Archives of “August 13, 2020” day

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US treasury to auction off $25 billion of 20 year bonds next week

  
  Analysis
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Expectations were for a $23 billion auction

As the treasury auctions continue at an increasing pace, the US treasury has a announced that they will auction off $25 billion of 20 year bonds next week. That was higher than the 23 billion expected.

Later today the treasury will complete their refunding for the week with the sale of $26 billion of 30 year bonds. The auction will take place at 1 PM ET.  The current WI yield is trading at 1.375%

Dollar reverses its course

  
  Analysis
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Seeing some dollar buying all of the sudden

The dollar has reversed back higher in the last 30 minutes of trading.
Seeing some dollar buying all of the sudden
The EURUSD is back down testing the trend line on the 5 minute chart. The 100 bar MA on the same chart has been broken, but the trend line continues to hold the support.
GBPUSD
The GBPUSD has moved down to test its 100 bar MA on the 5 minute at 1.30904 but is finding some support as well. It will take a move below to swing more of the bias back to the downside.

US weekly initial jobless claims 963K vs 1100K expected

  
  Analysis
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Claims fall below 1 million

weekly initial jobless claims
  • Prior was 1186K (revised to 1191K)
  • Continuing claims 15486K vs 15800K expected
  • Prior continuing claims 16090K
  • PUA claims 489K vs 656K prior
  • Full report
The total number of people claiming benefits for all programs was 28,257,995, down 3065K from the prior week.
This was the first time initial jobless claims were below 1 million in 21 weeks.

Trump: Dollar will be even stronger if I am reelected

  
  Analysis

Further comments by Trump

Further comments by Trump

  • Says he made the US dollar strong and the dollar will be stronger in his second-term
It is funny how he has come around on the dollar policy after having complained about the Fed and the ‘strong’ dollar up until May this year. But as we look towards the election phase, it is all about public opinion and boasting, if you will.
This is another case in point and he surely knows that given the circumstances at the Fed, it is hard to justify a stronger dollar so long as markets are keeping calmer as well.

IEA cuts oil demand forecasts as over gloomy outlook on global travel

  
Analysis, Crude

IEA cuts its forecast for global oil demand as air travel suffers more than expected from the ongoing virus crisis

Oil
  • 2020 global oil demand cut from 92.1 mil bpd to 91.9 mil bpd
  • 2021 global oil demand cut from 97.4 mil bpd to 97.1 mil bpd
  • Says global oil supply to fall by 7.1 mil bpd in 2020
  • Says global oil supply to rise by 1.6 mil bpd in 2021
The agency reduces oil demand estimates for almost every quarter through the end of 2021, with 2H 2020 seeing the steepest downgrades.
Adding that this is due to air travel suffering, being two-thirds lower than last year in July – a peak month due to the summer holiday, according to the agency’s estimates.

The outlook for jet fuel demand has worsened in recent weeks as the coronavirus has spread more widely. It remains unclear if the new coronavirus cases herald a second wave or are simply a regular fluctuation…

Demand uncertainty, possibility of higher output renders market re-balancing delicate.

That said, they do note that the compensation for earlier OPEC+ over-production could help to keep world supply steady this month.
But the key takeaway for oil in the bigger picture is that as long as the world doesn’t get back to normal any time soon, it increases the risks of the market staying oversupplied.

Trade the strong against the weak

  
Analysis, Forex
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NZD

One of the key trading maxims in the FX world is pairing strength against weakness.If you need a refresher on that concept please do check that out here. So, yesterday we had the RBNZ rate meeting which has given us a weak NZD bias. Going into the event a client was asking me what I was going to do before the RBNZ rate meeting. The answer was simple, wait. Waiting to for the central bank to show its hand. The RBNZ has now done that and that is what gives us a bearish bias.

Reasons for the RBNZ’s weakness

The RBNZ has launched a set of bearish policies extending its asset purchases programme and showing openness to negative interest rates. They increased their quantitative easing (LSAP) programme to $100bn and extended its length from 12 to 22 months. Furthermore, the RBNZ expressed a preference for a lower or negative OCR and a ‘Funding for Lending Programme’, while leaving all options on the table.

So, we now have a short to medium term NZD bearish bias, look to pair it with currencies as they show strength. Yesterday’s strong AUD employment data make AUDNZD longs appealing on pull backs.

NZD

Nikkei 225 closes higher by 1.78% at 23,249.61

  
Analysis, Global Indices

Asian equities mostly better on the day

Nikkei 13-08

This follows the more positive mood from Wall Street overnight, as the market keeps calmer for the most part to start the new day as well. The Hang Seng is down a little by 0.1% but the Shanghai Composite is up by 0.3% currently.

Elsewhere, US futures are down ~0.1% but keeping closer to flat levels for the most part – giving little hints of a risk tilt to kick start the session.
In the currencies space, the dollar is keeping weaker across the board with EUR/USD rising to to 1.1825 – back above both key hourly moving averages. Meanwhile, AUD/USD is also holding above both its key hourly moving averages at 0.7170 but off earlier highs.

German Ifo institute says companies expect business situation to return to normal in 11 months

  
Analysis, Economy

Ifo remarks based on their latest survey of businesses in the month of July

Germany
The survey shows that German firms are expecting business to return to normal in an average of 11 months with services sector companies expecting things to normalise in 11.7 months while manufacturing sector firms expect it in 10.1 months.
If ‘normal’ means a return to pre-virus conditions, I reckon that may be a little too optimistic for the time being. Just be mindful that considering the current virus situation, global travel will at least be dead until 1H 2021 at the very least.
That in turn will feed to lower demand conditions – especially for the services sector – and as more businesses are impacted, it will also lead to sluggish labour market conditions i.e. weaker consumer purchasing power and eventually hurt other sectors as well.
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