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Tokyo reportedly finds 266 new coronavirus cases in latest update today

  
  Analysis
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NHK reports on the latest virus situation in the Japanese capital

That just reaffirms the narrative that the low count from yesterday was largely skewed by the ‘weekend effect’ and the fact that there was a long weekend in Japan.

The virus trajectory in Japan has not been encouraging since the start of the month, with the spread of infections already surpassing that seen during the initial outbreak. As of yesterday, Japan has recorded over 8,000 active cases – the most since early May.

Japan
For now, the government is still maintaining that the situation does not call for any extraordinary measures to curb the spread of infections but let’s see how long they can keep at this with the Olympics next year a key focus as well.

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

Apple reportedly delays launch event for new 5G iPhone

  
  Analysis
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This according to a New York Post article

the New York Post is out with an article saying that “Apple is reportedly delaying a fall launch event for its next batch of iPhones to the later half of October”.

Apple is now on track to releases 5G iPhone just-in-time for the holiday season. This according to Japanese Apple blog Mac Otakara.
Apple shares are down about $10.55 or 2.71% on the day to $378.50. It’s high price reached $399.81 few days ago – just short of the magical $400 a share.  Apple is expected to announce earnings on Thursday, July 30 after the close. That will be the same day that Amazon releases their earnings.
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European indices end the session lower on the day

  
Analysis, Global Indices
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German DAX, -0.54%, UK’s FTSE 100 -0.96%

The major European indices are ending the day lower. The provisional closes are showing:

  • German DAX, -0.54%
  • France’s CAC, -1.28%
  • UK’s FTSE 100, -0.96%
  • Spain’s Ibex, -1.42%
  • Italy’s FTSE MIB, -0.74%
The 10 year yields showed meaningful moves to the downside. Italian yields fell the most at -5.7 basis points. German yields declined by -3.3 basis points
European yields are lowerIn other markets as London/European traders look to exit:
  • spot gold continues its move to the upside with a gain of $19.60 or 1.07% at $1861.50. Sobers doing even better with a $1.09 gain or 5.13% to $22.39.
  • WTI crude oil futures for September delivery are down $0.57 or -1.36% at $41.35. Inventory data confirmed the private data with a build of 4.892M barrels. The expectations was for a -2.2M draw.
In the US stock market the major indices are mixed:
  • S&P index is up 4.9 points or 0.15% at 3262.69
  • NASDAQ index is down -1 point or -0.1% at 10679.30
  • Dow industrial average is up 82 points or 0.31% at 26923.
In the forex market, the EUR is the strongest while the JPY is the weakest of the majors. The US dollar is down vs. all the major currencies with the exception of the JPY. It is near unchanged vs. the GBP and has recovered losses of around 90 basis points at the London morning session lows.

USD facing more questions about its status as the primary reserve currency

  
Analysis, Forex
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Here is an item on the US dollar from Bloomberg that may be of interest.

It cites analysts from Credit Agricole and Mizuho
  • USD accounts for more than 60% of global reserves
  • the most widely used currency for international transactions
  • But it risks ceding ground to the euro after European Union leaders agreed on a 750 billion euro stimulus package that enhances the appeal of the shared currency and euro-denominated assets
CA say that the recovery fund will facilitate diversification out of the US dollar
offering liquid, high-rating, euro-denominated debt
Here is an item on the US dollar from Bloomberg that may be of interest.
I’d not be getting too gung-ho on this, and note that the analysts say ‘risks ceding ground’, they are not writing off the dollar.

GOP leaders said to meet at White House later today to discuss next coronavirus bill

  
  Analysis
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FOX News reporter, Chad Pergram, reaffirms the earlier story

Senate majority leader, Mitch McConnell, and House GOP leader, Kevin McCarthy, will be headed to the White House later to discuss the next stimulus bill with Trump and Mnuchin. This adds to the story from earlier in the day here.

 

US
The end of the month is going to be an interesting time, as the US approaches a fiscal cliff with stimulus money set to run out in the coming weeks/months.
Amid a surge in virus cases and the likelihood of the economy facing more dire consequences – not to mention election uncertainty, it will be interesting to see if the market can hold up in the way that it has over the past few months. A neat summary by Bloomberg:
US virus

What to look out for in the week ahead?

  
Analysis, Forex
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As we turn to UK/EU trade moves in FX markets been a rather quiet affair despite the EU Summit having given us little to work with.

I have no firm intel on when we get full confirmation and the outcome but we’re now heading into the fourth day of the marathon talks, but at this point it appears we’re getting closer to a deal, with the level of grants the key sticking point and rumoured to be around E390b.

EUR implied volatility (vol) has been rising of late, as we can see this in the weekly implied volatility scan, with EURUSD 1-week vol pushing into the 32nd percentile of the 12-month range.

