Covid-19, Hong Kong Security Law, US-China Trade War, SP500, USD/JPY – Talking Points:
- Upbeat Chinese PMI information fuelled view early in Asia-Pacific trade.
- SP 500consolidating during pivotal insurgency as Hong Kong’s confidence law escalates tensions between a US and China
- USD/JPY eyeing a 200-day relocating normal as it looks to extend a 5-day rally
A extended risk-on lean was seen early in Asia-Pacific trade as upbeat Chinese PMI information nudged a trade-sensitive Australian Dollar aloft opposite a US counterpart. SP 500 futures remained comparatively unvaried notwithstanding better-than-expected tentative home sales total overnight.
The haven-associated US Dollar and Japanese Yen drifted reduce before pegging behind mislaid ground, as a shutting bell sounded for a Australian session. Gold reason plain during $1,770 while yields on US 5-year Treasuries fell to a record low of 0.271% as a Federal Reserve considers replicating a Reserve Bank of Australia’s take on Yield Curve Control (YCC).
Looking forward, concentration will sojourn fixated on Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell’s testimony in front of a House Financial Services Committee, with any inkling of serve impulse measures being introduced presumably stoking marketplace ardour for risk.
Source – TradingView
Coronavirus Headlines Continue to Dictate Sentiment
Warning shots dismissed by a conduct of a World Health Organization (WHO) that a “worst is nonetheless to come” might continue to empty a positivity from financial markets as tellurian cases of coronavirus blast past 10 million, ensuing in over 500,000 deaths.
The deteriorating conditions in a United States continues to import on risk ardour as Houston, a second-most populous city in Texas, reported ICU beds were 5% bashful of ability while Arizona re-instated restrictions on bars, gyms and theatres.
The idea that Covid-19 might be anniversary in inlet seems all though debunked as cases continue to stand during a summer months, suggesting that a finish lifting of restrictions might not start until a introduction of an effective vaccine.
To that end, tellurian item prices might come underneath vigour as investors start to doubt either a liberation has extended over a fundamentals.
Source – Worldometer
Hong Kong Security Law Stokes US-China Tensions
The National People’s Congress Standing Committee (NPCSC) might have escalated tensions between a world’s dual biggest economies after voting unanimously to approve a argumentative National Security Law one day before a anniversary of Hong Kong’s lapse to Chinese rule.
Adoption of this law radically allows Beijing to overrule a internal legal complement in Hong Kong, eroding a liberty of a special executive region’s (SAR) ‘one country, dual system’ element of governance that has postulated it special trade standing with a United States.
Given a Trump administration’s pre-emptive movement to shorten US exports of counterclaim apparatus and high-tech products on Monday, serve measures are roughly guaranteed with a President hinting during a relinquishment of a extradition covenant with Hong Kong along with a termination of visas for Chinese students and researchers with ties to a military.
Furthermore, Hong Kong Chief Executive Carrie Lam’s defiance that “sanctions will not shock us” and that “China will take countermeasures when needed” all though assures a duration of postulated tit-for-tat exchanges, presumably fueling a swell of risk hatred and discounting of risk-associated assets.
SP 500 Daily Chart – Descending Triangle Forming during Key Resistance
Source – TradingView
End of month flows along with a condensed trade week has seen a SP500 connect into a probable Descending Triangle arrangement after cost collapsed by a uptrend from a yearly low (2,179) on Jun 11.
The remarkable 9% tumble from a Jun high (3,233) pushed a benchmark index behind to pivotal understanding connection during a 61.8% Fibonacci (2,933), 50-day relocating normal (2,916) and 2009 uptrend.
This pointy improvement presented a event to maybe ‘buy a dip’, permitting cost to tentatively redeem behind above a psychological 3,000-level.
The opinion stays constructive as cost reason above 3,000, that might continue to inspire buyers as a overlie between a 50- and 200-MA provides a understanding reserve net for a US benchmark index.
However, serve gains seem to be singular by estimable insurgency during a 78.6% Fibonacci (3,137) and a loss movement seen on both technical indicators.
To that end, offered vigour might feature if cost can transparent support during a 61.8% Fibonacci (2,932) and carve a trail behind to a May low (2,766) and 38.2% Fibonacci (2,645).
USD/JPY Daily Chart – Rate Eyeing 200-Day Moving Average
Source – TradingView
USD/JPY continues to replenish mislaid belligerent after collapsing 3% from a Jun high (109.85) before reacting to a psychologically commanding 106-handle.
Initial growth in a RSI late final week suggested cost would continue to breakdown, though a high annulment before to oversold readings could see USD/JPY work a approach behind to a 200-day relocating normal (108.21).
Having pronounced that, a movement indicator has diverged from cost and a associate technical oscillator, hinting during an underlying grade of bearishness in USD/JPY, that could see a sell rate retreat during a Feb downtrend as a finished on dual prior occasions.
Reaction around a 200-MA (108.21) could yield a pivotal tell for destiny direction, with a inability to transparent a sentiment-driving relocating normal presumably signalling a annulment of a 5-day rally.
— Written by Daniel Moss
Follow me on Twitter @DanielGMoss