Monday June 29th, 2020

Markets are starting the week off mixed with European equity markets up, US$ index & oil prices lower as Covid-19 continues to dictate investor sentiment. Global coronavirus cases hit +10mio and global deaths surpassed 500k, amid rising new cases across the US, Latam and South Asia. Chinese lawmakers review the draft of HK national security bill which could be approved as soon as Tuesday and is expected to be enforced rigorously. The activation of the HK national security will likely see increased protests in HK and could increase Sino/US tensions. Markets are relatively quiet as US$ stabilizes after Friday’s rally opening a ¼% weaker vs most major currency. Today the focus remains on covid-19 updates and US Pending home sales and Dallas Fed manufacturing Business index data for intraday direction.

Oil prices start the week down slightly as demand concerns linger due to the uptick in coronavirus cases globally. C$ has rebounded moderately from its 4-week low despite weaker oil prices as US$ eases in early trading. The rising coronavirus cases will likely keep oil under pressure so C$ strengthening may be limited. Bias is to buy US$ dips, look for support at 1.3625 with resistance at 1.3715, with the potential US$ could extend to 1.3800 (June 1st highs).

Euro is starting the week stronger as the US$ eases in early trading. The EU economy is starting to show signs of recovery as the continent continues to loosen its lockdown restrictions and open tourism. A new travel guidance expected out by Tuesday is likely to exclude US travelers amid the US’s rising covid-19 cases and possibly creating some backlash from the US government. On Fiscal front the EU leaders are set for another round of discussions on the EU Fund in hopes to find a compromise to pass the stimulus. US & EU data out this morning will provide intraday direction. Support remains at 1.1170, with resistance at 1.1300.

A volatile start for GBP after initially rallying in early trading amid hopes for a new fiscal stimulus program from the government which failed to impress investors. The UK PM said that he will double-down on investment in infrastructure, tech and education ahead of a more detailed speech Tuesday. Fears of a 2nd wave after a spike in new cases in the city of Leicester is putting some pressure on GBP. Brexit – round 5 – starts today, the talks have been labeled as “intense”, however recent comments suggest a breakthrough is unlikely. Expect GBP to remain under pressure with minor support at 1.2290, with potential of further weakness to 1.2070 and resistance at 1.2415.