The Week Ahead 3rd-7th August 2020

Market Recap

The markets as of Friday’s closed in the red as rising tensions between the U.S. and China as well as the latest earnings reports continued to concern investors. U.S. stocks closed lower Friday as investors seemed to have been troubled about rising Chinese- American tensions and a lack of progress on another fiscal stimulus bill in Washington. The DJIA declined 182.44 points, or 0.7%, to close at 26,469.89; the S&P 500 index 20.03 points, or 0.6%, closing at 3,215.63; and the Nasdaq Composite Index fell 98.24 points or 0.9% to close at 10,363.18. 

Market Outlook for Today

In today’s session the calendar is very light in terms of political and central bank events, but we do have FED speakers on the wires such as Bullard, Barkin and Evans so make sure to pop into the Currency Research Tab in the terminal and check out the Fed’s Hawks & Doves cheat sheet to familiarize yourself with their current policy stance. 

In Asia, Nikkei closed up 2.24%. Hong Kong HSI is down to -0.73%. China Shanghai SSE is up 1.36%. Singapore Strait Times is down -1.52%. Japan’s 10-year JGB yield is up 0.0108 at 0.026. 

As for the stocks market, European stocks turned higher as of market open today, since positive economic data countered pessimism over a resurgence of Covid-19 cases. Gains in auto and chemical shares helped the Stoxx 600 Index erase a modest decline after the euro area recorded its first manufacturing expansion in one-and-a-half years. HSBC Holdings Plc, which missed profit estimates on the pandemic’s effect, came off its session lows, contracts on the S&P 500 Index reversed a drop and the dollar trimmed its increase. 

In the currencies market however and for the short term, the decline in the USD is reflecting the potential weakness of the US economy as the pandemic spreads in southern states. For the time being, however, academics broadly agree that the moment when the world decisively shifts away from the US currency has not yet arrived. As most currencies are, by default, traded against the USD, EUR would be of little use when, for example, an emerging market central bank needs to stop its currency from plummeting.  

Still into currencies but rather technically, an immediate focus would be on whether the USD could finally turn around the corner and has a sustainable rebound. USD/JPY has already breached 106.07 resistance, so did USD/CHF on 0.9151 minor resistance. Eyes will now be on 1.1698 minor support in EUR/USD, 1.3013 minor support in GBP/USD, as well as 0.7063 minor support in AUD/USD. Additionally, 1939.20 support in Gold will also be watched. 

Overview for the Week Ahead

For the week ahead, it will be interesting with a super busy calendar. Central bank activities include RBA and BoE rate decisions. Economic data include US ISM and non-farm payroll, Canadian employment, Japan GDP, New Zealand employment, and China PMIs. These events could further shape the interactions between JPY, USD, Gold, AUD as well as stocks. 

Today’s High Impact Events

The times below are GMT+3

Monday 3rd August

17.00 – ISM Manufacturing PMI (USA) 

Potential instruments to Trade: USD Crosses. 

Tuesday 4th August

  • 04.30 – Retail Sales (Australia)  

Potential instruments to Trade: AUD Crosses. 

  • 07.30 – RBA Interest Rate Decision (Australia)  

Potential instruments to Trade: AUD Crosses. 

Wednesday 5th August

  • 01.45 – Employment Change (New Zealand) 

Potential instruments to Trade: NZD Crosses. 

  • 12.00 – Retail Sales (Europe)  

Potential instruments to Trade: EUR Crosses. 

  • 15.15 – ADP Nonfarm Employment Change (USA)  

Potential instruments to Trade: USD Crosses & impacts Gold movements too. 

  • 17.00 – ISM Non-Manufacturing PMI (USA) 

Potential instruments to Trade: USD Crosses & impacts Gold movements too. 

  • 17.30 – EIA Crude Oil Stocks Change (Globally) 

Potential instruments to Trade: Crude Oil, CAD, USD Crosses & impacts Gold movements too. 

Thursday 6th August

  • 09.00 – BoE Interest Rate Decision (UK)  

Potential instruments to Trade: GBP Crosses. 

  • 09.30 – BoE Governor Bailey Speech (UK)  

Potential instruments to Trade: GBP Crosses. 

Friday 7th August

  • 15.30 – Employment Change (Canada)  

Potential instruments to Trade: CAD Crosses. 

  • 15.30 – Nonfarm Payrolls (US)  

Potential instruments to Trade: USD Crosses. 

  • 17.00 – Ivey PMI (Canada)  

Potential instruments to Trade: CAD Crosses. 

Coronavirus Update

US CDC reported coronavirus cases rose by 58,947 to 4.6mln and deaths rose by 1,132 to a total of over 154k, while a major newswire tally showed that US coronavirus cases rose by at least 45,688 to 4.68mln and deaths rose by at least 420 to 155,343. (Newswires) A major incident was declared in Greater Manchester, UK due to a continued rise in coronavirus infections with substantial increases for Manchester, Oldham and Tameside. (Manchester Evening News) Ireland’s Health Minister said they are considering additional measures to restrict non-essential travel (Newswires). 

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