Daily Market Outlook, July 21, 2020 

US equity market closed higher, supported by technology stocks in particular but also by reported falling pace of increases in coronavirus cases in the US and positive news on early-stage vaccine trials from Oxford University. Asian equity indices were mostly higher overnight, while futures markets point to a positive start to European trading. The main news overnight was that EU leaders agreed a €750bn recovery plan following marathon talks. The compromise in the end means that €390bn of the funds will be disbursed as grants, down from €500bn initially proposed, while €360bn will be given as loans to be paid back by individual countries. 

There is little in the economics calendar to excite financial markets today. UK June public finance figures were released earlier this morning showing net borrowing of £35.5bn (exbanks), lower than the consensus forecast for £38bn. Still, it compares with £7.2bn in the same month a year ago. Borrowing so far this financial year has totalled nearly £128bn and net debt has risen to 99.6% of GDP. 

The US Chicago Fed survey is expected to show a further improvement. Canadian retail sales are forecast to have bounced back by around 20% in June after plunging more than 25% in May. 

ECB Vice President Luis de Guindos and Bank of Greece Governor Yannis Stournaras take part in a panel discussion. With the European recovery fund agreed, investors will turn their attention towards details of a further stimulus package in the US. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi are expected to start negotiations on the next virus relief plan.

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

  • EURUSD: .1345-50 (1.2BLN), 1.1450 (400M), 1.1500 (650M)
  • USDJPY: 106.00 (650M), 106.35-45 (1.45BLN), 106.75 (431M) 106.85 (410M), 107.00 (452M), 107.30-40 (1.5BLN), 107.50-55(770M)
  • AUDUSD 0.6860-70 (735M), 0.6965 (198M), 0.7000 (180M)

Technical & Trade Views

EURUSD Bias: Bullish above 1.1150 targeting 1.15

EURUSD From a technical and trading perspective, increasingly looking like a buy the rumour sell the fact set up, price looks poised to probe offers and stops to 1.15, watch for bearish reversal patterns on a fade the news play as initial optimism over the deal develops into a lack of detail in the plan and profit taking kicks in. Anticipate the potential for a pullback 1.14/1.1380

GBPUSD Bias: Bullish above 1.25 targeting 1.28

GBPUSD From a technical and trading perspective, as 1.25 attracts sufficient demand, look for a grind higher to test offers and stop at 1.28. A closing breach of 1.25 suggests return to range and a test of range support at 1.2250

USDJPY Bias: Bullish above 107.50 Bearish below

USDJPY From a technical and trading perspective, anticipated test of the equality objective at 108.13 saw bearish reversal patterns, setting up a move for  another test of 106 enroute to a pivotal 105 test UPDATE equality objective achieved as 107.30 caps the upside look for  a retest of 106.30’s

AUDUSD Bias: Bullish above .6830 targeting .7100

AUDUSD From a technical and trading perspective, as 6830 attracts buyers there remains scope to retest and break prior cycle highs en route to a .7100 test. Expect bids towards .6900 to act as support. A closing breach of .6900 opens another test of bullish appetite at .6880

 

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