Trading Analysis – 30th July 2020

Today’s Market Outlook

In Asia, currently, Nikkei is down -0.26%. Hong Kong HSI is down 0.67%. China Shanghai SSE is down 0.23%. Singapore Strait Times is down -1.56%. Japan 10-year JGB yield is up 0.0012 at 0.022. Overnight DOW rose 0.61%. S&P 500 rose 1.24%. NASDAQ rose 1.35%. 10-year yield dropped -0.002 to 0.579, staying below 0.6 handle. 

Generally, from an economic standpoint in the US, the FOMC kept Fed Funds Rate (FFR) unchanged at 0-0.25% as expected through unanimous decision and maintained IOER at 0.10%. The FOMC also said, that economic activity and employment has picked up in recent months but remains well below its levels at the beginning of the year and noted that the path of economic recovery will depend significantly on the course of the virus. Fed Chair Powell stated at the press conference that the Fed would be committed to using its tools “for as long as it takes” to ensure a strong economic recovery and that household spending looks to have recovered by about half, likely owing to fiscal stimulus, but business fixed investment is yet to improve.  

As for the currencies market, the USD dropped again overnight after the rather uneventful FOMC rate decision, but the selling slowed a little as seen in Asian session today. However, the USD remains the poorest player for the week. Commodity currencies are actually performing poorly, with the NZD and CAD being bearish against other currencies for the week. The GBP and EUR are the stronger ones, taking turns to be the best performer. Movements in the markets could re-accelerate with busy calendar and heave weight economic data scheduled for today and tomorrow. 

Still with regards to currencies but from a technical standpoint, JPY crosses would be interesting to scout for trading opportunities, since they are clearer in their technical and trend set ups. For example, the EUR/JPY and GBP/JPY gained significant support by rebounding at the 4Hr chart. The focus is back on 124.29 and 136.62 temporary tops respectively. Break could possibly extend recent rally. On the other hand, AUD/JPY and CAD/JPY struggles in very tight range above 74.87 and 78.38 temporary lows respectively and look susceptible. Break of these levels will extend recent decline.  

Talking about Gold or XAU/USD to be specific, it is currently trading at the 1960’s area after finding resistance at the 1971 area which mirrored previous High of July 2020. Gold price is seen to be depreciating for now especially on lower time frames. Is this due to the appreciative performance of the USD? We will soon find out together with some High impact Data releases as highlighted below. 

Today’s High Impact Events

The times below are GMT+3.

11.00  – Germany Gross Domestic Product (GDP) 

The Gross Domestic Product released by the Statistisches Bundesamt Deutschland is a measure of the total value of all goods and services produced by Germany. Economic Minister Peter Altmaier, has recently mentioned about his expectations of the German economy to be returning to growth in October. This is made a possibility he said as well, due to being boosted by unprecedented government stimulus to spur investment and consumer spending, alongside huge rescue packages that have helped companies like Lufthansa stay afloat and preserve thousands of jobs. 

Potential instruments to Trade: EUR Crosses.

15.00 – Euro Harmonised Index of Consumer Prices 

HICP or The Harmonised Index of Consumer Prices is an indicator of inflation and price stability for the European Central Bank. It is a consumer price index which is compiled according to a methodology that has been harmonised across EU countries. 

Potential instruments to Trade: EUR Crosses.

15.30 – US Gross Domestic Product Annualized (GDP)

The Gross Domestic Product Annualized released by the US Bureau of Economic Analysis shows the monetary value of all the goods, services and structures produced within a country in each period of time. Today’s market reaction from GDP numbers, would most likely follow through or continue with sentiments generated by yesterday’s Federal Reserve decision to keep interest rate near zero. Although the grim GDP numbers in the April-June period have long been expected, a figure on today’s announcement, whether it be noticeably better or worse in comparison to the median 35% decline, could potentially shed light on the length of the recovery, if so it be digested as positive. 

Potential instruments to Trade: USD Crosses.

Coronavirus Status Update 

CORONAVIRUS UPDATE US COVID-19 cases +56,862 (Prev. +54,448) and deaths +1,194 (Prev. +1,126). (Newswires) California COVID-19 cases +8,755 (Prev. +6,000) and deaths increased by a record +197 (Prev. +73), Florida COVID-19 cases +9,446 (Prev. 9,230) deaths increased by a record of 217 (Prev. +191), while New York COVID-19 cases +715 (Prev. +534) and deaths rose by 5 (Prev. +9) (Newswires).

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