Tuesday July 21st, 2020

Global markets extended their gains on vaccine hopes and stimulus news from the US and EU. A positive immune response from the Oxford university vaccine and other vaccine projects are also underway providing confidence to investors. The EU have reached an agreement on the Eur 750 bln coronavirus recovery fund and the US is working on a US$ 1 trillion coronavirus relief bill. The markets responded positively to the news with equity, gold and oil markets rallying alongside trade & petro related currencies. Balancing out the positive news is the still rising coronavirus cases which may unhinge the current rally with the reality that a vaccine is still over 6 months away. US$ Index rebounded from its overnight lows and with no US economic data today markets will focus back on coronavirus updates for intraday direction. 

Oil prices rallied +2% on vaccine and stimulus news lifting the prospect for fuel demand and oil is on track for its biggest % rally since June. C$ rallied alongside oil prices and also on the news that Ontario will enter into phase 3 of its covid-19 reopening on Friday. We have seen similar rallies on positive vaccine news only to watch the markets sell off as the euphoria fades. Today watch for Cad Retails Sales & New Housing price index data for direction. There are several key support levels 1.3480 (Jun 23rd), if breached cleanly we could see 1.3395 (June 11th) tested. Resistance lowers to 1.3585.

Eur fails to extend through the key 1.1492 level and is holding around the 1.1450 level vs US$. After a mammoth effort at the EU summit, the leaders were able to agree on the Eur 750 bln recovery fund. With the agreement in place and the stability of covid-19 across Europe and positive vaccine news, places euro in a strong position to rally further. No Key economic data out, expect investors to monitor US covid situation for intraday direction. Support at 1.1350 with resistance at 1.1492 (2020 highs)

Quite a significant rally for GBP as it breached 1.2670 a triple top and is technically capable of extending to 1.2815 next. The positive result of the University of Oxford & AstraZeneca ongoing vaccine trials making all the headlines, with one newspapers headline saying “vaccine by Christmas” and giving GBP a major boost. Still weighing on the pound is the rising Sino/UK tensions and ongoing Brexit talks. Support initially sets at 1.2670, below that 1.2595 and resistance at 1.2815.