equality objective at 1.19, expect profit taking pull back on first test.
Flow reports suggest topside offers increasing the closer the market gets to the 1.1900 level with strong offers into the area however, a break through the 1.1920 level will likely see the market gunning for the 1.2000 for the highs of the year however, option plays are likely to see good defences of the levels for the moment and any push through could be brief before dropping back again and any push for the top would have to have good timing. Downside bids light through to the 1.1780 with weak stops on a move through the level before running into congestion around the 1.1750-00 area before further stops appear and a weak downside on any break below 1.1650 area.
GBPUSD Bias: Bullish above 1.2861 targeting 1.3266
GBPUSD From a technical and trading perspective, while 1.2950 attracts sufficient bids look for a test of primary equality objective at 1.3264
Flow reports suggest downside bids into the 1.3000 level however, they are likely to be limited with weak stops through the level however, the move through to the 1.2950 level well likely see increasing bids and will possibly slow the market with further bids appearing into the 1.2900 level possibly significant. Topside offers light through into the 1.3150 level before stronger offers start to make an appearance and those offers are likely to increase into the 1.3200 area with limited stops on a move through and 1.3250-1.3300 area likely to be strong.
USDJPY Bias: Bullish above 104.30 targeting 1.05.50
USDJPY From a technical and trading perspective, as 104.30 supports look for a test of descending trendline resistance at 105.50
Flow reports suggest downside bids strengthen into the 104.20-00 level with possibly bottom pickers appearing below the figure level however weak stops through the 103.80 area could see a quick stab lower through to the 102.00 level before bids start to reappear. Topside offers light on a push through the 105.00 level with limited offers into the 105.80-106.20 area and the possibility of congestion then continuing through to the 106.40-80 area. And stronger offers thereafter
AUDUSD Bias: Bearish below .7243 targeting .6907
AUDUSD From a technical and trading perspective, as .7170 caps upside attempts look for decline to resume to expose bids and stops towards .6900
Flow reports suggest topside offers into the 0.7140-60 area before some light weakness appears however, 0.7180-0.7200 area sees stronger offers and 0.7220 level likely to see some congestion with stop losses through the level to open a quick move to stronger offers around the 0.7250 area. Downside bids light through to the 0.7060-40 area with stronger bids likely to appear on any move to test the 0.70000 areas, while there may be some weak stops on a move through the 0.6980 area the market is likely to see plenty of congestion into the 0.6950 area and increasing bids beyond
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!