CFD Markets News and Forecasts — 03-06-2020

FXStreet reports that economists at TD Securities explain how the EUR/USD pair, which trades just above the 1.12 level, could react to four different scenarios after the ECB meeting tomorrow at 11:45 GMT. A PEPP expansion may actually boost the euro further near-term if the ECB adds to investor confidence.

“More Hawkish (10%):No further policy easing as ECB delays its Pandemic Emergency Purchase Programme (PEPP) decision until Sept. EUR/USD at 1.1020.”

“Hawkish (30%): €250-300 billion for PEPP. Door open to more as needed. Confirms reinvestments. EUR/USD at 1.1115.”

“Base Case (50%): Rates on hold. ECB adds €500 billion to PEPP, buying until ‘the first half of 2021.’ EUR/USD at 1.1255.”

“Dovish (10%): ECB doubles PEPP, adding €750 billion, running to mid-2021. Reinvestments for PEPP to continue until just before the first rate hike. EUR/USD at 1.1305.”

The U.S. Commerce Department reported on Wednesday that the value of new factory orders tumbled 13.0 percent m-o-m in April, following a revised 11.0 percent m-o-m plunge in March (originally a 10.3 percent m-o-m decline). That was the biggest fall in new orders on record.

Economists had forecast a 14.0 percent m-o-m decrease.

According to the report, orders for transportation equipment plummeted 48.3 percent m-o-m in April after a 43.2 percent decrease in the previous month. Total factory orders excluding transportation declined 8.5 percent m-o-m in April compared to a 4.0 percent m-o-m fall in March. 

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories fell by 2.077 million barrels in the week ended May 29. Economists had forecast a build of 3.038 million barrels.

At the same time, gasoline stocks rose by 2.796 million barrels, while analysts had expected a gain of 1.000 million barrels. Distillate stocks climbed by 9.935 million barrels, while analysts had forecast an increase of 2.686 million barrels.

Meanwhile, oil production in the U.S. decreased by 200,000 barrels a day to 11.200 million barrels a day.

U.S. crude oil imports averaged 6.2 million barrels per day last week, decreased by 1.0 million barrels per day from the previous week.

The Institute for Supply Management (ISM) reported on Wednesday its non-manufacturing index (NMI) came in at 45.4 in May, which was 3.6 percentage points higher than the April reading of 41.8 percent. The May reading pointed to the continued contraction in the non-manufacturing sector for the second consecutive month.

Economists forecast the index to increase to 44.0 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 manufacturing industries, 14 reported decreases last month, the ISM said, adding that respondents remained concerned about the ongoing impact of the coronavirus and many of them were hoping and/or planning for a resumption of business.

According to the report, the ISM’s non-manufacturing business activity measure rose 15 percentage points from April’s figure to 41 percent in May. The new orders gauge came in at 41.9 percent; 9 percentage points higher than the April’s reading. The Employment Index increased by 1.8 percentage points to 31.8 percent from the April reading. The Prices Index of 55.6 percent was 0.5 percentage point higher than the April reading, indicating that prices increased in May. Meanwhile, the Supplier Deliveries Index registered at 67 percent, down 11.3 percentage points from April’s all-time-high reading of 78.3 percent, continued to elevate the composite NMI.

Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, "The past relationship between the NMI and the overall economy indicates that the NMI for May (45.4 percent) corresponds to a 1.1-percent decrease in real gross domestic product (GDP) on an annualized basis.”

The Bank of Canada (BoC) left its benchmark interest rates unchanged at 0.25 percent on Wednesday, as widely expected.

In its policy statement, the Canadian central bank noted:

• Incoming data confirm the severe impact of the COVID-19 pandemic on the global economy;
• This impact appears to have peaked, although uncertainty about how the recovery will unfold remains high;
• Global recovery likely will be protracted and uneven since different countries’ containment measures will be lifted at different times;
• In Canada, the pandemic has led to historic losses in output and job;
• Canadian economy, however, appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report (MPR);
• The level of real GDP in the first quarter was 2.1 percent lower than in the fourth quarter of 2019;
• The level of real GDP in the second quarter will likely show a further decline of 10-20 percent;
• BoC expects the economy to resume growth in the third quarter;
• CPI inflation has decreased to near zero, as anticipated in the April MPR;
• BoC expects temporary factors to keep CPI inflation below target band in near term;
• BoC’s programs to improve market function are having their intended effect;
• As short-term funding conditions have improved, BoC is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers’ acceptances to bi-weekly operations;
• BoC stands ready to adjust these programs if market conditions warrant;
• Other programs to purchase federal, provincial, and corporate debt are continuing at their present frequency and scope;
• As market function improves and containment restrictions ease, BoC’s focus will shift to supporting the resumption of growth in output and employment;
• BoC maintains its commitment to continue large-scale asset purchases until economic recovery is well underway;
• Any further policy actions would be calibrated to provide necessary degree of monetary policy accommodation required to achieve inflation target.

The latest report by IHS Markit revealed on Wednesday the seasonally adjusted final IHS Markit U.S. Services Business Activity Index (PMI) stood at 37.5 in May, up from a record low 26.7 in April and slightly higher than the “flash” figure of 36.9. The rate of contraction in activity softened considerably amid some reports of businesses returning to work, but was nonetheless the second-steepest since data collection began in October 2009.

Economists had forecast the index to stay unrevised at 36.9.

According to the report, the U.S. service providers indicated a further significant, albeit softer, contraction in business activity in May, as the impact of the COVID-19 continued to dampen client demand. At the same time, new order inflows declined at a slower rate than in April, despite domestic and foreign demand remaining subdued. Consequently, companies cut jobs at a considerable pace, and one that was only slightly slower than April's recent record. The reduction in employment partially stemmed from pessimism among firms towards the outlook for activity over the next year, as extreme levels of business uncertainty weighed on confidence.

U.S. stock-index futures rose on Wednesday, as investors remained optimistic about economic recovery from the coronavirus downturnб despite unsettling protests in the U.S.

Global Stocks:

FXStreet reports that the Credit Suisse analyst team apprises that the AUD/USD pair above the 0.6664/6789 area increases the likelihood of a broader change in direction, with resistance seen at 0.939.

“AUD/USD has accelerated again its upmove, breaking above the pivotal resistance zone at 0.6664/6789 – the 200-day average, February and March highs, 78.6% retracement of the 2020 fall and 2018 potential downtrend – turning our near-term bias to the upside.”

“We see resistance at the potential downtrend from 2013 currently at 0.6939, ahead of the 2020 high at 0.7032, where we would expect to see fresh selling at first. A break above here though would reinforce a broader change in trend to the upside.” 

“Support is seen at the 200-day average at 0.6658, which now ideally holds to keep the short-term risk directly higher.”

(company / ticker / price / change ($/%) / volume)

USD fell against most other major currencies in the European session on Wednesday as hopes for a quick global economic recovery from the coronavirus downturn and expectations of more stimulus from central banks and governments bolstered risk sentiment. The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.15% to 97.53.

The Markit/Caixin Services PMI for China climbed to 55.0 in May from 44.4 in April, signaling the first increase in services activity since January. The pace of expansion was the steepest since October 2010. The surveyed companies mentioned that an easing of restrictions related to the COVID-19 outbreak had driven the renewed expansion of activity. 

Meanwhile, IHS Markit Eurozone Composite PMI rose markedly from April’s record low of 12.0 to record a three-month high of 30.5. Despite the improvement, however, the index remained well below the 50-no-change mark and indicative of another considerable reduction in service sector activity. 

The U.S. currency remained also weighed down by ongoing violent mass protests across the United States over police brutality and their implications for the U.S. economy.

The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed on Wednesday the U.S. private employers cut 2,760,000 jobs in May.

Economists had expected a drop of 9,000,000.

The decrease for April was revised to -19,557,000 from the originally reported -20,236,000.

“The impact of the COVID-19 crisis continues to weigh on businesses of all sizes,” noted Ahu Yildirmaz, co-head of the ADP Research Institute. “While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.”

FXStreet reports that UOB Group’s Economist Ho Woei Chen, CFA, assesses the recent measures by the PBoC aimed at supporting the SMEs.

