FXStreet reports that Axel Rudolph, Senior FICC Technical Analyst at Commerzbank, suggests that the pair will keep downside pressure while below 1.0688.

“AUD/NZD continues to put pressure on the 1.0581/34 support area which consists of the March high, May and June lows as well as the 200-day moving average. Were this support zone to give way, the 1.0506/1.0460 area should also offer support. It is where the January and February highs and also the April 20 low were made. Only an unexpected failure at 1.0460 would confirm a top formation and would target the 1.0386 December low.”

“Immediate downside pressure remains in play while the cross trades below the two-month resistance line at 1.0651 and the 55-day moving average at 1.0688. Further minor resistance comes in at the 1.0757 April high. Only if the next higher 1.0836/84 resistance zone were to be exceeded, would the May and October 2018 highs at 1.0963/95 be eyed.”

• Too many countries not following pandemic guidelines
• If basics aren't followed, pandemic is going to get "worse and worse and worse"
• Too many countries headed in wrong direction
• Seeing dangerous increases in several countries

FXStreet reports that economists at Rabobank expect EUR/GBP to surge towards 0.92 fueled by no Brexit agreement and prospects of negative interest rates.

“EUR/GBP has been unable to push convincingly below the 0.895 level suggesting that GBP’s good run may have run out of steam. In the wake of continued Brexit fears and continued UK labour market vulnerabilities we would favour buying EUR/GBP on dips with the view that another move back above the 0.90 level is likely.”

“Brexit related uncertainties on top of the shock of the covid-19 lockdowns has meant that the market is reluctant to dismiss the possibility that the BoE could at some point be forced into using negative interest rates. Insofar as the UK has a current account deficit, in contrast to the other countries that have used a negative rate, it is possible that GBP could be particularly vulnerable in this scenario.” 

“The combination of a no deal Brexit and negative interest rates could push EUR/GBP towards parity. For now, we see EUR/GBP pushing to 0.92 on a three-month view on Brexit uncertainty before recovering back towards 0.89 on a six-month view.”

FXStreet reports that Commerzbank’s Axel Rudolph suggests that NZD/USD tries to better the 0.6585/0.6601 area, above which lies the mid-January high at 0.6666.

“NZD/USD is heading back up towards the June and current July highs at 0.6586/0.6601, a rise above which would target the mid-January high at 0.6666. Further up sits the December peak at 0.6756.”

“Overall upside pressure should be maintained while the cross remains above the June 22 low at 0.6374. Above it is a three month support line at 0.6520 and also sits the March spike high at 0.6443. Below 0.6374 the 200- and 55-day moving averages and the March-to-July support line can be spotted at 0.6348/08. Below the 55-day moving average at 0.6308 solid support can be seen between the April and previous May highs at 0.6176/31.”

• There is a long way to go, very worried about jobs

U.S. stock-index futures rose on Monday,  as positive news about potential COVID-19 treatment offset concerns about rising coronavirus cases, while better-than-expected quarterly results from PepsiCo (PEP; +2.4%) gave a boost to the U.S. equities.

Global Stocks:

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

Walt Disney (DIS) initiated with a Buy at Goldman; target $137

Apple (AAPL) target raised to $450 from $425 at Wedbush

Deere (DE) upgraded to Outperform from Neutral at Robert W. Baird; target $189

USD traded mixed against other major currencies in the European session on Monday as investors weighed positive reports about vaccine candidates against the novel coronavirus and rising coronavirus cases. USD rose against JPY, CHF, GBP and NZD, but fell against EUR, CAD and AUD. 

Pfizer (PFE) and BioNTech (BNTX) announced today that two of their for COVID-19  vaccine candidates received "Fast Track" designation from the U.S. Food and Drug Administration (FDA). This news bolstered further investor optimism about potential coronavirus treatment, which was initially ignited by Gilead Sciences' (GILD) Friday report that its antiviral drug remdesivir reduces sharply the risk of death for coronavirus patients.

