Daily Market Outlook, October 7, 2020
Asian equity market performance is mixed this morning after a fall on Wall Street yesterday. Reports attribute that to President Trump ordering his officials to end talks on a new fiscal stimulus package until after the November elections. However, he tweeted that he wants Congress to pass bills to support airlines and protect pay. US Federal Reserve Chair Powell again ruled out a move to negative interest rates but said more fiscal stimulus was urgently required and that not doing enough was a bigger risk than doing too much.
Reports suggest that Scotland will introduce further restrictions today in response to a sharp rise in Covid-19 cases. However, First Minister Sturgeon has already said that these will not signal a return to full lockdown. Media sources also point to more restrictions in England, particularly in the North West where cases are reported as rising most rapidly.
Just released German industrial production unexpectedly fell by 0.2% in August snapping a three month rebound from the lockdown slump. That points to a possibility that output in the Eurozone as a whole may also have faltered. Spanish factory data which will also be released this morning and Friday’s returns for France and Italy will provide further guides on the outlook for the region.
The rest of today’s data calendar is very light. In the UK, the July update of the house price index is likely to be too early to be impacted by the recent temporary reduction in stamp duty. Nevertheless, it is expected to show another rise in prices.
The minutes of the Fed’s September policy meeting will be released this evening. Markets will be looking for further detail on the Fed’s new approach to inflation targeting which will allow some overshoot before tightening monetary policy. Key questions include to what extent and for how long inflation will be allowed to be above target. In another busy day for central bank speakers, Fed policymaker Williams is also supposed to address those issues.
The early hours of Thursday UK time will see the only scheduled debate between the two Vice-Presidential candidates for November’s US election. It will be hoped that the session is less acrimonious than last week’s Presidential debate. Nevertheless, both candidates will want to be strong advocates of their party’s agenda.
The Democrat candidate Kamala Harris will probably want to make the President’s handling of the Covid-19 the key issue. Republican VP Pence will try to emphasise other areas and in particular argue that the President is best placed to manage an economic rebound. Two further Presidential debates are currently timetabled for the 15th and 22nd of October but given President Trump’s recent illness it is unclear whether at least the first of those will go ahead.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1740-50 (750M). GBP/USD: 1.2630 (377M)
- USDJPY: 105.10 (385M), 105.25 (450M), 105.45-50 (2.1BLN), 105.60 (320M), 105.75 (429M), 106.20 (550M)
- AUDUSD: 0.6975 (695M), 0.7000 (1.1BLN)
Technical & Trade Views
EURUSD Bias: Bearish below 1.1750 Bullish above
EURUSD From a technical and trading perspective,test of 1.1750 trendline attracted fresh bids, as 1.18 now acts as interim support look for a test of offers and stops above 1.1950 UPDATE as 1.1700/50 acts as support expect continued rotation in 1.17/1.19 range, a breach of 1.17 would suggest a deeper correction underway to challenge bids at 1.16. UPDATE as 1.1750 now acts as resistance look a challenge of bids and stops below 1.16 UPDATE 1.18 the line in the sand now through here and bulls target 1.1850 test next
Flow reports suggest offers through the 1.1800 levels with weak stops on a push through the 1.1820 level with sentimental offers around the 1.1850 area with increasing offers through to the 1.1900 level, downside bids into the 1.1700 level with weak stops on a break through the 1.1680 level and limited bids through to the 1.1620 area where stronger bids seem to appear however, a break here opens a deeper move through to the 1.1500 area.
GBPUSD Bias: Bearish below 1.2800 Bullish above
GBPUSD From a technical and trading perspective, test of the pivotal primary trendline support at 1.2830/50 stalls downside for now, however as 1.3000 acts as resistance look for renewed downside to target 1.2650 next UPDATE as 1.2850 acts as resistance look for a test of bids to 1.26/1.2570 UPDATE as 1.28 now acts as support lok for a test of 1.30, a breach of 1.2750 would suggest a false upside break and resumption of downtrend UPDATE 1.3030 likely to retain sufficient supply to cap the current cycle, potential for inverse head and shoulders pattern to develop on a pullback to 1.28
Flow reports suggest topside offers remain through the 1.3000 level with weak stops appearing and then congestive offers through the 1.3050 area, those congestive offers continue through in increasing size to the 1.3100 level with strong congestion likely to limit any further movement for the short term, downside bids light through to the 1.2900 level with weak stops opening a quick test to the 1.2850 area and stronger bids then moving into the 1.2800 area and through to the 1.2750 level.
USDJPY Bias: Bearish below 105.50 Bullish above
USDJPY From a technical and trading perspective, as 106.50 acts as resistance look for another test of support at 105.50 failure to find sufficient bids here will expose 104.18 again. UPDATE as 105.50 now acts as resistance look for a test of bids towards 103.80 as the next downside objective. UPDATE continued rotation around 105.50, as 105.10 supports look for a test of 106.00
Flow reports suggest offers strong into 106.00 area with stops on a break through the 106.20-30 area, offers remain into the 107.00-20 area with congestion likely to be mixed with weak stops on a break of the level and that congestion likely to continue on any move into the 107.60 area where stronger offers are likely to appear, maybe another round of stops before stronger offers then appearing through to the 108.00 level. Downside bids into the 104.20 light and then increasing on any dips to the 104.00 level and stronger stops through the 103.80 level, any break here opens the chance of a deeper move through to the 103.00 level before stronger bids start to appear with possible option related buyers.
AUDUSD Bias: Bullish above .7100 Bearish below
AUDUSD From a technical and trading perspective, as .7220 now acts as support, look for a test of psychological .7500. Only a daily closing breach of .7220 would concern the bullish thesis opening a retest of .7100. UPDATE as .7220 now acts as resistance look for a test of bids to .7050 UPDATE as .7150 acts as resistance look for a test of bids and stops below .7000 UPDATE breach of .7150 opens a retest of .7220 from below UPDATE .7200 caps for now look for retet of bids and stops to .7100 UPDATE buyers stepped in at .7100, as supply at .7200 look for attest of .7050
Flow reports suggest downside light bids through to the 0.7020 area with stronger bids starting to make an appearance and possible option related bids coming into play, a push through the 0.6980 level should see weak stops appearing and the market running into congestion on any push to the sentimental 0.6950 area and likely to continue through to 69 cents area, Topside through to the 0.7220 level with some of the area cleared but immediately filling up again however, that weakness exposes the market through to the 0.7250 area with likely strong offers again into the level with congestive offers likely continuing through to the 0.7300 levels.
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.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!