“The People’s Bank of China (PBoC) said on Monday (1 June) that it will begin to purchase uncollateralized loans to small & medium enterprises (SMEs) with maturities of at least six months, for loans made between March to December 2020. PBoC will purchase 40% of qualified loans using RMB400 billion special re-lending funds provided through a special purpose vehicle (SPV) and requires the banks to buy back the loans after one year.”

“Qualified financial institutions include city commercial banks, rural commercial banks, rural cooperatives and private banks. The new measure is expected to reduce banks’ capital requirements and allow them to lend more to SMEs as well as reduce funding costs as PBoC will not charge an interest for the loans.”

“Unlike the previous three rounds of re-lending facility totaling RMB1.8 trillion, this direct loan purchase will be interest rate-free compared to the interest rate of 2.5% for earlier relending. The PBoC also pointed out that the new measure will be more directed and ensure precise use of its monetary tools.”

“The new measures follow the announcement at the National People’s Congress (NPC) that SMEs can delay their interest and principal payments to the end of March 2021, from an original deadline on 30 June. The government also asked the big commercial banks to increase loans to SMEs by more than 40% this year, up from 30% in 2019. The PBoC repeated the call for banks to focus on directing credit to the real economy and SMEs.”

“The latest announcement signals PBoC’s intention to use more innovative monetary policy tools instead of relying on conventional interest rate and banks’ reserve requirement ratio (RRR) cuts to boost the economy as the interest rate and RRR are already at low levels.”

“Looking ahead, the easing inflation continues to provide some room for further cuts to the LPR though this is likely to be even more moderate as focus turns to direct and more targeted funding support. We have factored in another 30 bps cut to the 1Y LPR to 3.55% by end-4Q20. We also see room for another one to two rounds of RRR cut in the next 3-6 months to reduce funding costs and increase the room for banks to expand credit and absorb the RMB1 trillion of special treasury bonds issuance. However, we note that the space for RRR cuts for the smaller financial institutions has narrowed after earlier moves.”

FXStreet notes that gold has resumed its uptrend, although momentum remains poor. Nevertheless, strategists at Credit Suisse expect the yellow metal to test the $1800 barrier.

“Gold is struggling to extend its uptrend. We continue to have concerns with respect to momentum and consensus positioning, but we look for the bull trend to resume for a test of $1796/1803 next. We look for this to then cap for a fresh consolidation phase.” 

“Big picture, we continue to eventually look for new highs above $1921, with resistance then seen next at $2000, then $2075/80.”

“Support at $1660 needs to hold to keep the immediate risk higher.”

• Says that possibility that negotiations between UK and EU over future trading relationship might not conclude in deal is one of a number of outcomes that UK banks need to prepare for over the coming month
• It is fundamental to BoE's remit that it prepares UK financial system for all risks that it might face
• In performing that role, BoE's governor meets the leadership of UK banks on very regular basis

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. decreased 3.9 percent in the week ended May 29, following a 2.7 percent gain in the previous week.

According to the report, refinance applications dropped 8.6 percent, while applications to purchase a home surged 5.3 percent.

Meanwhile, the average fixed 30-year mortgage rate fell to a record low 3.37 percent from 3.42 percent.

“The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring,” noted Joel Kan, an MBA economist. “However, there are still many households affected by the widespread job losses and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months.”

According to sources, OPEC+ countries discuss implementing criteria for compliance with oil cuts and June 4 meeting is conditional on countries, which have not fully complied in May to compensate in upcoming months. 

FXStreet reports that analysts at Credit Suisse expect USD/CAD, which is trading at 1.3523 ahead of the BoC's meeting, to continue to track the broader USD, which is consistent with a test of the second half of 2019 highs around 1.3320-1.3340 ahead of the 15 July BoC meeting. 

“Our bias beyond today’s meeting and ahead of the 15 July meeting, remains mildly constructive on CAD, which leaves us looking to fade rallies in USD/CAD above 1.37 and aiming for a re-test of the 1.3320-1.3340 area where the cross stalled repeatedly in 2019.”

“We see very limited risks of fiscal stimulus being withdrawn or reduced sharply in Canada in the coming months, whereas a more considerable risk is emerging in the US on that front in mid-July, as a by-product of recent social unrest.” 

“With the WTI-Western Canada Select oil benchmark spread still below $10bn, and without the rail transport bottlenecks that have plagued the sector for years, our view is that Canada would be able to benefit fairly quickly and directly from further strength in oil prices.”