Meanwhile, the situation with coronavirus remains a concern. The U.S. has reported more than 60,000 new cases daily for three days in a row now. Overall, the U.S. has 3,304,942 cases of COVID-19, the most in the world, according to the Johns Hopkins Center for Systems Science and Engineering. Deaths in the country increased to 135,205, also the most in the world. The total number of confirmed global coronavirus cases rose to 12,910,357 and deaths grew to 569,128.

Market participants also looked to the upcoming U.S. corporate earnings season for Q2, which is to kick off this week and is expected to reveal the steepest decline in quarterly earnings for S&P 500 companies since the financial crisis as coronavirus-induced lockdowns hurt corporate profits. 

FXStreet notes that GBP/USD weakness was well supported on Friday, holding high level price support at 1.2568/66. The immediate risk stays seen higher for a test of key resistance from the 200-day average at 1.2701, analysts at Credit Suisse apprise.

“Immediate resistance remains seen at 1.2681/88, above which and we then see the 200-day average at 1.2701. Whilst we would expect fresh sellers here, a break can expose the downtrend from late last year, currently seen at 1.2737, with the ‘measured base objective’ seen at 1.2808. With the June high and 78.6% retracement of the decline from late last year just above at 1.2813/17, we would expect fresh sellers here.” 

“Support moves to 1.2621 initially, with a break below 1.2566 needed to rekindle thoughts of a pullback with support next at the 13-day average at 1.2542, then the ‘neckline’ to the base and 38.2% retracement of the rally from late June at 1.2519/09.”

FXStreet reports that economist at UOB Group Lee Sue Ann does not see the ECB modifying its monetary policy at this week’s event.

“At its June meeting, the ECB decided to add a further EUR600bn to its EUR750bn COVID-19 rescue plan, bringing the total stimulus package to an astonishing EUR1.5tn.”

“Whilst we are not excluding the possibility of further monetary stimulus down the road, the latest measures announced by the ECB should dent any talks or concerns (for now) about whether or not the ECB is willing to play its role of lender of last resort for the Eurozone.”

S&P 500: Financials threats new lows - Credit Suisse

FXStreet reports that economists at Credit Suisse expect the financial sector to remain in its relentless underperformance trend while the energy sector is also awaited to continue its long-term downtrend. On the other hand, the consumer discretionary sector has surged higher and is looked for to outperform.

“The S&P Financials Sector has been capped at its 200-day average at 444 and we look for the risk to turn lower again with support seen next at 350, then 333, which we look to try and hold. 

“S&P Energy Sector recovery has been capped well ahead of key resistance at 389/95 and a fresh top is threatening. Below 259.50 would confirm to turn the core risk lower again.”

“Along with Tech the Consumer Discretionary sector has been one of the star performers from late March and with the sector in new highs and above long-term trend resistance we expect this trend to continue, with resistance seen next at 1124, then 1160.”

• We will adopt proactive fiscal policy, prudent monetary policy
• We will strive to achieve full-year development target
• Economy faces unprecedented hit from the virus pandemic and global recession
• Economy is showing a steady recovery but the situation is still severe at home and abroad

• We do think masks have a great deal of value in confined spaces
• It is very important to wear face-covering in shops
• We will look at the guidance and say more in the next few days

PepsiCo (PEP) reported Q2 FY 2020 earnings of $1.32 per share (versus $1.54 per share in Q2 FY 2019), beating analysts’ consensus estimate of $1.25 per share.

The company’s quarterly revenues amounted to $15.945 bln (-3.1% y/y), beating analysts’ consensus estimate of $15.472 bln.

PEP rose to $138.90 (+3.30%) in pre-market trading.

FXStreet reports that Ho Woei Chen, CFA, Economist at UOB Group, assessed the latest inflation figures in the Chinese economy.

