Archives of “July 2020” month

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

  
  Analysis
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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
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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
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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
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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.
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