Trading Analysis – 21st July 2020

Today’s Market Outlook

In Asia, Japan’s Nikkei 225 index appreciated by 0.43% or about 98.12 points to 22,815.60 during early trading sessions. Hong Kong’s Hang Seng index climbed 1.47%, or 369.07 points, to 25,427.06. China’s Shanghai Composite index gained 0.49%, or 16.40 points, to 3,330.55. 

In the commodities market, Gold tiptoed higher today after scaling a near nine-year high in the previous session, since demand improved driven by both fear and worries over a spike in coronavirus cases and expectations of higher inflation from more stimulus measures to mitigate the economic blow. Spot gold was up 0.23% at $1,822.53 per ounce, hitting its highest since September 2011. For Oil on the other hand, its’ prices were little changed from yesterday, as prices were trapped in the narrow trading band of the past three weeks, due to  hopes for a recovery in oil demand against fears of new lockdowns due to a growing number of coronavirus cases. Brent futures were up 15 cents, or 0.4 per cent, at $43.43.  

As for the currencies market, the EUR weakened in earlier trading sessions today, after the EC finally reached an agreement on the recovery fund. Traders seem to be taking some profits as expectations became news on mainstream media. The NZD however, is spotted to be the weakest link so far, partly driven by cross selling, especially against the AUD. The CAD and AUD are trading strongest especially on a risk-on sentiment. Just as a note, the AUD is given additional boost which may enhance its skywards moves, due to RBA Governor’s ruling out of negative rates and any interventions. 

Today’s High Impact Events

The times below are GMT+3.

04.30 – Australia RBA Meeting Minutes (Post)

Australia’s central bank has decided that it was not necessary to adjust its policy measures in the current environment, minutes of its July policy meeting showed during Sydney’s open sessions today, where board members restated that negative interest rates remained “extraordinarily unlikely”. 

Potential instruments to Trade: AUD & NZD crosses.

06.30 – Australia Governor Lowe’s Speech (Post) 

Governor Philip Lowe, in his annual speech to the Anika Foundation today, addressed the following key points: 

  • The jobs market appears to have reached its trough, but there will be “bumps” as previously resilient sectors run out of work. 
  • Government borrowing costs are the lowest since Federation, which will allow stimulus to continue 
  • Direct central bank financing of government spending (as proposed by MMT) is not under consideration 

Potential instruments to Trade: AUD & NZD crosses.

15.30 – Canada Retail Sales 

Statistics Canada will release retail trade figures for May later today. Retail sales seem to have fallen by a record 26.4 per cent to $34.7 billion in April due to COVID-19 restrictions, but that early estimates suggest retail sales rose 19.1 per cent in May.  

Potential instruments to Trade: CAD crosses.

Coronavirus Status Update 

More than 14.7 million people around the world have been diagnosed with the coronavirus. More than 7.5 million have recovered while nearly 610,000 have died, according to data from Johns Hopkins University. The US has recorded nearly 141,000 deaths, the most in the world. 

US COVID-19 cases rose by at least 61,761 on Monday, whilst deaths rose by at least 500, according to a major newswires tally. California COVID-19 (D/D): Cases +1.8%/+6,846 (prev. +9,329, vs 7-day average +2.7%); deaths +9 (prev. +90) 

EU leaders have reached a pre-dawn agreement on a massive post-pandemic economic recovery plan. The Australian state of Victoria reported 374 new cases of coronavirus and three deaths on Tuesday as it prepares to make mask-wearing mandatory. 

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