“China’s Consumer Price Index (CPI) rose 2.5% y/y in June (Bloomberg est: 2.5%; May: 2.4%). This was led by higher food price inflation while core inflation (excluding food and energy) slipped to 0.9% from 1.1% in the two preceding months.”

“Producer Price Index (PPI) deflation eased to -3.0% y/y in June from -3.7% in May (Bloomberg est: -3.2%), marking the fifth straight month of declines.”

“Data indicates that the price pressure has remained weak in June despite continuing measures to boost demand and ensure ample market liquidity.”

“Weak Inflationary pressure supports monetary easing but PBoC is likely to adopt a more cautious stance as economy recovers.”

July 14

Before the Open:

Citigroup (C). Consensus EPS $0.27, Consensus Revenues $19060.87 mln

Delta Air Lines (DAL). Consensus EPS -$4.15, Consensus Revenues $1364.40 mln

JPMorgan Chase (JPM). Consensus EPS $1.23, Consensus Revenues $30226.82 mln

Wells Fargo (WFC). Consensus EPS -$0.10, Consensus Revenues $18298.94 mln

July 15

Before the Open:

Goldman Sachs (GS). Consensus EPS $3.91, Consensus Revenues $9759.78 mln

UnitedHealth (UNH). Consensus EPS $4.04, Consensus Revenues $63491.28 mln

After the Close:

Alcoa (AA). Consensus EPS -$0.26, Consensus Revenues $2133.96 mln

July 16

Before the Open:

Bank of America (BAC). Consensus EPS $0.28, Consensus Revenues $21714.84 mln

Johnson & Johnson (JNJ). Consensus EPS $1.49, Consensus Revenues $17629.51 mln

Morgan Stanley (MS). Consensus EPS $1.13, Consensus Revenues $10392.47 mln

After the Close:

Netflix (NFLX). Consensus EPS $1.83, Consensus Revenues $6077.95 mln

FXStreet reports that Axel Rudolph, Senior FICC Technical Analyst at Commerzbank, expects the upside pressure to be kept while the EUR/USD pair trades above 1.1255.

“EUR/USD is heading back up towards its current July high at 1.1371, above which beckons the June peak at 1.1422. It will remain in play while the cross remains above the two-month support line at 1.1267 and, more importantly, above the 1.1168 June 22 low. Immediate upside pressure should be maintained above Friday’s low at 1.1255.” 

“The 1.1422 June high, together with the March high at 1.1495, represents quite formidable resistance which we would expect to cap at first. However a break higher is eventually favoured and would target the 2019 high at 1.1570, then 1.1815/22, the 61.8% Fibonacci retracement of the move down from the 2018 peak and the September 2018 high.”

FXStreet reports that the US elections may not be a dominant FX driver as the socio-economic conditions that help determine the winner could dominate the FX market for some time to come. Economists at HSBC see the Japanese yen as the best safe-haven asset.

“The pandemic and the associated economic lockdowns and re-openings have created heightened uncertainty around the US economic outlook. This means the evolution of the nascent US economic recovery is likely to remain at the heart of the outlook for FX in the coming months. Indeed, the socio-economic factors that may help shape the outcome of the elections are likely to retain their grip on the FX market for a period well beyond November's poll.”

“We believe any issues around the US economy or the US elections, such as rhetoric from both presidential candidates regarding the state of US-China relations, would be best played at the wings of the RORO sensitivity spectrum. We see the JPY as the cleanest ‘safe-haven’, unencumbered by the intervention threat faced by the CHF. At the other end of the scale are the "risk-on" plays such as the AUD and CAD.”

“The RORO implications on the USD may become less clear in an environment where risk appetite is being driven by US-centric factors. For example, strong US data could be USD positive from a cyclical perspective or USD negative due to a reduced ‘safe-haven’ bid.”

Reuters reports that Germany can prevent a second wave of the coronavirus in the autumn if people stay vigilant, particularly during the summer vacation season, Health Minister Jens Spahn said on Monday.

