Archives of “July 27, 2020” day

rss

US treasury auctions off $49 billion of 5 year notes at 0.288%

  
  Analysis
#  #  #

WI at auction time was at 0.281%

  • High yield 0.288%
  • Bid to cover 2.32 xvs. six-month average of 2.49x
  • Dealers 29.55%vs. six-month average of 27.2%
  • Directs 12.3% vs. six-month average of 14.7%
  • Indirects 58.1% vs. six-month average of 51.9%
  • Tail 0.7 basis points
The $49 billion of 5 year note auction came in at 0.288%. That was 0.7 basis points above the WI auction level of 0.281%.
The bid to cover was lower than the six-month average. Dealers were saddled with more than the six-month average. Overall the auction is a C-.

Not a good look as USD/JPY nears 100 pip loss

  
Analysis, Forex
#  #  #  #  #  #  #

USD/JPY wilts even as risk trades rise

The old correlation between the S&P 500 and USD/JPY is dead. Stocks have climbed in the past 20 minutes and the pair is at the lows of the day.
More importantly, the technical pictures is melting as the pair falls below the May low once again. It would take a miracle turnaround to finish back above 106.00 today. With the break lower, there isn’t much to halt a decline to the 2020 lows.
USD/JPY wilts even as risk trades rise

The euro is off and running. Levels to watch

  
Analysis, Forex
#  #  #  #  #  #

EUR/USD up 92 pips today

The euro cracked 1.17 in Asia and has continued to run higher, hitting 1.1764 as New York arrived before pulling back to 1.1747 at the moment. Today’s durable goods orders report hasn’t been a factor.
The impetus for the seven-day run in the euro was a successful European recovery fund negotiation. At the same time, the US is struggling with COVID-19 and European economies are closer to normalcy with virus counts low (although some hotspots are appearing).
Overbought indicators are obviously flashing warning signs for the euro but there is still a lot to like. 1.17 isn’t particularly high and assets in Europe are still relatively cheap. Carry is dead almost everywhere so that’s not going to be a big drag.
I’ll keep it simple on the technicals and highlight the June and Sept 2018 highs at 1.1852 and 1.1815 as resistance. I like the euro against the US dollar but the risk-reward at the moment is mediocre.
EUR/USD up 92 pips today

Cable pushes to near five-month highs as dollar stays weaker on the day

  
Analysis, Forex

GBP/USD climbs to a fresh session high of 1.2869

GBP/USD D1 27-07

The dollar is slipping further on the session now as we see the likes of EUR/USD approach 1.1730 and USD/JPY fall to a low of 107.25. Adding to that, cable is also extending gains to fresh highs on the session of 1.2869.
That’s the highest level since early March and puts the pair near five-month highs now.
The push above the 200-day moving average from last week now puts a lot of focus back on the bigger picture in cable and that is more clearly outlined by the weekly chart.
On the close last week, buyers managed to push above the 100-week MA (red line) and that hints at more bullish technical momentum but further resistance is seen from the 200-week MA (blue line) @ 1.2907 upon a break of the June high @ 1.2813.
That will be a key level to watch as the dollar continues to weaken, thus underpinning the pair into the closing stages of the month. Further out, the trendline resistance stretching back all the way to 2015 is also a key upside level to be mindful about.
That comes in at 1.3128 for now so baby steps. The 200-week MA will be the first key point of contention before the 1.3000 handle, and then the focus turns to that.
As for sellers, keeping price under the 200-week MA and looking for a push back under the 100-week MA @ 1.2746 will be key. But searching for a break back below 1.2800 will be the first key step for any further potential retracement in the near-term.

The never ending QE story

  
  Analysis
#  #  #  #  #  #

Via Bloomberg

Via Bloomberg  
I came across an interesting Bloomberg piece when the Market’s Live team published a piece on the Market’s Live blog making a case for QE continuing indefinitely.  The rationale for the view is that the world’s major banks are not buying debt quickly enough leaving  ~$1 trillion of new sovereign bonds for buyers in the months ahead. This mean that the Fed, ECB and BoE will need to increase the pace of purchases in order to maintain the present low bond yield levels.
The devilish deal means that huge COVID-19 support packages is met with a seemingly virtually unlimited amount of bond purchases to keep borrowing costs down.
The Market’s Live team make a greta point. There is no way to go back now we have started down this QE road. Many people now who take mortgages will have no memory of high interest rates and how crippling they can be. Many new mortgages will be based on these ultra low rates which means that the central banks must keep adding to their QE programs and keep the borrowing costs down. Failure to do so will just cripple an economy now that is dependent on low borrowing costs
Gold and silver set to shine
This environment is perfect for both gold and silver to shine in. With central banks committed to do ‘whatever it takes’ to cushion the COVID-19 blow and low yields for the medium term future expect the precious metals to keep moving higher and look for pullbacks for buying.
$1855 looks like an area where we can expect pullback buyers in gold and $21 an area to expect pullback buyers in silver.

