Daily Market Outlook, May 14, 2020

Daily Market Outlook, May 14, 2020

Daily Market Outlook, May 14, 2020 

Asian equity market is down this morning following declines in US and European markets yesterday. Concerns about the size of the economic impact of the Covid-19 pandemic and indications of growing tensions between the US and China were cited as reasons for the weakness. 

In the US, Fed Chair Powell ruled out the likelihood of a near-term cut in US interest rates saying it was “not something that we’re considering”. However, he did add “for now” which suggests that the option may not be completely off the table. President Trump said he disagreed with the assessment. 

In Australia, employment fell by almost 600k in April, while the unemployment rate rose to 6.2% (from 5.2% in March). The Australian PM said that the economy will be reopened in a “Covid-safe environment. 

In the UK, the RICS house price balance fell to -21% in April from 9% in March. 

Bank of England Governor Bailey will deliver a speech via webinar this morning. His economic assessment is unlikely to depart much from last week’s Monetary Policy Committee update, where he stated that the BoE stood ready to offer more support to the economy if necessary. Markets will in particular listen for more information on the MPC’s asset purchase programme (QE) which many analysts think will be increased in June. There will also be interest in whether Governor Bailey says anything to indicate that the MPC is wavering from its previous position that cutting interest rates below zero is highly unlikely. Meanwhile, the Office for Budget Responsibility will issue an update of its assessment of the pandemic’s impact including monthly numbers. 

Weekly initial jobless claims will give a further indication of the parlous state of the US labour market. While the level of claims has dropped a little over the past few weeks they are still exceptionally high by normal standards which indicates that the labour market is still rapidly weakening. The latest data is expected to show only a modest slowdown in claims.

The Bank of Canada will release its latest Financial System Review this afternoon. Afterwards, BoC Governor Poloz (who leaves office in early June) will hold a press conference. He is likely to conclude that the financial sector is robust enough to cope with the present testing conditions. 

Early tomorrow, China’s April retail sales, industrial production and fixed asset investment data may provide further evidence of a post lockdown rebound. There were signs in March data that activity was starting to improve. However, retail sales were noticeably weaker than industrial production suggesting that consumer demand remains constrained

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

  • EURUSD: 1.0750 (1.8BLN), 1.0800 (1.5BLN), 1.0870-80 (900M) 1.0900 (1.4BLN), 1.0905-15 (1.3BLN), 1.0925-30 (1.5BLN)
  • USDJPY: 106.10-25 (1BLN), 106.75-85 (900M), 107.00-05 (1.2BLN) 107.15-25 (500M), 107.35-40 (500M)
  • AUDUSD: 0.6350 (1.7BLN), 0.6400 (725M), 0.6500 (1.1BLN), 0.6550 (1.4BLN)
  Short-Term Bollinger Reversion Strategy 2.0 (Feb. 20 – 27)

Technical & Trade Views

EURUSD Bias: Bullish above 1.0750 targeting 1.1050

 From a technical and trading perspective, 1.09 remains pivotal for the achievement of the interim (1.1050) and primary (1.1240) upside objectives. Last week’s defense of the ascending trendline support has renewed bullish spirits. As last week’s lows remain intact on a closing basis then bulls will seek to test offers and stops to 1.10 as the initial upside objective this week. UPDATE massive EURUSD strikes between 1.0750-1.0900 all week UPDATE watch for reaction at the ascending trendline support towards 1.0750 where there is also sizeable optionality interest, a failure to defend this area would be a berish development opening a move to test year to date lows

Daily Market Outlook, May 14, 2020

GBPUSD Bias: Bearish below 1.2350 targeting 1.20)

GBPUSD From a technical and trading perspective, bids emerged last week at the range support as the trendline Fridays close flipped the daily chart bullish as per the near term volume weighted average price. As 1.2390 supports look for a close above 1.25 to encourage the bullish bias to retest range resistance towards 1.26. UPDATE a close below 1.2270 will be a bearish development targeting a move back towards 1.20. Note the breach of the momentum trendline support UPDATE the momentum trendline failure forewarned of the price decline through 1.23 support, as this level contains upside attempts look for a move to test the pivotal support cluster to 1.20

Daily Market Outlook, May 14, 2020

USDJPY Bias: Bearish below 107.50 targeting 1.0465)

USDJPY From a technical and trading perspective, range contraction persists,albeit with a downside bias, a breach of 106.80 should inject downside momentum. A topside breach of 108 would delay downside objectives opening a retest of range resistance above 109 before lower again

Daily Market Outlook, May 14, 2020

AUDUSD Bias: Bullish above .6450 targeting .6700)

  CAD Weekly Forecast (Feb. 17 – 21)

AUDUSD From a technical and trading perspective, price testing pivotal .6568 prior cycle highs area if sufficient supply is seen here look for another leg lower to test trend support back to .6330 before another attempt to base and make another run towards the .6700 primary upside objective

Daily Market Outlook, May 14, 2020

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.

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