Spahn told a news conference it was important to remain alert when travelling abroad and said he was worried by pictures showing holidaymakers partying in Mallorca at the weekend and ignoring social distancing rules.

“I understand the impatience, but where there are parties the infection risk is particularly high,” he said.

“That’s why we have to try particularly now in the holiday season to prevent infections. We don’t automatically have to expect a second wave in the autumn and winter. Together, as a society, we can prevent that, as we did once before: breaking the wave and keeping the pandemic in check.”

He added that more than 15.5 million people had installed Germany’s coronavirus warning app and that 500,000 people were tested for COVID-19 last week, the most since the crisis began.

FXStreet reports that economists at Credit Suisse expect the Brent Crude Oil to extend the current consolidation phase before stretching higher. 

“Brent Crude extends its near-term consolidation but maintains its base above the 38.2% retracement of the Q1 collapse at $37.28. Further consolidation should be allowed for below the 50% retracement of the Q1 fall at $43.86. Above here in due course though should see resistance next at $45.18/50 and then more importantly at $48.74, where the 200-day average is hovering, which we expect to cap the market at least temporarily.”

“Near-term support is seen at $37.18/35.37, the May/June price gap, with $33.62 ideally holding further weakness. Only below $28.86 would see the base negated though.” 

“Poor momentum increases the risk $43.86 should continue to cap for now for further consolidation and potentially a deeper setback.”

Bloomberg reports that Australia’s effective unemployment rate that also includes people who have opted against searching for work as the economy contracts is almost double the official jobless level, Treasurer Josh Frydenberg said.

“That is around 13.3% right now,” Frydenberg said of the effective rate, in contrast to the official unemployment rate of 7.1%. “That is a large number of people reflecting the economic challenges that we see right now.”

Australia’s economy tumbled into recession in the first half of the year -- ending an almost three-decade expansion -- and Treasury, the department that provides economic analysis and develops policy for Frydenberg, reckons official unemployment will climb to 8% this quarter.

“We have seen a big reduction in hours worked in the months since the Covid pandemic first hit in Australia. Globally, they are seeing the same,” the treasurer said. “That just reflects the enormous economic challenge that we face and the impact it’s having on the unemployment rate.”

The official unemployment rate has been held down by people giving up looking for employment -- captured with sharp fall in the participation rate -- and by the government’s JobKeeper program that pays a wage subsidy to keep workers tied to employers.

The jobless rate probably edged up to 7.2% in June as those previously discouraged from job searching return, offsetting the 100,000 positions added in the month, economists predicted ahead of Thursday’s employment data. The expected surge in hiring reflects the removal of restrictions and reopening of the economy during the month.

FXStreet reports that FX Strategists at UOB Group noted USD/CNH could drop further and test the 6.9500 region in the next weeks.

24-hour view: “The current movement in USD is viewed as an on-going consolidation phase. For today, USD is likely to trade sideways, expected to be between 6.9920 and 7.0200.”

Next 1-3 weeks: “In our previous update from last Tuesday (07 Jul, spot at 7.0150), we highlighted that USD ‘is under pressure’. We added, ‘a daily closing below 6.9950 could potentially lead to further sharp loss’. USD subsequently dropped to a low of 6.9815 on Thursday (09 Jul) before closing at 6.9970. USD rebounded last Friday (10 Jul) and while downward momentum has been dented, only a break of 7.0390 (‘strong resistance’ level previously at 7.0550) would indicate that the current downside risk has dissipated. Until then, USD could weaken further to 6.9650 with lower odds for extension to 6.9500. Meanwhile, oversold shorter-term conditions could lead to a few days of consolidation.”

Reuters reports that Germany's economy has passed its lowest point and the recovery process is starting, the economy ministry said on Monday.

A rise in industrial orders indicates that production will pick up in the coming months, but risks still exist, particularly in a very slack demand from non-euro zone, the ministry said in its monthly report.