According to Sky News, the governor of the Bank of England (BoE) Andrew Bailey said during a call with bank chief executives on Tuesday that they should accelerate planning for the UK ending the transition period at the end of the year without an agreement. 

The instruction came at an interesting time as the final round of the UK-EU trade talks before the end-of-June deadline got underway this week. The negotiations are to end on Friday, and a breakthrough seems unlikely.

Insiders told Sky News that executives from Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland, the taxpayer-backed lender, participated in the call with Bailey.

The BoE declined to comment on the talks.

FXStreet reports that Liz Ann Sonders from Charles Schwab believes that heightened complacency could breed risks for the S&P 500 with no shortage of potential negative catalysts.

“With only one exception in the post-WWII period, bear markets typically started in advance of recessions’ start dates; while bear markets typically ended in advance of recessions’ end dates. With the exception of 2001, when the recession ended, but the stock market didn’t bottom until the end of 2002, bear markets ended while the economic data remained in the dumpster.”

“The cumulative advance/decline (A/D) line for the S&P 500 has been catching up to the rally in the stock market over the past couple of weeks. As such, more than 95% of stocks in the S&P 500 are now trading above their 50-day moving averages; although less than 50% are trading above their 200-day moving averages.” 

“The parabolic move up in stocks trading above their 50-day moving averages points to extremely overbought conditions; even if surges like this historically were longer-term positives. Similar surges occurred off the 1991, 2003, 2009 and 2016 market lows; and were generally followed by a few months of choppy/consolidative action, before stocks resumed their ascent.” 

“One of my concerns is investor complacency—bred from stocks’ rocket launch off the lows. There is no shortage of catalysts for a consolidation and/or a period of heightened volatility; including second waves of the virus, second-order/lasting economic effects of the shutdown, simmering tensions between the United States and China, budding election uncertainty, and of course civil unrest on the heels of the death of George Floyd.”

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, agrees with FXStreet’s analyst Yohay Elam as both see the EUR/USD pair testing the 1.1240 level.

“EUR/USD remains bid and looks set to challenge the 1.1240 December peak; our initial target remains the 200-week ma at 1.1333. This is the break point for the 1.1495 March peak.” 

“Dips back from here should find initial support at the 1.1019 May high and the 200-day ma at 1.1012. Below the 200-day ma dips should find initial support at 1.0941 ahead of the short-term uptrend at 1.0826. Provided this holds, an upside bias remains entrenched.”

Eurostat said that in April 2020, the second month after COVID-19 containment measures were implemented by most Member States, industrial producer prices fell by 2.0% in the euro area and by 1.9% in the EU, compared with March 2020. Economists had expected a 1.8% decrease in the euro area. In March 2020, prices decreased by 1.5% in the euro area and by 1.4% in the EU.

In April 2020, compared with April 2019, industrial producer prices decreased by 4.5% in the euro area and by 4.3% in the EU.

Industrial producer prices in the euro area in April 2020, compared with March 2020, decreased by 7.5% in the energy sector, by 0.7% for intermediate goods and by 0.2% for non-durable consumer goods, while prices rose by 0.1% for capital goods and by 0.2% for durable consumer goods. Prices in total industry excluding energy decreased by 0.3%.

In the EU, industrial producer prices decreased by 7.1% in the energy sector, by 0.6% for intermediate goods and by 0.2% for non-durable consumer goods, while prices rose by 0.1% for durable consumer goods and by 0.2% for capital goods. Prices in total industry excluding energy decreased by 0.3%.

Industrial producer prices in the euro area in April 2020, compared with April 2019, decreased by 16.5% in the energy sector and by 2.7% for intermediate goods, while prices rose by 1.0% for capital goods, by 1.3% for durable consumer goods and by 1.7% for non-durable consumer goods. Prices in total industry excluding energy decreased by 0.3%. In the EU, industrial producer prices decreased by 16.1% in the energy sector and by 2.5% for intermediate goods, while prices rose by 1.2% for capital goods, by 1.4% for durable consumer goods and by 2.0% for non-durable consumer goods. Prices in total industry excluding energy decreased by 0.1%.

