Daily Market Outlook, September 25, 2020
Asian equity markets were mostly positive as investors weighed optimism regarding further US fiscal stimulus against rising coronavirus cases in Europe. Reports yesterday appeared to signal a deal in Washington on more fiscal support might be closer. However, there were mounting concerns about a second wave of Covid-19 infections, with the UK and France recording the highest number of new cases since the start of the pandemic.
UK GfK consumer confidence and public finance figures were released earlier this morning. Consumer confidence moved up 2 points to a six-month high of -25 in September. It nevertheless remains at a weak level from a historical perspective and is a contrast to the recent rebound in retail sales. Meanwhile, UK net borrowing in August was £35.9bn, less than expected, but significantly higher than £5.4bn in the same month a year ago. The Chancellor yesterday announced further measures to support the economy, including a new plan to protect jobs after the Coronavirus Job Retention Scheme closes at the end of October. The new scheme tops up wages for employees on reduced hours and is expected to cost significantly less than the current furlough scheme. Other measures include an extension of the VAT reduction for the hospitality sector until the end of next March. There is not a huge amount of economic data releases later today.
Eurozone money supply figures for August will provide a modicum of interest – M3 money growth has risen significantly in recent months, partly reflecting substantial monetary and fiscal policies to support the economy.
The afternoon session sees the release of US August durable goods orders. We forecast a rise of 0.9% in August which would represent a fourth consecutive monthly increase, signalling the likelihood of a strong increase in investment spending in Q3. However, concerns about a broader slowdown in the economic recovery remain, underlining Fed officials’ recent pleas for more fiscal stimulus to be passed.
In speakers’ corner, the ECB’s Villeroy and Hernandez de Cos are due to speak at online events. The Fed’s Williams and George are also scheduled to appear
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1650 (280M), 1.1700 (630M), 1.1725-30 (700M), 1.1740-50 (500M)
- USDJPY: 104.30-40 (750M), 104.50 (700M), 104.70 (650M), 105.00 (1.3BLN) 105.50 (610M), 105.80-90 (850M)
- AUDUSD: 0.7250 (280M), 0.7300 (1.84BLN)
Technical & Trade Views
EURUSD Bias: Bearish below 1.1750 Bullish above
EURUSD From a technical and trading perspective,test of 1.1750 trendline attracted fresh bids, as 1.18 now acts as interim support look for a test of offers and stops above 1.1950 UPDATE as 1.1700/50 acts as support expect continued rotation in 1.17/1.19 range, a breach of 1.17 would suggest a deeper correction underway to challenge bids at 1.16. UPDATE as 1.1750 now acts as resistance look a challenge of bids and stops below 1.16
Flow reports suggest downside bids limited through the 1.1650 area opening the downside through to the 1.1480-1.1500 level in the short term, limited congestion around the 1.1650 level likely to give way with similar limited congestion through the figure and onwards Topside offers light through the congested 1.1800 area and the market then building above the 1.1860 area and through into the 1.1900 level with weak stops through the level but limited stops likely to leave the topside vulnerable to reversals through the area.
GBPUSD Bias: Bearish below 1.2850 Bullish above
GBPUSD From a technical and trading perspective, test of the pivotal primary trendline support at 1.2830/50 stalls downside for now, however as 1.3000 acts as resistance look for renewed downside to target 1.2650 next UPDATE as 1.2850 acts as resistance look for a test of bids to 1.26/1.2570
Flow reports suggest downside congestion through the 1.2700 level with limited potential for stops with a stronger supportive area on a dip to the 1.2650 level and increasing through to the 1.2630 area and possibly to the 1.2600 area before weak stops appear, any push through the level will likely to find stronger bids into the sentimental handles through to 1.2500 and possibly stronger key area. Topside light through to the 1.2800 level with limited offers only just starting to build in the area, a push through the 1.2850 area opens up the chance of a short squeeze through the 1.2900 level before stronger offers start to increase through to the 1.30000.
USDJPY Bias: Bearish below 105.50 Bullish above
USDJPY From a technical and trading perspective, as 106.50 acts as resistance look for another test of support at 105.50 failure to find sufficient bids here will expose 104.18 again. UPDATE as 105.50 now acts as resistance look for a test of bids towards 103.80 as the next downside objective. NOTE Massive 3-billion USD/JPY between 104.90-105.10 expire Thursday NY cut
Flow reports suggest offers light through to the 105.50 level with some weak stops likely on a break through and opening the market through to the slightly stronger 106.00 area with stops on a break through the 106.20-30 area, offers remain into the 107.00-20 area with congestion likely to be mixed with weak stops on a break of the level and that congestion likely to continue on any move into the 107.60 area where stronger offers are likely to appear, maybe another round of stops before stronger offers then appearing through to the 108.00 level. Downside bids into the 104.20 light and then increasing on any dips to the 104.00 level and stronger stops through the 103.80 level, any break here opens the chance of a deeper move through to the 103.00 level before stronger bids start to appear with possible option related buyers.
AUDUSD Bias: Bullish above .7150 Bearish below
AUDUSD From a technical and trading perspective, as .7220 now acts as support, look for a test of psychological .7500. Only a daily closing breach of .7220 would concern the bullish thesis opening a retest of .7100. UPDATE as .7220 now acts as resistance look for a test of bids to .7050 UPDATE as .7150 acts as resistance lok for a test of bids and stops below .7000
Flow reports suggest downside light bids through to the 0.7020 area with stronger bids starting to make an appearance and possible option related bids coming into play, a push through the 0.6980 level should see weak stops appearing and the market running into congestion on any push to the sentimental 0.6950 area and likely to continue through to 69 cents area, Topside offers light through the 70 cents handle with stronger offers starting to build for any move through to the 0.7100 with weak stops on a push through the 0.7120 area and opening to the 0.7160 level before sufficient offers appear to slow any further rise however, strong offers through to the 72 cents level are likely to stymie any further movement.
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. 73% and 76% 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!