Monday August 17th, 2020

The US$ continues to edge weaker, oil prices remain steady, while Sino/US trade talks are delayed, and Japanese GDP falls worst on record. Japan, the worlds 3rd largest economy saw Q2 GDP annualized fall -27.8% its worst decline since on records began. In the US, Democrats prepare to officially nominate Joe Biden just 80 days before the US presidential election and with widespread fears about an unfair election growing. As global coronavirus cases approach 22 mio, China grants the countries first COVID-19 vaccination patent, with Saudi Arabia starting phase 3 trials and Russia, Brazil and Chile expected follow.. The Sino/US trade talks were delayed on the weekend, leaving the trade pact in place and allowing China more time to fulfill its obligations. Asian and commodity currencies rallied on the news and the US$ edges into its 9th week of consecutive weakness. No key data releases today, so the markets primary focus will be Wednesday’s FOMC minutes. 

Oil prices remain steady as China is expected to boost its imports of US Crude in August & September to help facilitate its phase 1 trade obligations. Medium-term Oil remains vulnerable to weakness as global demand is forecasted to fall. C$ strengthened alongside its commodity peers as the Sino/US phase 1 trade deal remains intact. Intraday no key data releases so C$ will focus on Oil prices and await Wednesdays BoC’s CPI data release. Support holds at 1.3188 (Thursday’s low), if breached expect 1.3120 (Jan 23rd low), with resistance at 1.3265.

Euro is steady as safe-haven US$ demand remains sidelined due to the delay in the Sino/US trade meeting. Euro appears to be lagging, running out of steam and could be entering into a consolidation phase. Rising coronavirus cases across the continent could stall the EU’s recovery efforts causing a number of analysts to revise their quarterly forecasts for Euro down to 1.1660 vs US$. Focus will be on the ECB meeting on Thursday and EU PMI data out on Friday. Support at 1.1780 with resistance 1.1885 if breached a retest of 1.1915 (Aug6th high).

GBP continues to hover around its 6-month highs amid mixed Brexit opinions, and finding support from a weaker US$. BoE Chief economist presented an upbeat economic outlook ahead of the Brexit meeting. UK/EU negotiators will resume talks on Tuesday, with the UK saying that they would not accept any deal that ‘constrains’ the UK to the EU rules. The Chief UK negotiator said last Thursday that a Brexit agreement can be reached in September. This week’s key focus points will be Brexit headlines, UK CPI data on Wednesday alongside FOMC minutes. support 1.3050 with resistance at 1.3130 (Mar20 highs).