CFD Markets News and Forecasts — 15-06-2020

• No reason why we shouldn't get e deal with EU in July

FXStreet reports that analysts at Charles Schwab note that the daily chart of August 2020 Crude Oil futures is showing the first significant price correction since the recovery in Oil prices began on April 29 with support seen at the $35.36 level.

“Prices have recently moved below the 10-day moving average as well as the uptrend line drawn from the April 29 lows on Thursday, which appears to have triggered some additional momentum based selling pressure.”

“The 14-day RSI has turned down following a brief stint into overbought territory but is still reading a modestly strong 57.28 as of this writing.”

“Traders should pay attention to the 50 level on the RSI to see if the recent downward momentum can take this indicator below 50 or if the price correction stalls out with the RSI holding just above 50.”

“We still have the March 9 chart gap at 42.17 in place on the daily chart that is now acting as strong resistance for the August futures, with near-term support seen at the 20-day moving average, currently near the 35.26 price level and more significant chart support found at the May 22 low of 31.28.”

FXStreet reports that the EUR/USD pullback is viewed as corrective by analysts at Credit Suisse who expect the weakness to extend toward the 1.1222/12 support, then 1.1160/54.

“EUR/USD weakness has now extended to its 13-day exponential average at 1.1222/12. Although this is holding for now the immediate risk is seen lower and below 1.1212 would suggest the setback can extend further with support seen next at 1.1160/54, then more importantly 1.1122 – the 38.2% retracement of the entire rally from March. We would look for a better floor here.” 

“Resistance is seen at 1.1292 initially, ahead of 1.1323 and then 1.1341. Above here is needed to suggest the correction is over and the rally can resume with resistance then seen at 1.1403 ahead of 1.1423/28, then the 1.1495 high for the year. Whilst this latter level should clearly be respected, a break would mark a medium-term base.”

• Expects slow, steady progress as economy reopens
• Says she supported the Fed's move to near-zero rates

The Federal Reserve Bank of Boston announced today about the opening of lender registration for the Main Street Lending Program. "Eligible financial institutions are now able to register for the program via the program’s lender portal", the Federal Reserve Bank of Boston tweeted.

• Expects budget deficit at 7.25% of GDP in 2020
• Deficit-to-GDP ratio will rise to 77% this year from below 60% in 2019

U.S. stock-index futures fell on Monday amid increased concerns about the second wave of coronavirus infections that could hold back the recovery of the global economy.

Global Stocks:

Statistics Canada released its Monthly Survey of Manufacturing on Monday, which showed that the Canadian manufacturing sales tumbled 28.5 percent m-o-m in April to CAD36.37 billion, following a revised 9.8 percent m-o-m decline in March (originally a 9.2 percent m-o-m drop), as many manufacturing plants operated at limited capacity or ceased operations completely in April due to COVID-19. That was the largest decline in manufacturing sales on record.

Economists had forecast an 18.7 percent m-o-m plunge for April.

According to the survey, sales decreased in all 21 industries, led by sharp declines in the transportation equipment (-76.4 m-o-m percent, the largest decrease on record) and petroleum and coal product (-46.4 m-o-m percent, the largest drop on record) industries.

Overall, sales of durable goods industries declined 38.3 percent m-o-m in April, while sales of non-durable goods industries plunged 18.7 percent m-o-m.

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

Starbucks (SBUX) initiated with an Overweight at Atlantic Equities; target $95

Intel (INTC) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; target $82

McDonald's (MCD) upgraded to Buy from Neutral at Kalinowski

Twitter (TWTR) upgraded to Positive from Mixed at Vertical Group

The report from the New York Federal Reserve showed on Monday that manufacturing activity in the New York region steadied in early June after deteriorating sharply over the prior two months.

According to the survey, NY Fed Empire State manufacturing index climbed from -48.5 in May to -0.20 in June. That was the highest reading since February.

Economists had expected the index to come in at -27.5

Anything below zero signals contraction.

According to the report, new orders index surged forty-two points to a level of around zero, indicating that the quantity of orders was unchanged from last month, and the shipments index jumped forty-two points to 3.3, pointing to a slight advance in shipments Delivery times and inventories both held steady. Meanwhile, the index for number of employees was little changed at -3.5, pointing to a second consecutive month of slight employment declines. On the price front, input price increases picked up, and selling prices stabilized.