FXStreet reports that Axel Rudolph, Senior FICC Technical Analyst at Commerzbank, expects the GBP/USD to see some consolidation at the 1.2694/1.2730 resistance area

“GBP/USD is getting ever closer to the 1.2694/1.2730 resistance area which consists of the 200-day moving average and the eight month resistance area. There it is likely to at least short-term stall. Further up beckons the June peak at 1.2814.” 

“Immediate upside pressure will be maintained while the cable remains above the 1.2543 June 24 high. Minor support below it can be seen along the 55-day moving average at 1.2439 and also along the March-to-July support line at 1.2364. Below, the next lower 1.2251 late June low lie the April low at 1.2163 and the May trough at 1.2072.”

FXStreet reports that gold is trading above $1,800 per ounce and strategists at TD Securities expect the yellow metal to stay above the mentioned level or even higher fueled by lower real rates. 

“Gold remains torn between its safe-haven bona fides, which are prompting money managers to sell on risk-on behavior in markets, and its inflation-hedge characteristics, which are driving a swarm of capital to seek refuge in the yellow metal.” 

“Ultimately the regime change toward inflation protection has been the stronger force in recent weeks, seeing the shiny metal trade at higher ranges, most recently north of $1800/oz, as real rates continue to churn lower. This has renewed speculator appetite of late, seeing net length increase once again, although both longs and shorts have increased.” 

“Moving forward, given positioning is still not extremely stretched, we anticipate that real rates will continue to drive gold prices higher as normalizing inflation expectations and suppressed rates vol provide fuel for the trade.”

During today's Asian trading, the US dollar fell against the euro and changed little against the yen.

This week, traders are waiting for the results of the European Central Bank meeting on July 16 and the EU leaders ' summit on July 17.

Investors also continue to follow the news about the spread of the coronavirus. In Florida on Sunday, reported more than 15 000 cases of infection per day. This is a record daily increase among American States since the beginning of the epidemic.

At the same time, the risk appetite was helped by data from the American biopharmaceutical company Gilead Sciences, which on Friday reported that the drug remdesivir can reduce mortality by 62% among seriously ill patients with coronavirus.

The People's Bank of China (PBOC) on Monday poured 50 billion yuan ($7.15 billion) into the financial system through reverse REPO operations at a rate of 2.2%. In a statement, the PBOC notes that these injections are aimed at maintaining the liquidity of the banking system. The country's Central Bank does not plan to take new stimulus measures as China's economy recovers from the shock caused by the coronavirus outbreak, said Kai Guo, Deputy Director of the PBOC monetary policy Department. "In the coming half-year, the economy will return to normal, and the role of traditional monetary policy will become more obvious," he said.

The ICE Dollar index, which shows the value of the dollar against six major world currencies, fell by 0.25% compared to the previous trading day.

Reuters reports that French Finance Minister Bruno Le Maire said on Monday that French consumption has almost returned to normal levels and that forced household savings during the coronavirus lockdown period could boost consumption later on in the year.

"Our recovery plan...is working. A few weeks ago consumption in France was at minus 30%, today we are just minus 5%, we have almost returned to normal," Le Maire said on RTL radio.

Le Maire also said that he estimates that households will have saved about 100 billion euros by year-end due to the coronavirus crisis. "What I wish for is that they will spend this 100 billion," he said.

As reported by the Federal Statistical Office (Destatis), the selling prices in wholesale trade fell by 3.3% in June 2020 in comparison with the corresponding month of the preceding year. In May 2020 and in April 2020 the annual rates of change had been -4.3% and -3.5%, respectively. From May 2020 to June 2020 the index rose by 0.6%.

In June 2020, lower prices in the wholesale trade of petroleum products (-23.4%) had the biggest impact on the overall development compared to the same month of the previous year. Compared to May 2020, however, mineral oil products were sold again at a significantly higher price (+8.9 %), after prices had fallen by around 30 percent since February 2020 due to the crisis.