According to the report from Eurostat, in April 2020, the second month after COVID-19 containment measures were implemented by most Member States, the euro area seasonally-adjusted unemployment rate was 7.3%, up from 7.1% in March 2020. Economists had expected unemployment to rise to 8.2%. The EU unemployment rate was 6.6% in April 2020, up from 6.4% in March 2020. 

Eurostat estimates that 14.079 million men and women in the EU, of whom 11.919 million in the euro area, were unemployed in April 2020. Compared with March 2020, the number of persons unemployed increased by 397 000 in the EU and by 211 000 in the euro area. 

In April 2020, 2.776 million young persons (under 25) were unemployed in the EU, of whom 2.239 million were in the euro area. In April 2020, the youth unemployment rate was 15.4% in the EU and 15.8% in the euro area, up from 14.6% and 15.1% respectively in the previous month. Compared with March 2020, youth unemployment increased by 159 000 in the EU and by 89 000 in the euro area.

In April 2020, the unemployment rate for women was 6.8% in the EU, up from 6.7% in March 2020. The unemployment rate for men was 6.4% in April 2020, compared with 6.1% in March 2020. In the euro area, the unemployment rate remained stable for women in April 2020 compared with March 2020 (at 7.6%) while it increased from 6.8% to 7.0% for men.

According to the report from IHS Markit/CIPS, UK service providers signalled a steep reduction in business activity during May, which was again almost exclusively linked to a slump in business and consumer spending amid the coronavirus disease 2019 (COVID-19) pandemic. The rate of decline in service sector output moderated from April's survey record, but was still faster than at any other time since the survey began in July 1996.

At 29.0 in May, the headline seasonally adjusted UK Services PMI Business Activity Index remained well below the 50.0 mark that separates expansion from contraction, but rose slightly from the earlier 'flash' estimate of 27.8. The latest reading was also up from 13.4 in April, to signal a slower pace of decline than in the previous month.

Just over half of the survey panel (54%) reported a drop in business activity during May, while only 13% signalled an increase. Those indicating a decrease in output since April often commented on a severe lack of new business to replace work that had been completed after the lockdown, following deep cutbacks to corporate spending in response to the COVID-19 pandemic.

There were some reports that the gradual reopening of the UK economy, especially the construction sector, had a positive impact on client demand. Other service providers commented on a tentative revival in business conditions following the initial shock of the lockdown period. May data pointed to a further sharp drop in total new work received by service sector companies, although the rate of contraction eased from April's survey record. Lower volumes of new business were often attributed to the cancellation of new projects, customer closures and constrained sales operations with staff placed on furlough. New export work also fell rapidly in May, despite sporadic reports of rising demand in the Asia-Pacific region and new online sales initiatives. Moreover, a number of service providers noted that they had ceased taking any new work from abroad due to severe restrictions on international travel during the COVID-19 pandemic.

At 30.0 in May, the IHS Markit/CIPS UK Composite Output Index was entrenched below the 50.0 no-change mark, but picked up from April's record low of 13.8. The final index reading was also marginally higher than the earlier 'flash' estimate of 28.9 in May.

According to the report from IHS Markit, May saw a noticeable bounce in the Eurozone PMI Composite Output Index following April’s survey low. Posting 31.9, higher than the flash reading of 30.5 and up on April’s 13.6, the PMI posted its best level in three months. Nonetheless, by remaining well below the 50.0 nochange mark, the index was again consistent with sharply falling activity across the region as restrictions related to the coronavirus disease 2019 (COVID-19) pandemic continued to have a severe impact on economic performance. Both manufacturers and service providers endured further noticeable contractions in output although, in line with the headline composite figure, at much slower rates than April’s survey records. Country level data showed a broad-based improvement in respective composite PMI readings.

Albeit falling at a slower rate, levels of incoming new business continued to fall markedly during the latest survey period as lockdown restrictions designed to prevent the spread of COVID-19, whilst generally looser than in April, continued to severely hamper demand. 

There remained evidence of excess capacity across the region during May, with backlogs of work falling sharply and for the fifteenth successive month. A lack of new work meant companies were able to comfortably deal with current workloads and led in several cases to firms reducing their employment levels. 

