The Week Ahead 6th – 10th July 2020

Market Recap

In today’s Asia-Pacific trading session, the overall risk tone was positive with indices going green across the board alongside strength in yields but volatility remained elevated. Leading Asia-Pacific indices to the upside was the CSI 300 at +5.35%, followed by the Hang Seng at +3.32%, Nikkei 225 at +1.83%, and the TOPIX (Tokyo Stock Price Index) at +1.60%. The ASX 200 is negative on the day at -0.71%. The overall positive risk tone supported high-beta currencies with AUD and NZD leading the FX complex to the upside. In contrast, safe-havens JPY and USD are the session’s laggards as they lead the FX majors to the downside. Consequently, AUDJPY has broken back above the 75.00 handle while DXY once again trades below the 97.00 handle. 

Market Outlook for Today

In Stocks, the question is ‘why are stocks (SPY– SPDR S&P 500 trust ) so robust given so much bad news?’. The US and global economy were struggling to come out of a slowdown when the virus hit the global economy hard in Q1, and now in the US, about half the country is hesitating or reversing reopening the economy as new cases and hospitalizations spike. 

In the Currencies market, both the USD and the JPY are seen to be under pressure today as Asian markets opened the week with a strong Bull’s run. In particular, the Chinese stocks seemed to have extended last week’s powerful upsurge, taking Hong Kong equities up too. In the currency markets, though, Euro is currently the largest beneficiary and is so far the strongest. It’s followed by commodity currencies, with Australian dollar having a mild upper hand over others. 

Technically, the JPY crosses would be something to watch for today. EUR/JPY has taken out last week’s high to resume recovery from 119.31. But as long as it stays below 122.11 resistance, such recovery is still seen as a corrective move only. EUR/USD is also kept well below 1.1348 resistance and thus, today’s recovery could just be a leg inside the near-term consolidation pattern. 

Overview for the Week Ahead

Key events for the week include the monthly US ISM non-manufacturing figures, plus a UK construction PMI and an RBA rate decision. Following the above-mentioned soft docket risk events, traders are most likely be focusing on the overall risk tone, as it will likely remain the dominant driver of price action for the trading days ahead. If the risk tone remains positive, we could be expecting an ongoing strength in the antipodeans (AUD & NZD) and weakness in safe-havens (JPY, CHF & USD). However, should sentiment sour, expect the antipodeans to begin paring their recent gains, and safe-havens their recent weakness. 

Today’s High Impact Events

The times below are GMT+3

Monday 6th July

  • 17.00 – US ISM Non-Manufacturing PMI 

Potential instruments to Trade: USD crosses & Gold. 

Tuesday 7th July

  • 07.30 – Australia RBA Interest Rate Decision 

Potential instruments to Trade: AUD & NZD Crosses to some extent GBP crosses. 

  • 07.30 – RBA Rate Statement 

Potential instruments to Trade: AUD & NZD Crosses to some extent GBP crosses.

Wednesday 8th July

No high impact news today.

Thursday 9th July

  • 04.30 – China Consumer Price Index (CPI) 

Potential instruments to Trade: USD, AUD & NZD Crosses and to some extent Gold.

Friday 10th July

  • 15.30 – Canada Unemployment Rate 
  • 15.30 – Canada Net Change in Employment 

Potential instruments to Trade: USD, AUD & NZD Crosses and to some extent Gold.

Coronavirus Update

World Health Organization reported that the global number of new COVID-19 cases rose by a record 212,326 to over 10.9mln as of Saturday. (Newswires) US CDC reported 52,228 new coronavirus cases for a total 2,841,906 and the death toll increased by 271 for a total 129,576. (Newswires) Florida coronavirus cases rose by 10,059 which represents the 3rd occasion new daily cases rose by over 10,000 in the past 4 days, while Texas coronavirus cases rose by 3,449 to 195,239 and current hospitalizations rose by 291 to a record 8,181 total.  

Furthermore, Texas and Florida had reported record daily increases on Saturday with a combined total of almost 20,000 new cases. (Newswires) UK coronavirus death toll rose by 22 to 44,330 which was one of the lowest number of increases in deaths since the pandemic began. (Newswires) UK Government said the R estimate for COVID-19 remains at 0.7 to 0.9, and the current growth rate for UK as a whole is between -6% to 0%. Additionally, it was separately reported that the UK is in talks to join an EU plan to secure supplies of potential COVID-19 vaccines and a decision could be made as soon as this week (FT).

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