USD treaded mixed against its major rivals in the European session on Monday amid concerns about the second wave of coronavirus infections that could hold back the recovery of the global economy. The U.S. currency rose against AUD and CAD, fell against GBP, CHF, and changed little against EUR, JPY and NZD.

China reintroduced strict lockdown measures in some areas after Beijing reported an outbreak of new infections. In the United States, a large number of states, which are in the reopening process, including Texas, California, Florida, North Carolina, etc., are reporting a rise in daily new coronavirus cases in recent days. Increasing coronavirus infections raised fears of a possible second wave of COVID-19 and the threat of further disruption to global growth.

Worse-than-expected China's data also weighed on investor sentiment, suggesting that the country's economy is struggling to get back on track after containing the coronavirus. The National Bureau of Statistics (NBS) reported that China's industrial production increased 4.4 percent y/y in May after a 3.9 percent y/y gain in April. Economists had forecast a 5.0 percent y/y rise. At the same time, the country's retail sales dropped 2.8 percent y/y in May, following a 7.5 percent y/y decline in April. Economists had expected a fall of 2.0 percent y/y.

FXStreet noes that the S&P 500 saw a pullback at the end of the last week as Randy Frederick from Charles Schwab had warned. Nonetheless, the retracement has brought the S&P 500 Index to a consolidation area which should allow for a wave higher.

“I had been fairly comfortable with the S&P 500 rebound off the 3/23 lows, especially during the 6-week long consolidation period from early-April through late-May. While I had hoped that consolidation would continue for longer, when it broke out again in late-May, I began to get concerned that it could be setting the stage for a 5%-10% pullback. Unfortunately, that concern became a reality this week; that’s the bad news.”

“The good news is that the pullback was enough to bring the S&P 500 back down to the consolidation zone again, which leaves room for the next wave higher. Hopefully, it will go a little slower this time.”

“For now, technical traders should look for downside support at the 200-day SMA (3,013), the 100-day SMA (2,945) and the 50-day SMA (2,903).”

FXStreet reports that Howie Lee, an economist at OCBC Bank, notes how the yellow metal has rebounded amid concerns of a second wave of coronavirus but sees a tough resistance at the $1750 level. 

“Gold broke sharply below the $1700/mt level a week ago but rebounded strongly after it looks like a second wave of Covid-19 contagion might be sweeping the US and China.” 

“Risk-off sentiment should support the precious metal this week, although we continue to see strong resistance at $1750/oz.”

USD/CHF: Downtrend at 0.9697 caps the correction higher - Commerzbank

FXStreet notes that USD/CHF is correcting higher near-term but Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, expects the pair to suffer further losses as the 0.9697 downtrend caps any potential upside.

“USD/CHF charted a hammer reversal on Thursday and is seeing a correction higher ahead of further losses. Rallies from here will see initial resistance 0.9580, 0.9650, but the market will remain directly offered while capped by the short-term downtrend at 0.9697.” 

“Beyond this rebound, there is scope for the 0.9336/78.6% retracement, which is the last defence for 0.9184 the March low.”

FXStreet reports that EUR/USD has been unable to stay above the 1.13 level and Terence Wu, an FX strategist at OCBC Bank, expects the pair to fall toward the 1.12 mark as downside pressure is mounting.

“Failure to hold on to the 200-week MA (1.1334) and 1.1300 should imply that a top has been established last week. Note that short-term implied valuations have also sunk.” 

“Expect the EUR/USD pair to see some downside pressure for now, with the next target at 1.1200.” 

“Macro environment remains inconducive for EUR strength, with the German Economics Minister warning for more data weakness.”

FXStreet reports that EUR/JPY remains under pressure and analysts at Credit Suisse expect the pair to test the 119.50 level where it should floor. 

“We stay biased lower with support seen next at 119.96/84 and then 119.52/41 – the 200-day average, 50% retracement of the rally from May and back of the broken medium-term downtrend. We will look for a floor here. Should weakness extend on a closing basis we this would see the trend stay directly lower with support seen next at 118.85, then the 61.8% retracement at 118.22.” 

“Resistance is seen at 121.17 initially, then 121.82/85, above which would now see a small base complete to reassert an upward bias with resistance then seen next at 122.37/62.”

