Trading Analysis – 14th July 2020

Today’s Market Outlook

The start of the Asian session seemed to have been driven by geopolitical heat. The US  has denounced China’s claims to the South China Sea as unlawful, while Secretary of State Pompeo said that, Beijing’s claims to offshore resources across most of the South China Sea and its “bullying” campaign, are completely unlawful. This followed earlier reports that the US was set to formally reject Chinese territorial claims in the South China Sea, departing from its past practice of not taking sides and will warn that it will “pose the single greatest threat to the freedom of the seas in modern history,” according to WSJ sources (Newswires/WSJ).

As a follow-up result of the abovementioned matter, the continuous deterioration of Australia’s relationship with its largest trading partner, China, continues to impact the ASX 200 index’s struggle to recover from yearly lows, as it fails to break above its’ key 6,200 resistance level. 

With regards to commodities, Saudi Arabia and Iraq confirmed full commitment to the OPEC+ agreement according to a statement, while Iraq will reach 100% compliance by August and will compensate in July-Sept for overproduction. Furthermore, Saudi Arabia and Nigerian oil ministers also reiterated firm commitment to the OPEC+ agreement in which Saudi emphasised the importance for all OPEC+ countries to meet their agreed output target cuts to accelerate oil markets rebalancing (Newswires). 

As for the Currencies market, the US Dollar by correlating it to the DXY Index hinted traders of a slow descent lower, weighed down by the recent surge in coronavirus cases. As Europe moves closer to re-opening, Australia and New Zealand avoided significant economic damage, and even Canada avoided a significant rise in cases, the juxtaposition in the level of support needed to keep the US economy afloat while the Federal Reserve focuses on its’ ‘easing’ plans, while other central banks may follow suit. 

Today’s High Impact Events

The times below are GMT+3.

11.00 – ECB Bank Lending Survey 

EUR/USD appears to be on track to test the June high (1.1423) as the ECB is expected to retain the current policy on July 16, and the central bank may endorse a wait-and-see approach for the second half of 2020 as fiscal authorities attempt to draw up a COVID-19 recovery fund. 

Potential instruments to Trade: EUR crosses.

12.00 – Germany ZEW Survey 

Germany’s Merkel says a second EU summit may be needed on the fiscal stimulus package. Upside may remain elusive if the global stocks turn risk-averse on lingering virus concerns. 

Potential instruments to Trade: EUR crosses. 

15.30 – US Consumer Price Index (CPI)

The Consumer Price Index (CPI) will be released by the Labor Department today. Economists polled by Dow Jones are estimating U.S. consumer prices rose 0.5% in June, according to economists polled by Dow Jones.  

Potential instruments to Trade: USD crosses.

16.30 – Swiss National Bank (SNB) Chairman Jordan’s Speech

What happen just last month was that Jordan said that the SNB had room to lower its policy rate further if needed. ”Using negative interest rate and interventions are particularly important at the moment as franc in demand as safe haven,” Jordan explained and reiterated that they are will to intervene in currency markets more strongly. The question is: What is he going to say this time and still lowering interest rates?  

Potential instruments to Trade: CHF crosses.

Coronavirus Status Update 

US COVID-19 cases rose 60,469 (Prev. +62,918) and death toll rose 312 (Prev. +906). (Newswires) Florida COVID-19 cases 12,624 +4.7% (Prev. 7-day avg. +4.4%); Texas coronavirus cases increased by 5,655 to a total 264,313 which is an increase of 2.2% (Prev. 7-day avg. +4.1%), deaths rose by 43 to 3,235 and current hospitalizations declined by 5 to 10,405 to snap 14 days of consecutive record highs; California COVID-19 cases rose 8,358 (Prev. +8,460, above 14-day average) and the death toll rose by 23 (Prev. +72, below the 14-day average), while hospitalizations increased by 2.6% (Newswires). California Governor Newsom ordered indoor activities to close state-wide, including bars, restaurants, museums, zoos, and movie theatres, while he added that the worst-hit counties also must close churches and salons (Newswires).

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