This puts EURUSD in an expected range this week of 1.1523 to 1.1303, with a 68% level of confidence. Once again last weeks implied move/range offered a solid guide for mean reversion traders, or those just looking to manage risk more effectively.

(Weekly vol matrix – snapshot from Friday’s close)

PS2
Traders were net buyers of the single currency on Friday into the EU Council meeting, with EURUSD testing 1.1447 – a level I’ve marked as core to markets – a weekly close through here could hold huge implications for global markets and take the USDX through 95.78.

EURGBP is also getting some good interest, with price having pushed into 0.9134 before finding good supply – I have this on this cross on the radar as the buyers are back in control here and we have Fridays high in our sights. A break of 0.134 would be clearly bullish.

Options traders extremely neutral on gold moves

Gold is on the radar too, with the USD firmly at the centre of the thought-process today.

Moves today should be sanguine, and if I look at the options markets I see 1-week implied volatility falling to a 7 vol discount to 1-year vol – the lowest since 2013 – showing a belief that near-term moves in gold will be incredibly subdued and a grind. I also see 1-week risk reversals at 0.56, and 1-month risk reversals at 1.015 – effectively, the options markets is about as neutral on the metal as I have seen in some time – a move through 1813, and into new cycle highs, possibly changes that dynamic and see traders looking for a more explosive move in price.

PS3

Still upbeat on equities but fiscal debates offer new challenges

On the index side, the weekly chart of US500 looks constructive, and despite earnings season ramping up this week, the feel the technical side is suggestive of further upside. The risk for the market this week is on the fiscal side and equities could be sensitive to the news flow and one suspects it will not be smooth sailing.

Staying in the vol space and we see equity vol headed lower, with the cash VIX -2.3 vols on Friday and into 25.68% – closing below its 200-day MA, which is something it failed to do throughout the various tests in June. Our VIX index tracks the VIX futures and is approaching the June lows – one to watch as lower equity vol is saying we’re moving into the US summer doldrums and is having an effect in FX markets. (more…)

European shares end the session mixed

  
Analysis, Global Indices
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France and Spain indices move lower

The European shares are ending the session with mixed results. France and Spain indices are lower. Germany, UK, Italy are trading higher.

The provisional closes are showing:
  • Germany Dax, +0.44%
  • France CAC, -0.36%
  • UK FTSE 100, +0.6%
  • Spain’s Ibex, -0.34%
  • Italy’s FTSE MIB, +0.2%
For the week, the indices closed higher:
  • German DAX, +2.3%
  • France’s CAC, +1.9%
  • UK’s FTSE 100, +3.15%
  • Spain’s Ibex, +1.8%
  • Italy’s FTSE MIB, +3.1%
In the European debt market, the benchmark 10 year yields are mostly and modestly higher. The exception is the Italian 10 year which is trading down -1.5 basis points.
European debt market
In other markets as European/London traders look toward the exits for the week:
  • spot gold is trading at $13.50 or 0.75% $1810.70. The high price extended to $1811.11 the low has reached $1795.96
  • WTI crude oil futures are trading down $0.27 or -0.66% of $40.48. The high for the August contract reached $40.90 while the low extended to $40.02. The September contract is currently trading down $0.27 or 0.66% at $40.66
In  the US equity market, the major indices are trading mixed. The Dow industrial average is down on the day while the S&P and NASDAQ index are currently trading in the black
  • S&P index is up 3.25 points or 0.10% at 3218.81
  • NASDAQ index is up 11.5 points or 0.11% at 10,485.25
  • Dow industrial average is trading down 43.12 points or -0.16% at 26691.40
In the US debt market the yields are trading near unchanged across the curve:
  • 2 year 0.143, -0.2 basis points
  • 5 year 0.278%, +0.3 basis points
  • 10 year 0.618%, +0.1 basis point
  • 30 year 1.314%, +0.6 basis points
A look at the strongest and weakest currencies at the close of the London session shows the CHF is the strongest and the GBP is the weakest.  The US dollar is mostly lower.

Global recovery unlikely to be v-shaped, says Shell chief

  
Analysis, Crude
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The head of Shell spoke in an online interview, in a nutshell said that there will be no V-shaped recovery for the global economy after the coronavirus epidemic

  • this will  curtail oil and gas demand for years to come
Ben van Beurden, Chief Executive of Royal Dutch Shell:
  • “Energy demand, and certainty mobility demand, will be lower even when this crisis is more or less behind us. Will it mean that it will never recover? It is probably too early to say, but it will have a permanent knock for years”
  • “It is most likely not going to be a v-shaped recovery.”
  • Shell & others have had to reduce spending sharply, postpone investment and will continue to do so “for some time to come”
via Reuters
The head of Shell spoke in an online interview, in a nutshell said that there will be no V-shaped recovery for the global economy after the coronavirus epidemic
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