According to the report from Eurostat, in April 2020, the COVID-19 containment measures widely introduced by the Member States continued to have a significant impact on international trade in goods. The first estimate for euro area exports of goods to the rest of the world in April 2020 was €136.6 billion, a decrease of 29.3% compared with April 2019 (€193.3 bn). Imports from the rest of the world stood at €133.7 bn, a fall of 24.8% compared with April 2019 (€177.8 bn). As a result, the euro area recorded a €2.9 bn surplus in trade in goods with the rest of the world in April 2020, compared with +€15.5 bn in April 2019. Intra-euro area trade fell to €112.4 bn in April 2020, down by 32.2% compared with April 2019.

In January to April 2020, euro area exports of goods to the rest of the world fell to €703.3 bn (a decrease of 8.6% compared with January April 2019), and imports fell to €646.3 bn (a decrease of 9.3% compared with January-April 2019). As a result the euro area recorded a surplus of €57.0 bn, compared with +€57.2 bn in January April 2019. 

Intra-euro area trade fell to €595.4 bn in January-April 2020, down by 11.1% compared with January-April 2019. The first estimate for extra EU exports of goods in April 2020 was €125.4 billion, down by 28.2% compared with April 2019 (€174.7 bn). Imports from the rest of the world stood at €125.1 bn, down by 22.7% compared with April 2019 (€161.8 bn). As a result, the EU recorded a €0.2 bn surplus in trade in goods with the rest of the world in April 2020, compared with +€12.9 bn in April 2019. Intra-EU trade fell to €175.2 bn in April 2020, -32% compared with April 2019.

FXStreet reports that analysts at Credit Suisse expect the EUR/GBP pair to resume its uptrend with resistance seen at 0.9025/28 after breaking the 0.9013 level. 

“A clear break above the top of the recent ‘outside day’ high at 0.9013 remains needed to add weight to our view an important turn higher is indeed underway again with resistance then seen at 0.9025/28 initially, then the recent high and ‘measured base objective’ at 0.9056/57. Whilst a fresh rejection from here should be allowed for, above in due course can see resistance next at the 50% retracement of the March/April fall at 0.9086 and eventually at the 61.8% retracement at 0.9184.” 

“Support at 0.8948/40 now ideally holds to keep the immediate risk higher. A break can see a fall back to 0.8917, then 0.8888/82, potentially a retest of 0.8866/64.”

FXStreet reports that in light of the recent price action, USD/CNH is expected to trade within a consolidative mood between 7.0500 and 7.1250 in the next weeks.

24-hour view: “USD traded in a relatively narrow range of 7.0669/7.0875 last Friday before ending the day little changed at 7.0755 (-0.06%). The firm price action upon opening this morning suggests that a break of the strong resistance at 7.0950 would not be surprising. However, USD is unlikely to move above 7.1100. Support is at 7.0820 followed by 7.0740.”

Next 1-3 weeks: “Last Monday (08 Jun, spot at 7.0570), we indicated that USD ‘could weaken to 7.0400’. After USD dropped to 7.0400, we highlighted on Thursday (11 Jun) that ‘the negative phase in USD is still intact and noted that the next support below 7.0400 is at 7.0200 followed 7.0000’. We added, ‘oversold short-term conditions could lead to a few days of consolidation first’. The subsequent consolidation has resulted in a rapid loss in momentum and while our 7.0950 ‘strong resistance’ is still intact, the prospect for USD to move below 7.0400 from here has dissipated. In other words, USD has likely moved into a consolidation phase and is expected to trade between 7.0500 and 7.1250 for a period.”

According to the report from Istat, in May 2020 the rate of change of Italian consumer price index for the whole nation (NIC) was -0.2% both on monthly basis and with respect to May 2019 (inflation was zero in the previous month); the flash estimate was -0.1%.

The decrease on annual basis of all items index was mainly due to the widening of the decrease of prices of non-regulated energy products (from -7.6% to -12.2%).

Core inflation (excluding energy and unprocessed food) was +0.8% and inflation excluding energy was +1.0% (the same as in the previous month for both).

The decrease on monthly basis was mainly due to the decrease of prices of non-regulated energy products (-4.2%), only partially offset by the increase of prices of unprocessed food (+1.2%).

