Friday July 24th, 2020

Geopolitical concerns and the ongoing surge in new Covid-19 cases is causing risk sentiment to wane. In China’s anticipated response to the closure of its Houston consulate, it ordered the closing of the US consulate in Chengdu. The escalating Sino/US tensions saw equity markets weaken, safe haven gold and Jpy to strengthen while the US$ index held near its 22-month lows. The resurgence of COVID-19 cases in the US is stalling its economic recovery which was evident in the rise of initial jobless claims reported yesterday. Europe posted strong PMIs results this morning, the focus now shifts to the US which will report its PMIs results this morning and should provide a clearer picture of the US’ recovery progress.

Oil prices remain steady, slightly up to start the Friday session supported by a weaker US$. Expect oil prices to be capped by the surge in coronavirus cases which will likely impact longer-term demand for fuel. C$ weakened from its 6-week high on concerns that the US, its largest trading partners economic recovery is stalling. Intraday C$ will monitor US PMI and Oil related data for direction. Support at 1.3310 (June 10th) with resistance at 1.3485.

Euro remains firm amid upbeat PMIs across the EU which provided investors the confidence to hold on to long Euro positions. The positive data was also supported by the German GFK consumer Confidence Survey which rose for the third consecutive month. The Euro which is sitting at its highest level since Oct 2018, continues to be attractive after the agreement of the Eur 750bln recovery plan. The Euro could become a proxy safe haven amid Sino/US tensions and rising covid-19 cases in the US and Latam counties. Support at 1.1540 with resistance 1.1650 (Sep2018), if breached we could see 1.1755 next.

GBP continues to defy the prospect of a “No-Deal” Brexit and remaining strong, supported by better-than-expected UK retail sales and PMIs. Retails sales hit 13.9% in June and PMIs leaped to 57.1 points providing investors’ confidence in the GBP. UK/Sino tensions continue to simmer with its decision to phase out Hauwei’s technology and cancel its extraction treaty with Hong Kong. The EU Chief negotiator acknowledged no progress has been made on Brexit but said negotiations will continue. Support initially sits at 1.2670, a break will likely see 1.2595 and resistance at 1.2815.