Daily Market Outlook, May 06, 2020

<h2><span>Daily Market Outlook, May 06, 2020 </span></h2>
<p><span><strong>The Asian equity market is mostly up this morning following gains yesterday on Wall Street and in Europe</strong>. The Japanese market remains closed for the Golden Week holiday but Chinese markets have reopened. </span></p>
<p><span><strong>The oil price is little changed with Brent crude holding at a near four-week high</strong> just below $31bbl. Australian retail sales posted a lower than expected Q1 rise of 0.7%. </span></p>
<p><span><strong>In Germany factory orders fell by a larger-than-expected 15.6% in March.</strong> </span></p>
<p><span><strong>US President Trump has said that it is time to reopen businesses even if some people are “badly affected”</strong>. In the UK, PM Johnson’s speech, when he will set out the next stages of the government’s plans for handling the Covid-19 pandemic, is keenly awaited.</span></p>
<p><span><strong>Germany’s constitutional court outlined some red flags with regards to the ECB’s existing asset purchase programmes</strong> and directed that the ECB could continue but needed to carry out a “proportionality assessment” within the next three months. This will need to show that the ECB is buying government bonds consistent with the “capital key” (reflecting each country’s share in population and GDP) and isn’t straying into monetary financing of governments. The ruling sets the scene for a legal challenge against the ECB’s new €750b pandemic emergency purchase programme, which has even looser limits than previous asset purchase programmes. It doesn’t change the fact that euro area governments need to show some unity and step up with a fiscal recovery plan to support the economy, taking the pressure off ECB policy.</span></p>
<p><span><strong>The Eurozone services PMI for April is a final release that is not expected to be revised from its first estimate</strong> (which was also an all-time low). There will also be April data for countries such as Italy and Spain who don’t publish ‘flash’ readings. Meanwhile, in China April Caixin services PMI and trade data (both early Thu) will provide further indications on the strength of the rebound post lockdown. </span></p>
<p><span><strong>In the US, the ADP employment report for April will provide an early gauge of Friday’s official labour market data.</strong> It is expected to show a huge fall in employment during the month. </span></p>
<p><span><strong>The Bank of England’s Monetary Policy Committee will release a policy update tomorrow at the unusually early time of 7am.</strong> This will include its latest Monetary Policy Report followed by a briefing (at 10am). Market watchers think that they will probably leave policy unchanged for now. There have been suggestions that they may make some adjustments to their asset purchases. However, the recent relative stability of markets weakens the case for adding to these, while it may be seen as premature to start tapering purchases. At the present rate of transactions the MPC still has until July to make a decision on any adjustment. Whatever the outcome a key message is likely to be that the Bank stands ready to offer more support to the economy if needed. The BoE faces a tricky task in conveying the current uncertainties in the MPR and so may present a range of scenarios rather than a single forecast.</span></p>
<h3><b>Today’s Options Expiries</b><span> for 10AM New York Cut (notable size in bold)</span></h3>
<ul>
<li><span>EURUSD: 1.0800 (210M), 1.0825-30 (400M), 1.0860 (520M) 1.0890-1.0900 (650M), 1.0940-50 (572M)</span></li>
<li><span>USDJPY: 106.60 (334M), 107.30 (225M), 107.50 (320M)</span></li>
<li><span>GBPUSD: 1.2325 (250M), 1.2350 (200M), 1.2400 (326M), 1.2700 (264M)</span></li>
</ul>
<h3><span>Technical &amp; Trade Views</span></h3>
<p><b>EURUSD Bias: Neutral within 1.09/1.09 range</b></p>
<p><span> From a technical and trading perspective, 1.09 remains pivotal for the achievement of the interim (1.1050) and primary (1.1240) upside objectives. As prices test the interim objective we could see profit taking pullback to retest support back to 1.09/1.0850 but as this area attracts bids we can see a base develop for another run towards 1.1240. A daily closing breach of 1.0850 would be detrimental to the bullis thesis opening 1.0730 again UPDATE DTCC data shows massive EUR 5-billion EURUSD option expiries Thursday. They are evenly split between 1.0800-10, and 1.0875-1.0900 Expiry is 10-am NY cut Thursday. On Friday 1-bln 1.0850, 2-bln 1.0885-1.0910 Without a renewed catalyst – expiries can help define 1.08-1.09 range.</span></p>
<p><img class="aligncenter size-full wp-image-42979" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.15.02.png" alt="" width="2209" height="1237" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.15.02.png 2209w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.15.02-300×168.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.15.02-1024×573.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.15.02-768×430.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.15.02-1536×860.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.15.02-2048×1147.png 2048w" sizes="(max-width: 2209px) 100vw, 2209px" /></p>
<p><b>GBPUSD Bias: Bullish above 1.2350 targeting 1.28)</b></p>
<p><span>GBPUSD From a technical and trading perspective,the bullish thesis is under pressure and a close today below 1.2440 would flip the daily chart bearish and open a deeper decline to retest the range base back at 1.2160. UPDATE Daily chart has flipped bearish price continues to rotate around the Daily VWAP, bulls need a move back through 1.25 to encourage the bullish bias continuation, failure to achieve this opens a deeper declining to test the range base back to 1.2350 before higher again</span></p>
<p><img class="aligncenter size-full wp-image-42978" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.16.16.png" alt="" width="2205" height="1239" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.16.16.png 2205w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.16.16-300×169.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.16.16-1024×575.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.16.16-768×432.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.16.16-1536×863.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.16.16-2048×1151.png 2048w" sizes="(max-width: 2205px) 100vw, 2205px" /></p>
<p><b>USDJPY Bias: Bearish below 107.50 targeting 1.0465)</b></p>
<p><span>USDJPY From a technical and trading perspective, range contraction persists,albeit with a downside bias, a breach of 106.80 should inject downside momentum. A topside breach of 108 would delay donside objectives opening a retest of range resistance above 109 before lower again</span></p>
<p><img class="aligncenter size-full wp-image-42980" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.17.10.png" alt="" width="2206" height="1239" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.17.10.png 2206w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.17.10-300×168.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.17.10-1024×575.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.17.10-768×431.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.17.10-1536×863.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.17.10-2048×1150.png 2048w" sizes="(max-width: 2206px) 100vw, 2206px" /></p>
<p><b>AUDUSD Bias: Bullish above .6330 targeting .6700)</b></p>
<p><span>AUDUSD From a technical and trading perspective, the decline back though .6450 concerns the bullish bias, a breach of .6350 would suggest a more meaningful top is in place opening a deeper decline to test support back towards .6150 before another base attempt. On the day a close back through .6500 will be needed to re-engage bullish spirits UPDATE price testing pivotal .6450/70 area if sufficient supply is seen here look for another leg lower to test trend support back to .6330 UPDATE as .6520 contains upside attempts .6330 should be see before another attempt to base and make another run towards the .6700 primary upside objective</span></p>
<p><img class="aligncenter size-full wp-image-42981" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.20.35.png" alt="" width="2211" height="1241" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.20.35.png 2211w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.20.35-300×168.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.20.35-1024×575.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.20.35-768×431.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.20.35-1536×862.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-06-08.20.35-2048×1150.png 2048w" sizes="(max-width: 2211px) 100vw, 2211px" /></p>
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