Midday Analysis – 13th August 2020

Today’s Market Outlook

In Asia today, the Nikkei closed up 1.78%. Hong Kong HSI is down -0.24%. China Shanghai SSE is up 0.04%. Singapore Strait Times is up 1.33%. Japan 10-year JGB yield is down -0.0119 at 0.032. Overnight, DOW rose 1.05%. S&P 500 rose 1.40% to 3380.35, just inch below record high of 3393.52. NASDAQ rose 2.13%. 10 year yield rose for another day, by 0.012 to 0.670. It remains to be seen if the rebound in yield is there to stay on not. 

For the currencies market, European majors turn slightly stronger today. The EUR appears to be supported by news that US is refraining from tariffs hikes on Airbus subsidies retaliation. Though, except against the JPY, EUR’s strength is not too convincing yet. The USD did turn soft following strong rally in US stocks overnight. But surprisingly, commodity currencies are not riding on solid risk-on sentiments at all. Even a set of positive job data from Australia is not able to lift the AUD. Focus will now turn to jobless claims from US later in the day. 

As for Gold and in the international markets, spot gold prices witnessed their biggest single-day drop in over seven years on Tuesday as stocks surged and the USD strengthened. Amid other cues, uncertainty over stimulus by US Federal Reserve played truant for investor sentiment for gold. The fall that took gold below $1,900 has flushed out a lot of weak longs and it looks like now the price is going for a bit of consolidation and gold is preparing for another move higher. 

Today’s High Impact Events

The times below are GMT+3.

09.00 (Post) – EUR Harmonized Index of Consumer Prices (HICP) m/m 

As of yesterday, European stocks advanced further. The Stoxx Europe 600 Index gained 1.11%, Germany’s DAX 30 rose 0.86% and France’s CAC 40 was up 0.90%. The U.K.’s FTSE 100 surged 2.04% despite the U.K. economy contracting by 20.4% on quarter in the second quarter and confirming a recession. In reaction to data and fundamental factors so far, Sentiments remain as moderately Bullish to strongly Bullish for the EUR crosses. 

Potential instruments to Trade: EUR Crosses.

15.30 – US Jobless Claims 

Traders have also been buoyed by optimism about a US stimulus package and capital gains tax cut as well as hopes of a coronavirus vaccine. Markets have also set aside jitters about US-China tensions in recent sessions. The question is, will this optimism prolong and be added onto more positivity in today’s Jobless claims?  

Potential instruments to Trade: USD Crosses & Gold.

Coronavirus Status Update 

US COVID-19 cases +55,540 (prev. +40,522); deaths +1,244 (prev. +565), while a major newswire tally stated that US cases increased by at least 51,848 to a total of 5.22mln and deaths rose at least 1,459 to a total of 166.1k. California COVID-19 cases +11,645 in which the increase includes a backlog (prev. +12,500) and a major newswire tally stated California cases increased by at least 7,914 on Wednesday and deaths rose by at least 148, while Texas cases +6,200 (prev. +8,913), deaths +324 (prev. +220) and hospitalizations fell by 188 to 7,028 which officials noted was a 6-week low (Newswires).

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