Trading Week Ahead: 20th July – 24th July 2020
Key Events and Data Releases This Week
AUD RBA Gov Lowe Speaks
CAC Core Retail Sales
JPY Japanese Bank Holiday
EUR French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI
(Times adapted to AEST timezone)
Last week peaked on Thursday data-wise with the European Central Bank holding rates as expected, but it was the EU stimulus package that provided the main focus as EU states remained in stasis over financing. The package is worth 750 billion EUR and European Union leaders held a face to face summit in Brussels this past weekend to try and hammer out a deal across all member states. Austria, Denmark, Sweden and the Netherlands have put fourth opposition to the size of the deal, inevitably holding up a deal. The EUR had another good week to the USD and JPY on the back of stimulus news, with the EURUSD trading above 1.1400. Agreement on this deal looks to be vital for the EUR rally at the moment.
On Thursday, we saw U.S. retail sales data beat expectations, but the worry was the fact jobless claims came in higher than expected at 1,300K. COVID-19 infections continue to be of concern in the USA as infection rates rapidly climb and start to hit new daily records. Some good news did hit midweek after a drug in phase one trials had created antibodies in COVID-19 patients. The Dow reacted to the good news and jumped by 800 points over two sessions. Trade for the week was far from smooth on the US30, as it set a 4.5% range, dropping from weekly highs on Thursday.
The Nasdaq continued its rise, racing to new records but failed to hold with solid selling setting in followed by a new push lower on Thursday. A week down was always going to come, jumping by over 10% in two weeks is just not sustainable most of the time. The ASX had a flat week but the AUD set its fourth higher week in a row, mainly off the back of an indecisive USD. Australian jobs data gave mixed messages with an increase in the unemployment rate but higher than expected job creation. This is off the back of the second largest state going back into lockdown due to its increasing COVID-19 infection rates.
Oil gained but remains flat from 40.70, worries continue about the recovery and future energy demand. Offsetting that is production cuts, but I feel the market is looking for strong evidence that energy demand will recover. That is hard at the moment with the state of infections in the USA and other parts of the world, with Brazil hitting two million infections and India reaching one million. Gold gained once again but failed to set new highs over the previous week’s 1,818 touch. Below we look at gold on the daily chart, to show the range that has started to develop.
This week, markets are likely to continue to monitor the EU stimulus package fallout. Attention will remain on the U.S. and its ever-expanding infection rate and continued vaccine development. It’s another week of sparse data with Friday being the peak as we see German, French, UK and EU services and manufacturing PMI data. With lockdowns winding up, traders will be looking for further signs of recovery.
Gold D1 – after solid bull runs we’re seeing a new range developing in the trend between 1,795 and 1,810. Currently, this seems to look like a continuation type range, but we would want to see a breakout by buyers to confirm that this is the case. If we break out to the upside the measured move suggests a target area around $15 higher.