Daily Market Outlook, September 9, 2020
Following declines across European and US stock market yesterday, equities have continued to trade heavily across the Asia Pacific region overnight. Almost all major indices are trading lower this morning, in part driven by the news of AstraZeneca Plc’s decision to pause its trial of a Covid-19 vaccine. Meanwhile, US Customs and Border Protection officials have prepared orders to block imports of cotton and tomato products from China’s Xinjiang region following allegations they were being produced with forced labour.
The eighth round of formal negotiations between the EU and UK on a future trade deal enters its second day today. So far, discussions have been acrimonious leading the UK to announce its proposal for a UK Internal Market Bill which, if passed, would ensure that trade amongst all four home nations remained free from barriers after the Brexit transition period ends on 31st December 2020.
In the event of no trade deal being reached, the bill would legally override parts of the Northern Ireland protocol that was signed in October alongside the Withdrawal Agreement. With little else of note on today’s calendar, the focus is likely to remain on discussions between the UK and EU, particularly with the Bill due to be published today, followed by a first vote likely to come next week.
Data wise, today’s focus is limited to the US JOLTS report, which is expected to show the number of job openings picked up further in July, following increases in May and June with consensus expectations centred on a 6mn rise in vacancies, pointing to a further firming in demand for labour. However, the number of vacancies relative to the number of unemployed people in the US is expected to remain low.
Elsewhere, the Bank of Canada delivers its latest policy decision at 15:00 BST. No major changes in policy are expected with policy rates forecast to remain at 0.25%. The focus, however, will be on any changes to its statement that suggest a more explicit shift towards an ‘average inflation targeting’ regime akin to that recently adopted by the US Federal Reserve.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1720 (300M), 1.1775-80 (300M), 1.1800 (717M), 1.1825-30 (660M), 1.1835-40 (1BLN)
- USDJPY: 105.40-50 (1.4BLN), 106.25 (533M), 106.50 (840M)
- GBPUSD: 1.3000 (150M)
- AUDUSD: 0.7210 (305M), 0.7230 (251M), 0.7300 (240M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.1950 targeting 1.1750
EURUSD From a technical and trading perspective, further consolidation likely look for supply at 1.1950 to contain upside attempts setting up a test of ascending trendline support to 1.1750.
Flow reports suggest downside bids into the 1.1740-60 congested sentimental area with increasing bids into the 1.1720-00 level weak stops on a dip through the 1.1680 area for the prospect of a deeper move through to the 1.1500 level before stronger bids start to appear and all that is available is possible congestive sentimental bids, topside offers light through to the 1.1800 level where some offers are starting to build with increasing congestion through to the 1.1850-1.1900 area with some weak stops above the 1.1920 level but almost certainly running into strong offers from there through to the 1.2000 level.
GBPUSD Bias: Bearish below 1.3350 targeting 1.3050
GBPUSD From a technical and trading perspective, the breach of 1.32 would negate the near term bullish thesis opening a retest of 1.3050 from above. UPDATE target achieved, now look for a test of the pivotal primary trendline support at 1.2830/50
Flow reports suggest downside bids into the 1.2950 area are likely to be strong still and once through to the 1.2900 area medium sized congestion opens up the downside to decent stops and the market then open to the 1.2760 area before decent bids reappear with limited sentimental bids around the 00/50 areas. Topside offers light through to the 1.3050 level with some congestion likely around the level and a push through likely to trigger weak stops for a move through to the weaker congested 1.3100 area and stronger stops above.
USDJPY Bias: Bearish below 106.50 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.
Flow reports suggest topside 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 light through to the 105.50 level where congestion is building then stronger bids likely on any dip through to the 105.20 area and weak stops then putting in an appearance on a dip below the 104.80 level.
AUDUSD Bias: Bullish above .7250 Bearish below
AUDUSD From a technical and trading perspective, as .7250 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 sub .7220 negates the near term bullish thesis, as .7270 now acts as resistance look for a test of .7100 ascending trendline support
Flow reports suggest topside offers light through the 0.7300 level with very light stops on a push through the 0.7320 area and stronger offers starting around the sentimental 0.7340-60 area limited at best, stronger offers start to appear on a move through the 74 cents level and continue through to the 0.7450 area although some weak stops possible, downside bids into the 0.7250 level a little thinner however, once through the 0.7240 level the market is likely to increase in size particularly through the 0.7220 area and weak stops possibly tempered by stronger bids below the 0.7180 level.
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