Monday July 27th, 2020

Surging coronavirus cases, fresh quarantine restrictions and Sino/US tensions continue to dominate market headlines. With virus cases approach 16 ½ million globally (1-million new cases 4-days) and 2nd wave fears prompting the UK to announce new quarantine rules for travelers returning from Spain. Equity markets dipped on the quarantine news, while Gold and other safe haven products rallied. US$ hit fresh 22-month low as ongoing US/China tensions and its domestic economy remains under pressure with the rising COVID-19 cases. A fresh surge of US$ selling saw Asian currencies rally +0.25%, trade related currencies +0.4% and ZAR rallied +1.2% vs US$. South African Rand rallied beyond its peers as investors exited US$, benefiting the ZAR with its higher interest rate yields. Investors will focus on updates on proposed US stimulus, US Durable Goods Orders and Nondefense Capital Goods Orders for intraday direction.

Oil prices open marginally lower, remaining capped by ongoing Sino/US tensions and rising global coronavirus cases. C$ starts the week off on a stronger note, benefiting from a weaker US$. With no domestic data until Fridays GDP, C$ will track Oil and US$ flows for direction, but trails its peers in its ability to strengthen due to its closer economic ties to the US. Support at 1.3310 (June 10th) with resistance at 1.3485.

Euro extends its gains testing a fresh 22-month high, benefiting primarily from a weaker US$ and despite mixed Germain IFO survey data. The rising COVID-19 cases has seen US Treasury bond yields declining indicating that markets are pricing in a slow US recovery. The securing of the Eur 750bln stimulus package, low virus resurgence rates and promising economic data has prompted investors to focus specifically on Euro as a safer long-term trade. Support at 1.1650 (Sep2018) with resistance now sitting at 1.1755, if breached look for 1.1850 (Jun2018) next.

GBP continues to defy Brexit fears and Sino/UK tensions as it tests an almost 5-month high vs US$. Despite rising expectations of a “No-Deal” Brexit with the latest round of negotiations ending in another stalemate. With no market-moving data expected out of the UK this week, the GBP gains are solely attributed to a weaker US$. UK imposed fresh quarantine restrictions on travelers returning from Spain, with rising 2nd-wave fears the quarantines could be expanded to more countries. GBP remains vulnerable to further weakness if investors sentiment towards the US$ changes. Support initially sits at 1.2780, resistance jumps to 1.2976 (Mar2020) with potential to 1.3200 (9 Mar2020).