Business  confidence remained negative overall, though continued to improve on March’s series low. Finally, latest prices data showed ongoing reductions in both operating costs and charges. Reduced employment expenses alongside lower prices for oil-related items led to a third successive monthly drop in input costs. The challenging business environment meant that service providers again reduced their own output charges markedly during May.

The IHS Markit Eurozone PMI Services Business Activity Index rose markedly from April’s record low of 12.0 to record a three-month high of 30.5. Despite the improvement, however, the index remained well below the 50.0 no-change mark and indicative of another considerable reduction in service sector activity.

FXStreet reports that USD/JPY could attempt a move to 109.00 and beyond in the next weeks, noted FX Strategists at UOB Group.

24-hour view: “The abrupt lift-off in USD that sent it soaring to an overnight high of 108.76 came as a surprise. While the rally appears to be running ahead of itself, robust momentum suggests USD could edge above 109.00. That said, in view of the overbought conditions, the next resistance at 109.35 is unlikely to come into the picture for today. On the downside, 108.20 is likely strong enough to hold for today (minor support is at 108.40).”

Next 1-3 weeks: “We have expected USD to trade sideways within 107.00/108.00 for about a week (27 May, spot at 107.55). We indicated that only a daily closing out of the expected range would suggest the start of a more sustained movement in USD. However, we did not anticipate the sudden strong pick-up in momentum as USD blast above 108.000 and posted the largest 1-day advance since mid-March (108.66, +1.00%). The outlook for USD is positive and from here and USD could continue to advance towards the early April high near 109.35. On the downside, the ‘strong support’ level at 107.80 is likely strong enough to hold any pull-back, at least for the next few days.”

CNBC reports that more than 80% of the U.S. companies in Hong Kong surveyed by the American Chamber of Commerce said they’re concerned about China’s plan to impose a new national security law in the city.

Out of the 180 AmCham members that responded to the survey earlier this week, 53.5% were “very concerned,” while 30.0% were “moderately concerned” about the security legislation. The survey results were published on Wednesday and are not intended to be scientific, said the chamber.

Respondents cited concerns such as threats to Hong Kong’s overall business environment, as well as the legislation’s potential impact on freedom of speech and other “basic civil liberties.”

The survey — which the chamber called “a temperature test of members’ sentiment” — came after China’s top legislative body last week approved the proposal to impose a national security law in Hong Kong.

During today's Asian trading, the US dollar declined against most of the world's major currencies. Investors continue to pin their hopes on a rapid economic recovery after the coronavirus pandemic, which contributes to demand for risky assets.

Statistics released on Wednesday showed that the Australian economy in the first quarter showed a decline for the first time in nine years. GDP declined by 0.3% compared to the fourth quarter of 2019, according to the country's Bureau of Statistics. In annual terms, the growth was 1.4%.

The focus of traders ' attention this week is the meeting of the European Central Bank (ECB). Experts expect that ECB President Christine Lagarde will announce an expansion of the Pandemic Emergency Purchase program (PEPP), which currently amounts to 750 billion euros, by 500 billion euros. Anything less than this will be a big shock, analysts say.

The ICE Dollar index, which shows the value of the dollar against six major world currencies, fell by 0.28% compared to the previous day.

FXStreet reports that the Aussie dollar could reach the psychological 0.7000 mark vs. its American peer in the next weeks, suggested FX Strategists at UOB Group.

24-hour view: “The pace of the rally in AUD continues to surprise us as it blast past our ‘likely out of reach level of 0.6860’ and hit a high of 0.6899 yesterday. The strong price action this morning suggests AUD could repeat its performance even though the next resistance at 0.7000 could be a bridge too far for today. On the downside, 0.6880 is likely strong enough to hold for now.”

Next 1-3 weeks: “We highlighted yesterday (02 Jun, spot at 0.6795) that the ‘positive phase in AUD has entered the next up-leg’ but indicated ‘it is left to be seen if AUD can maintain the pace of its current rally’. We added, ‘a move towards 0.6860 would not be surprising and that the next resistance is at 0.6900’. AUD subsequently blast past 0.6860 and at the time or writing, just surged above 0.6900. The outlook is still clearly positive and the next resistance level is at 0.7000 followed by 0.7030. On the downside, the ‘strong support’ level has also ‘rallied’ to 0.6800 from yesterday’s level of 0.6680.”

eFXdata reports that Credit Suisse discusses GBP/USD technical outlook and flags a scope for a retest of key resistance at 1.2643/71.

