The Week Ahead 20th – 24th July 2020

Market Recap

Euro ended last week as the most Bullish one, as it got backed up by hope of an agreement over EU’s post-pandemic recovery fund. The strength was particularly apparent against Swiss Franc and Sterling. Yet, up till the time of writing, there seems to be no consensus reached at the EU summit yet. Dutch Prime Minister Mark Rutte even complained that Germany Chancellor Angela Merkel and France President Emmanuel Macron were “walking away grumpy” from the meeting. Rutte added that a compromise is still “possible” at over-time during Sunday, but “there remain big issues”. Euro’s near term fortunate could have a U-turn if the negotiations collapse. 

Market Outlook for Today

APAC stocks traded unevenly after the region initially took its cue from Wall Street’s mixed close on Friday as the decline in Netflix shares kept other large tech stocks at bay ahead of another earnings-abundant week, with 92 S&P 500 companies alongside eight Dow 30 constituents bracing to report their numbers – including the likes of Tesla, Microsoft, Twitter, IBM and some major US airlines. ASX 200 (-0.5%) lost steam after the open as Australia remained subdued by the outbreak in its second largest state of Victoria– which prompted authorities to announce a mandatory mask-wearing rule over the weekend. Nikkei 225 (-0.1%) swung between gains and losses after seeing initial pressure as Japan’s June trade balance printed a significantly wider-than-expected deficit in JPY terms, but with losses somewhat cushioned on currency dynamics. 

In the currency’s markets, the AUD did end as the second strongest as of market close but is still looking supported by iron ore prices, as well as general risk appetite. But it should be reminded that coronavirus cases in Victoria continued to surge indicating that risk is rising for New South Wales. A sharp risk reversal in China’s stock markets could spill over to Asia and drag down the AUD too. The GBP was the worst performing one last week, followed by NZD and JPY. 

In moving forward with a plan of action, most traders are eying dominant currencies in both the Asian and Main/European & US sessions, and it’s summarised as follows: 

Asian Session: 

  • EUR is Mild to Moderately Bullish with a steady pick up of momentum with EUR/USD leading the pack by a +0.17% (Chg %) 
  • GBP is moderate to strongly Bearish with GBPCHF leading the pack by -0.26 decrease (Chg%) 

Main Session (European & US Sessions): 

  • JPY is moderate to strongly Bearish with GBPJPY leading the pack by -0.26 decrease (Chg%)

Overview for the Week Ahead

In the sessions ahead today and for the week, we are expecting a slow start to and major movements by data releases, as the economic docket looks rather subdued. However, volatility is expected to pick-up towards the end of the week especially with Markit PMI data due for Germany, UK as well as the euro zone as a whole on Friday the 24th. The start of the week, the market’s movements will be dominated mostly, by the earnings seasons, with a host of reports from US companies covering a variety of sectors. Key names include American Airlines, Intel and Microsoft.  

Today’s High Impact Events

The times below are GMT+3

Monday 20th July

  • 02.50 (Post) – Japan BOJ Monetary Policy Meeting Minutes 

Potential instruments to Trade: JPY crosses especially USD/JPY and Major crosses.

Tuesday 21st July

  • 04.30 – Australia RBA Meeting Minutes 

Potential instruments to Trade: AUD Crosses. 

  • 05.30 – Australia Governor Lowe’s Speech 

Potential instruments to Trade: AUD Crosses. 

  • 15.30 – Canada Retail Sales 

Potential instruments to Trade: CAD Crosses.

Wednesday 22nd July

  • 15.30 – Canada BOC Consumer Price Index 

Potential instruments to Trade: CAD Crosses.

Thursday 23rd July

No high impact events.

Friday 24th July

  • 10.30 – Germany Markit Manufacturing & PMI Composite  

Potential instruments to Trade: EUR Crosses. 

  • 11.00 – Europe Markit PMI Composite  

Potential instruments to Trade: EUR Crosses. 

  • 11.30 – UK Markit Services PMI 

Potential instruments to Trade: USD Crosses.

Coronavirus Update

US CDC reports 67,574 new COVID-19 cases (Prev. +74,710) and 877 new deaths (Prev. +918) as of yesterday. Texas coronavirus cases increased by 7,300 on Sunday (vs. +10,158 on Saturday) to a total of 352,030; deaths rose by 93 to total of 3,958; hospitalization down 66, down from record high; according to the State Health Department. Florida COVID-19 cases rose by 12,478 on Sunday to a total of 350,047 cases, marking the fifth straight day of +10,000 daily cases. Florida hospitalisation +131 in the past 24 hours. Arizona COVID-19 cases +1.7% vs. 7-day average 2.4%. 

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