Tuesday July 14th, 2020

US$ buyers reemerge as California and other US states announce new lockdown restrictions in a bid to tackle rising covid-19 cases. Equity and oil markets start the day lower on virus concerns and China posts better than expected trade data. Positive trade data out of China as it posts its first import growth (0.5% forecast -1.5%) since the start of the pandemic and June exports also rose (+2.7% vs forecast -10%). Sino/US tensions continue as the US State dept rejected China’s territorial claims to the south china sea, the US President said he is not thinking about “Phase-2” trade negotiations and the White house administration to end audit deal underpinning Chinese listings in the US. Today, the US CPI data out this morning will provide initial intraday direction, but Covid-19 updates will remain the primary market driver.

Oil prices slip on growing lockdown restrictions in several US states impacting fuel demand and as OPEC+ prepare to increase output from August. On a positive note China’s June oil imports have hit both daily & monthly highs. C$ continues to edge weaker on falling oil prices, US/CAN boarders remaining closed and the prospect that its largest trading partner could re-enter tighter lockdowns again. Bias remains to buy US$ dips. Support 1.3560, with minor resistance 1.3640 then 1.3690 (Jun30th), if breached look to test 1.3800 (Jun1st).

Euro continues to edge higher as US$ eased ahead of US CPI data release this morning. Disappointing Industrial production numbers out of the EU and weaker ZEW survey–Economic Sentiment put pressure on the Euro and stalling its advance. Markets remain optimistic for an EU fiscal stimulus plan as Germany applies pressure to EU leaders for acceptance. Intraday US CPI data and covid-19 updates will dictate intraday direction. Support holds at 1.1260 with resistance sits 1.1403 (Jun 11 high), if breached next 1.1492 (2020 highs)

GBP came under sustained selling amid a weaker-than-expected UK monthly GDP report, causing the pound to fall to a one-week low vs US$. Brexit still an anchor on GBP with ongoing negotiations failing to produce any tangible solutions and the prospect of a hard-Brexit becoming more realistic. We continue to expect further GBP weakness, a break of 1.2460 could see a retest of 1.2250 (Jun29) with resistance lower to 1.2560.