Prices of grocery and unprocessed food increased by 0.5% on monthly basis and by 2.4% on annual basis (down from +2.5% in the previous month).

In May 2020 the Italian harmonized index of consumer prices (HICP) decreased by 0.3% both on monthly basis and on annual basis (down from +0.1% in the previous month); the flash estimate was -0.2%.

FXStreet reports that Howie Lee, an economist at OCBC Bank, thinks the market may be experiencing a correction in the Brent Crude Oil price toward the $35 support as the inventories recorded a high the last week. 

“The rise in US crude oil inventories to a record high last week to 538.07 billion barrels – increasing 5.7 billion barrels again an expected 1.0 billion drop – underscored the task ahead for oil markets in absorbing the excess stockpile surplus. Even if the market is headed for a global supply deficit by Q4, the brimming stockpiles provide a sizeable challenge for any sustained price rally.” 

“Although OPEC+ extends its current supply cuts by a month, Saudi Arabia and its Gulf allies have chosen not to extend its voluntary cuts from June into July, in essence rendering the extension less effective than it should be. Adding to the bearishness is global markets believing that a second wave of contagion has begun in the US and possibly China.”

“We think Brent may correct 20% from its peak of $42.30/bbl, finding a short-term bottom at $35/bbl. It sounds like a deep correction, but when one remembers Brent (for August delivery) has risen 68% from trough to peak in 5 weeks, a 20% correction looks within reason.”

CNBC reports that a second wave of coronavirus has started in the U.S. — and people need to remain careful or risk stressing out the health-care system again, said William Schaffner, a professor at the Vanderbilt University School of Medicine.

“The second wave has begun,” said the professor of medicine told CNBC. “We’re opening up across the country, but many, many people are not social distancing, many are not wearing their masks.”

Even so, he said he “cannot imagine” a second shutdown due to the impact of the first one.

Several states in America have reported recent spikes in Covid-19 cases as measures are eased throughout the country. The U.S. has the highest number of cases in the world. Nearly 2.1 million people have been infected by the disease and more than 115,000 people have died, according to data from Johns Hopkins University.

Schaffner added that mass gatherings and religious services are also being held. “Many people are simply not being careful, they’re being carefree,” he said. “That, of course, will lead to more spread of the Covid virus.”

FXStreet reports that investors liquidated gold positions last week as they have some concerns regarding the recent bull market. Nonetheless, strategists at TD Securities believe a long period of negative rates is here to stay and, therefore, the yellow metal should offer hedge for the investment.

“Money managers further liquidated their gold length and added some shorts, as concerns emerged over the sustainability of the yellow metal's bull market. After all, global equity indices are surging at a record pace, leading to a reversal of safe-haven flows and dampening appetite for gold.” 

“Breaking down the drivers of money manager length, we find that risk-on behavior in markets has been the primary driver for liquidations in the past week. However, we reiterate that those selling gold in response to risk-on are improperly discounting the macro implications — the Fed will maintain its uber-easy policy for the foreseeable future and may even utilize more tools to support yields amid a massive supply of Treasuries.”

“We continue to expect that money managers will seek to shelter their capital from a prolonged period of negative real rates in gold.”

Reuters reports that Germany would see its contribution to the European Union’s budget rise by 42%, or 13 billion euros ($14.63 billion) annually, over the coming years, based on proposals from Brussels, newspaper Die Welt on Monday cited government calculations as showing.

Welt said the latest proposals from Brussels said member states needed to pay around 1.075% of their gross domestic product (GDP) into the budget over the next seven years - based on 2018 GDP, meaning a total volume of 1.1 trillion euros.

EU leaders are due to hold a virtual meeting on Friday to discuss the bloc’s budget for 2021-27, called the Multiannual Financial Framework (MFF), as well as the planned coronavirus recovery fund.

In today's Asian trading, the US dollar rose against the euro and declined against the Japanese yen on worries about a possible second wave of the coronavirus pandemic.

The ICE Dollar index, which shows the value of the dollar against six major world currencies, rose by 0.03% compared to the previous day.

Traders are following news regarding the increase in the number of new infections with the COVID-19 coronavirus infection in the United States and China, amid fears that a second wave of the disease could cause even more damage to the global economy.

