Daily Market Outlook, May 11, 2020
<h2><span>Daily Market Outlook, May 11, 2020 </span></h2>
<p><b>There is a positive tone to market risk sentiment at the start of the week with most Asian equity indices higher.</b><span> Sentiment has been supported by the People’s Bank of China’s pledge yesterday to use “more powerful” policies to combat the economic challenges presented by the coronavirus pandemic. </span></p>
<p><b>UK PM Johnson yesterday announced a three-stage plan and a Covid-19 alert system that will govern the easing of lockdown restrictions in the UK</b><span>. These included the “first careful steps” to easing lockdown rules, and allowed for unlimited leisure time, while those who could not work from home were offered the opportunity to return to their normal place of work. PM Johnson is expected to present to Parliament further details of the UK government’s roadmap to easing current lockdown restrictions in a 50-page document today. </span></p>
<p><b>More broadly, however, there remains a degree of optimism in the financial markets that the gradual reopening of economies will result in a recovery in the global economy in the second half of the year. </b></p>
<p><b>The Bank of England is predicting about a 30% plunge in UK GDP in H1</b><span>, but its central scenario sees activity picking up “fairly rapidly” in H2 as social distancing restrictions are gradually lifted. The Bank said last week, however, that the outlook is “unusually uncertain”, especially relating to the virus and the potential long-term ‘scarring’ effects of the current lockdown measures on the economy. </span></p>
<p><b>The UK and Germany will be reporting Q1 GDP figures this week,</b><span> which will provide some insight into the early effects that both economies experienced as they went into lockdown in March. For today, March industrial production data for Italy will be released at 09:00 BST. Sharp declines in industrial activity have already been registered across a number of other eurozone economies in March, including Germany (-9.2%), Spain (-11.9%) and France (-16.2%).However, with restrictions being imposed across a number of regions of Italy much earlier than other countries – some as early as 21st February – the effects are likely to be felt more acutely. </span></p>
<p><b>Elsewhere, it is a relatively quiet day with only a speech by US Fed member Bostic of note.</b><span> Speaking last week, ahead of the April US payrolls report (which showed a 20.5mn fall in employment), he said he was hopeful that the Fed’s emergency measures in combination with fiscal support would reduce the likelihood of a lengthy, protracted downturn.</span></p>
<p><b>Sino-US issues should not be too far off investors’ mind this week</b><span>, especially with Trump providing contrasting soundbites to Lighthizer/Mnuchin. However, with no outright breaking down of the relationship yet, that may just be enough to keep risk-on sentiment going. </span></p>
<p><b>Looking at CFTC data up till last Tuesday</b><span>, short term players like the noncommercial (reduced their net implied USD shorts) and leveraged accounts (increased their net implied USD longs) moved in favour of the broad USD. Asset managers also reduced their net implied USD shorts. Investment communities were in fact edging back into the USD as it moved towards its range lows. </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: </span><b>1.0800-10 (1BLN), 1.0850 (1BLN)</b><span>, 1.0885-90 (500M), 1.0900-05 (425M)</span></li>
<li><span>GBPUSD: 1.2270 (300M). AUD/USD: 0.6500 (400M), 0.6550 (210M)</span></li>
<li><span>USDJPY: 105.95-106.00 (500M), 106.25 (410M), 106.40 (511M), 106.70 (600M)</span></li>
</ul>
<h3><span>Technical & Trade Views</span></h3>
<p><b>EURUSD Bias: Bullish above 1.08 targeting 1.1050</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. Last week’s defense of the ascending trendline support has renewed bullish spirits. As last week’s lows remain intact on a closing basis then bulls will seek to test offers and stops to 1.10 as the initial upside objective this week</span></p>
<p><img class="aligncenter size-full wp-image-43209" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.01.09.png" alt="" width="2206" height="1245" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.01.09.png 2206w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.01.09-300×169.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.01.09-1024×578.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.01.09-768×433.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.01.09-1536×867.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.01.09-2048×1156.png 2048w" sizes="(max-width: 2206px) 100vw, 2206px" /></p>
<p><b>GBPUSD Bias: Bullish above 1.2350 targeting 1.28)</b></p>
<p><span>GBPUSD From a technical and trading perspective, bids emerged last week at the range support as the trendline Fridays close flipped the daily chart bullish as per the near term volume weighted average price. As 1.2390 supports look for a close above 1.25 to encourage the bullish bias to retest range resistance towards 1.26</span></p>
<p><img class="aligncenter size-full wp-image-43210" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.04.51.png" alt="" width="2205" height="1240" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.04.51.png 2205w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.04.51-300×169.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.04.51-1024×576.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.04.51-768×432.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.04.51-1536×864.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.04.51-2048×1152.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 downside objectives opening a retest of range resistance above 109 before lower again</span></p>
<p><img class="aligncenter size-full wp-image-43211" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.06.24.png" alt="" width="2208" height="1236" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.06.24.png 2208w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.06.24-300×168.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.06.24-1024×573.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.06.24-768×430.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.06.24-1536×860.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.06.24-2048×1146.png 2048w" sizes="(max-width: 2208px) 100vw, 2208px" /></p>
<p><b>AUDUSD Bias: Bullish above .6450 targeting .6700)</b></p>
<p><span>AUDUSD From a technical and trading perspective, price testing pivotal .6568 prior cycle highs area if sufficient supply is seen here look for another leg lower to test trend support back to .6330 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-43212" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.08.56.png" alt="" width="2203" height="1234" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.08.56.png 2203w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.08.56-300×168.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.08.56-1024×574.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.08.56-768×430.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.08.56-1536×860.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-11-08.08.56-2048×1147.png 2048w" sizes="(max-width: 2203px) 100vw, 2203px" /></p>
<p> </p>
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