There were also sharp price decreases compared to the previous year in the wholesale trade of waste materials and residual materials (-13.3 %), including iron and steel scrap (-16.3 %). Prices were also well below the previous year's level in the wholesale trade of live animals (-6.9 %), cereals, raw tobacco, seeds and animal feed (-4.0 %) and data processing equipment, peripheral equipment and Software (-3.5%). By contrast, wholesale tobacco prices were higher than in June 2019 (+4.3 %).

CNBC reports that China’s central bank isn’t planning much more stimulus for the country as its economy recovers from the coronavirus shock, policymakers said.

″(Some recent) policies and measures were made in response to the coronavirus outbreak, and once they completed their mission they have exited,” Guo Kai, deputy director of the monetary policy department of the People’s Bank of China, told reporters.

As an example, he pointed to two special loan programs worth a combined 800 billion yuan ($114.29 billion) that had completed their respective purposes of supporting production of medical supplies and resumption of work.

“In the next half of the year, the economy will return to normal, and the role of traditional monetary policy may become more obvious,” Guo said at the press briefing. “We have entered a more normal state.”

During the first three months of the year, China’s economy contracted by 6.8% after more than half of the country extended a Lunar New Year holiday shutdown by at least a week in February in an effort to limit the spread of Covid-19. The disease first emerged late last year in the Chinese city of Wuhan.

The outbreak stalled within the country by mid-March, while accelerating its spread overseas in a global pandemic that has since infected more than 12.8 million people worldwide and killed more than 567,000 people. The world economy is expected to fall into a recession this year as other governments have limited social gatherings. That drop could significantly affect demand for exports from China, which is still generally expected to eke out national growth this year.

The central bank’s statistics department head Ruan Jianhong said Friday that out of 10,000 enterprises surveyed nationwide, 90.7% of those in the services industry had reopened as of June 15. For those in industrial work, utilization of equipment was at least the same as the average level of the second quarter last year, Ruan said. 

China is set to release second-quarter GDP and other key economic data this week.

FXStreet reports that FX Strategists at UOB Group expect EUR/USD to navigate within the 1.1200/1.1380 range in the next weeks.

24-hour view: “EUR rebounded after touching a low of 1.1253 last Friday. Upward momentum has picked up, albeit not by much. From here, there is room for EUR to edge higher towards 1.1345 but a sustained rise above this level is unlikely (next resistance is at 1.1380). On the downside, support is at 1.1285 followed by 1.1260.”

Next 1-3 weeks: “Our latest narrative was from last Tuesday (07 Jul, spot at 1.1320) wherein ‘upward momentum is beginning to pick up but EUR has to close above 1.1380 to indicate that it is ready to move to last month’s top at 1.1422’. EUR rose to a high of 1.1370 on Thursday (09 Jul) before dropping back down quickly. The build-up in momentum has more or less fizzled out and from here; EUR could consolidate between 1.1200 and 1.1380.”

EUR/USD

Resistance levels (open interest**, contracts)

$1.1389 (1731)

$1.1368 (664)

$1.1351 (1449)

Price at time of writing this review: $1.1328

Support levels (open interest**, contracts):

$1.1249 (411)

$1.1226 (506)

$1.1198 (1103)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 7 is 54527 contracts (according to data from July, 10) with the maximum number of contracts with strike price $1,1400 (6629);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2777 (1630)

$1.2725 (1230)

$1.2689 (654)

Price at time of writing this review: $1.2659

Support levels (open interest**, contracts):

$1.2534 (167)

$1.2444 (308)

$1.2407 (1168)

Comments:

- Overall open interest on the CALL options with the expiration date August, 7 is 18055 contracts, with the maximum number of contracts with strike price $1,3000 (2987);

- Overall open interest on the PUT options with the expiration date August, 7 is 18462 contracts, with the maximum number of contracts with strike price $1,2400 (1472);

- The ratio of PUT/CALL was 1.02 versus 1.02 from the previous trading day according to data from July, 10

* - 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.