"GBPUSD has seen another strong push higher following the break above its downtrend from early March, helped by the weakening USD, with strength having extended to the 78.6% retracement of the April/May fall at 1.2522. Whilst this should be allowed to cap at first for a pullback, the risk stays seen higher for a break in due course for a fresh challenge on what remains seen as more significant resistance from the April highs and 200-day average at 1.2643/48 and 1.2671 respectively. We would again expect significant sellers to show here," CS notes. 

"A close above 1.2671 though would instead suggest we are seeing a more significant turn higher, with resistance seen next at 1.2711 – the 78.6% retracement of the March collapse. Support for a pullback is seen at 1.2457 initially, then 1.2426, with 1.2375 now ideally holding to keep the immediate risk higher. A break can see a deeper retracement lower to 1.2330/22, but with better buyers expected ahead of here," CS adds.

According to the report from Federal Statistical Office, Switzerland’s GDP fell by –2.6 % in the 1st quarter of 2020, after rising by +0.3% in the previous quarter. Economists had expected a 2.0% decrease. Due to the coronavirus pandemic and the measures to contain it, economic activity in March was severely restricted. The international economic slump also slowed down exports.

The service sector was particularly affected by business closures and restrictions. Value added dropped for almost all services. Historic declines were seen in trade (–4.4%) and accommodation and food services (–23.4%), which had been struggling with falling numbers of foreign guests since back in early March. Transport and communications (–5.1%) also posted its lowest negative figure in 30 years in the wake of reduced timetables and flight schedules. Additionally, the Healthcare sector (–3.9%) experienced a historic decline in value added, as various medical treatments were temporarily suspended. By contrast, public administration (+0.8%) and finance (+2.3%) supported GDP, with the latter sector benefiting from growing foreign trade in particular. However, exports of services (–4.4%) decreased overall, as did imports of services (–1.2%). As a result of the health policy containment measures and considerable uncertainty, private consumption (–3.5%) suffered a widespread slump. Since shops were closed from 17 March, purchases of furniture and clothing dropped sharply, as well as spending on mobility, leisure and health. Investment in construction (–0.4%) and investment in equipment (–4.0%) also contracted. The only domestic demand component to underpin the economy was government consumption (+0.7%). Overall, final domestic demand (–2.7%) recorded the biggest decline in recent decades.

• CNBC reports that health officials are warning that mass gatherings across the country could further spread the coronavirus, just as much of the economy is beginning to restart. Protests sparked by the police killing of George Floyd, an unarmed black man in Minneapolis, continued for a seventh night with overnight clashes between law enforcement and demonstrators.

• The World Health Organization, which has faced criticism for repeatedly praising China for a speedy response to the emergence of the coronavirus, complained in private meetings that China was not releasing enough information or doing so quickly enough about the virus, the Associated Press reported. 

• Global cases: More than 6.37 million

• Global deaths: At least 380,251

• U.S. cases: More than 1.83 million

• U.S. deaths: At least 106,181

EUR/USD

Resistance levels (open interest**, contracts)

$1.1306 (2320)

$1.1262 (2024)

$1.1226 (2030)

Price at time of writing this review: $1.1200

Support levels (open interest**, contracts):

$1.1162 (634)

$1.1148 (591)

$1.1124 (592)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date June, 5 is 99939 contracts (according to data from June, 2) with the maximum number of contracts with strike price $1,0700 (5296);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2705 (1597)

$1.2661 (1210)

$1.2622 (895)

Price at time of writing this review: $1.2584

Support levels (open interest**, contracts):

$1.2500 (1097)

$1.2433 (520)

$1.2391 (279)

Comments:

- Overall open interest on the CALL options with the expiration date June, 5 is 24613 contracts, with the maximum number of contracts with strike price $1,3500 (3420);

- Overall open interest on the PUT options with the expiration date June, 5 is 30382 contracts, with the maximum number of contracts with strike price $1,3500 (3095);

- The ratio of PUT/CALL was 1.23 versus 1.24 from the previous trading day according to data from June, 2

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.