Over the past years, 67 new cases of coronavirus infection have been detected in China,including 49 active patients and 18 asymptomatic carriers. In Beijing, after a long break, 36 new active cases of infection were registered for the second day in a row. The first were identified in the capital's Fengtai district at the Xinfadi wholesale market.

The Australian dollar is sensitive to changes in global economic forecasts and commodity prices. According to CBA experts, the market's revaluation of the world economy forecast may push the AUD/USD pair to the $0.6665. Additional pressure on the Australian dollar may be exerted by data on the labor market, which will be published on Thursday.

According to the report from Federal Statistical Office (FSO), the Producer and Import Price Index fell in May 2020 by 0.5% compared with the previous month, reaching 97.6 points (December 2015 = 100). This decline is due in particular to lower prices for pharmaceutical and chemical products as well as for petroleum products. Compared with May 2019, the price level of the whole range of domestic and imported products fell by 4.5%. 

In particular, lower prices for pharmaceutical preparations and basic pharmaceutical products were responsible for the decrease in the producer price index compared with the previous month. In contrast, rising prices were seen for waste collection and materials recovery.

The import price index registered lower prices compared with April 2020, particularly for petroleum products, chemical products as well as for petroleum and natural gas. The prices of rubber and plastic products also fell, as did prices for basic metals, semi-finished products and other special purpose machinery. In contrast, fresh vegetables and citrus fruit were more expensive.

• Domestic economy's recovery still faces pressure

• External risks have clearly increased

• Whether or not economic growth can turn positive in Q2 depends on June month

FXStreet reports that cable faces a potential drop to the mid-1.2400s in the near-term, suggested FX Strategists at UOB Group.

24-hour view: “We highlighted last Friday, ‘the rapid decline is severely oversold but there is room for the weakness in GBP to extend to 1.2510’. We added, ‘for today, the next support at 1.2450 is unlikely to come into the picture’. GBP subsequently dropped to 1.2473 before rebounding quickly. While downward momentum has waned somewhat, there is no indication that the current weakness has stabilized. From here, GBP could test the 1.2450 support first before a more sustained recovery can be expected (minor support is at 1.2475). Resistance is at 1.2545 followed by 1.2580.”

Next 1-3 weeks: “We continue to hold the same view from last Friday (12 Jun, spot at 1.2570) wherein GBP has likely made a short-term at 1.2812 last Wednesday (10 Jun). The current pullback is viewed as a corrective pull-back that has scope to extend to 1.2450, possibly as low as 1.2400. On the upside, if GBP moves back above 1.2650 (‘strong resistance’ level was at 1.2680 last Friday), it would indicate the corrective pull-back has run its course.”

RTTNews reports that China's industrial production growth accelerated and retail sales decreased at a slower pace in May, data from the National Bureau of Statistics showed Monday.

Industrial production grew 4.4 percent on a yearly basis in May, faster than the 3.9 percent increase logged in April. Economists had forecast a 5 percent rise.

Retail sales dropped at a slower pace of 2.8 percent in May from last year, slower than the 7.5 percent decrease seen in April. Sales were forecast to fall 2 percent.

During January to May, fixed asset investment decreased 6.3 percent from the same period of last year. Economists had forecast a 5.9 percent fall.

The People's Bank of China injected CNY 200 billion funds into the financial system via medium-term lending facility at a rate of 2.95 percent, unchanged from previous operation.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1371 (1236)

$1.1345 (1342)

$1.1323 (1169)

Price at time of writing this review: $1.1253

Support levels (open interest**, contracts):

$1.1184 (1980)

$1.1160 (588)

$1.1132 (595)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date July, 2 is 46290 contracts (according to data from June, 12) with the maximum number of contracts with strike price $1,1700 (2340);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2825 (1451)

$1.2746 (1490)

$1.2680 (565)

Price at time of writing this review: $1.2498

Support levels (open interest**, contracts):

$1.2435 (941)

$1.2416 (987)

$1.2394 (1482)

Comments:

- Overall open interest on the CALL options with the expiration date July, 2 is 14579 contracts, with the maximum number of contracts with strike price $1,2900 (1606);

- Overall open interest on the PUT options with the expiration date July, 2 is 16432 contracts, with the maximum number of contracts with strike price $1,2550 (1482);

- The ratio of PUT/CALL was 1.13 versus 1.13 from the previous trading day according to data from June, 12

* - 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.