Nikkei 225 closes lower by 0.16% at 22,715.85

  
Analysis, Global Indices

Little change in the Nikkei after the 4-day weekend

Nikkei 27-07

That said, Japanese stocks did recover from an early setback today so that is a positive takeaway for risk buyers when looking at the overall mood.

The Hang Seng is down by 0.4% amid the virus situation in Hong Kong – local infections hit another record high over the weekend – which is likely to prompt the city to ban dine-in services at restaurants to curb the spread of infections.
Meanwhile, the Shanghai Composite is up by 0.1% as Chinese equities are keeping a little firmer. Elsewhere, US futures are seen up by 0.4% currently.
In the currencies space, this is feeding into a weaker dollar as the trend continues from the end of last week. USD/JPY is holding a break under 106.00 while EUR/USD is looking perky as it trades slightly above 1.1700 for the time being.

Trade ideas thread – European session 27 July 2020

  
  Analysis

Daily thread to exchange ideas and to share your thoughts

It is one-way traffic in trading to start the week with the dollar being battered across the board, while gold and silver are continuing their hot streak into the new week.

WCRS 27-07
With USD/JPY breaking under 106.00 and EUR/USD threatening a further run above 1.1700, the greenback is in a really tough spot as we get things going in European trading today.
That said, given the market situation, unless we start to see a return of crisis-level fears, it is tough to imagine the dollar producing a stirring turnaround for now.
Granted the moves – especially in EUR/USD – may be a little stretched but this market loves to run with narratives for as long as it sounds good. US futures keeping a little higher after a setback on Friday isn’t really helping the dollar either.
Elsewhere, gold is now trading at fresh record highs and the sky is the limit for bullion in the long-term. As for silver, another 6% jump today sees price move above $24 and that starts to bring the focus towards the August 2013 high @ $25.11 next.
Fundamentally, both still has excellent prospects as long-term investments but the fear is that the recent run may be one that is a little “too far, too fast” and may see a sharp/violent pullback down the road before investors build positions further.
What are your views on the market right now? Share your thoughts/ideas with the ForexLive community here.

Coronavirus situation across Europe; what is happening?

  
  Analysis
#  #  #  #  #  #  #  #

Some updates to the virus situation across Europe recently warning by Saxony state premier UK imposing a 14-days quarantine for travelers from Spain The country recorded a rise of 340 new cases today, a more modest figure but could be skewed due to the ‘weekend effect’. This compares to the slight jump of 816 and 784 new virus cases seen on 24 and 25 July respectively.The rise comes amid localised outbreaks, with a farm in Bavaria seeing more than 500 people quarantined after 174 workers were tested positive for the virus.RKI estimates the 4-day virus reproduction rate to be at 1.22 and the 7-day average to be 1.16 as of yesterday; keeping above the threshold of 1.00.There have been concerns about the rising cases across the country, with the virus reproduction rate keeping above 1.00 threshold (it was 1.3 on Saturday) while daily new infections rose by 1,130 on last Friday.On the latter, that has seen the 7-day average in terms of cases rise above 1,000 for the first time since early June.Local authorities are warning about complacency but besides , they are maintaining their course to keep the economy running.

The situation in Italy appears relatively ‘under control’ with 275 new cases reported in the past day. Regional governments are continuing to stay prudent by reinforcing the need to wear masks in public spaces so that is encouraging.The slight rise in cases in Spain is seeing countries take notice with the UK imposing a 14-day quarantine for travelers from the country, following Norway’s decision to reimpose a 10-day quarantine as well for people arriving from Spain.This comes amid a surge in cases in Catalonia but the Spanish government’s virus expert has warned that the infection is already spreading among the general community in Barcelona and Zaragoza – saying that the rate of contagion has tripled.French prime minister, Jean Castex, has also “strongly recommended” its citizens to avoid going to Catalonia (the border remains open) though the region itself announced closure of bars and nightclubs for 15 days on Friday last week.Catalonia (counted separately from Spain’s total) itself reported nearly 1,500 new cases on Saturday, as the number of new cases in the region is starting to pick up again.Despite warnings of complacency and what not, local authorities are continuing to reaffirm that these outbreaks are “localised” and have not spread out of control. The right now remains on the – or at least continuing down that path.In due time, we’ll see how this all plays out but no doubt further reopening of international borders are going to be extremely tricky.The positive takeaway is that the death rate in most places isn’t as high as when the initial outbreak began but as infection numbers rise, there could be a delayed effect on that as medical capacity also starts to be burdened even more.

Go to top