Monday July 13th, 2020

Markets start the week mixed with equity & gold markets stronger, oil prices lower and US$ index slightly down verses a basket of major currencies. Investor focus has shifted to the corporate earnings as equity markets near a 5-month peak and the prospect of further rounds of stimulus. Sino/US tensions increase as China announces “corresponding sanctions” against the US on Monday in a response to the US penalizing senior Chinese officials over the treatment of the Uighur Muslims. Coronavirus concerns remain as global cases surpass 13mio, in the US Florida sets another daily record of infections and Houston is considering a 2nd lockdown. No Key economic releases today, so markets will focus on Fed’s Williams speech today and US monthly budget statement (June). 

Oil prices slip in early trading with ongoing covid-19 concerns remaining the primary cause for the weakness. Also impacting oil, speculation that the Yemens Houthi group initiated a drone attack an oil facility in Saudi Arabia, as well Libya has halted oil exports and OPEC is scheduled to meet on Tuesday. C$ continues to hold within its recent range, edging higher despite weaker oil prices boosted by investor risk-on sentiment. Bias remains to buy US$ on dips. Support 1.3530, with minor resistance 1.3640 then 1.3690 (Jun30th), if breached 1.3800 (Jun1st).

Euro edges stronger as investors focus on US corporate earnings and unwind long US$ positions. European analysis are growing positive for Euro longer-term with FX analyst at Danske bank saying “We expect a broad dollar decline to continue, supporting emerging fx markets and see euro/usd at 1.15 in three-months”. Supporting the sentiment is the encouraging EU data suggesting a faster than expected rebound into third quarter. As well, if the EU Commission can secure support for the latest proposed stimulus plan, boosting the Eur stronger scenario. Support holds at 1.1260 with resistance sits 1.1403 (Jun 11 high), if breached next 1.1492 (2020 highs)

GBP continues to hold around the 1.26 level vs US$ but GBP is coming under pressure heading into the BoE Governor Bailey’s speech today. Markets will look for signals on the UK economy and the prospect of future negative interest rates from the Governor’s speech. UK/EU Brexit negotiators will head back for another round of discussions this week, with observers remaining pessimistic of any real progress. BoE speech will provide intraday direction to the pound. Support holds at 1.2550 with initial resistance lowering to 1.2670 and key resistance at 1.2810 (Jun10 high).