Daily Market Outlook, May 28, 2020

<h2><span>Daily Market Outlook, May 28, 2020 </span></h2>
<p><span><strong>The Asian equity market was mixed overnight despite the positive close on Wall Stree</strong>t. Japan’s Nikkei continued to rise, up over 7% this week, but markets in China and Hong Kong fell again as the rhetoric between the US and China heats up. In particular, the US is considering revoking Hong Kong’s special trading status now China has approved new national security laws in the former British colony, and that would likely result in countermeasures by China. </span></p>
<p><span><strong>Fed Beige Book reported grim picture of pandemic-stricken economy</strong>: The Federal Reserve’s fourth Beige Book for 2020 reported that economic activity declined in all districts, reflecting disruptions associated with the COVID-19 pandemic. The fall in consumer spending was “especially severe in the leisure and hospitality sector, with very little activity at travel and tourism businesses”. There was also a sharp drop in manufacturing activity. Construction activity fell as well. A large number of retail tenants had deferred or missed rent payments and there was a strong demand for Paycheck Protection Program (PPP) loans. Agricultural conditions worsened. Employment fell in all districts while pricing pressures varied; weak demand weighed on selling prices as observed in discounting for apparel, hotel rooms and airfare. </span></p>
<p><span><strong>The Bank of England MPC’s Michael Saunders will speak at 11am on the economic impact of Covid-19, risks to the outlook and implications for monetary policy</strong>. Saunders was one of two MPC members that preferred a top-up to QE at the last meeting, while the current stance for the total stock of purchases at £645bn was deemed appropriate by the majority. Still, the collective view of the MPC and subsequent comments seem consistent with a likely increase in QE next month. Markets will be watching particularly closely for his view on potentially reducing interest rates below zero. Yesterday, Governor Andrew Bailey said that options such as negative rates “might be available in the future”, but that it is also important to consider the issues that they would give rise to. </span></p>
<p><span><strong>In Europe, preliminary German consumer price inflation data for May are expected to show a fall to 0.4%y/y from 0.8%y/y on the EU-harmonised measure</strong>, reflecting both lower energy prices and core inflation. The European economic sentiment index is forecast to rebound from April’s plunge to 67.0, but it will remain well below the long-term average of 100. </span></p>
<p><span><strong>There may be a risk of a downward revision to US Q1 GDP growth to -5.2% (annualised) from the advance estimate of -4.8%.</strong> Possible sharp falls of 16.8% in April durable goods orders and 15.0% in pending home sales. The latest weekly jobless claims data are expected to show unemployment still rising significantly but at a slower pace. Our forecast is for an increase of 2.0 million for the week ending 23 May following a 2.44 million rise in the prior week.</span></p>
<p><span><b><i>CitiFX Quant  Asset Rebalancing Model notes a rotation from equities into bonds at the May month end. The signal is moderately strong coming in at -1.4/+1.3 historical standard deviations (hist. std. dev.) for equities and bonds respectively.  Almost all, but LatAm equities, are likely to see outflows with US and Canada receiving the strongest signals. In bonds, UK, US and Canadian markets are set to receive inflows. The FX impact notes the selling of USD against EUR and GBP at month end.</i></b></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: 1.0930 (330M), 1.0995-1.1000 (960M), 1.1020-25 (900M) 1.1050 (300M)</span></li>
<li><span>USDJPY: </span><b>106.45-50 (1.1BLN)</b><span>, 106.95-107.00 (900M), 107.10 (370M) 107.75 (400M), </span><b>107.90 (1.8BLN)</b><span>, 108.329-33 (450M)</span></li>
<li><span>AUDUSD: 0.6600 (250M), </span><b>0.6535 (1.6BLN)</b></li>
</ul>
<h3><span>Technical &amp; Trade Views</span></h3>
<p><b>EURUSD Bias: Bullish above 1.09 targeting 1.11</b></p>
<p><span>From a technical and trading perspective, the rejection and reversal from last weeks 1.10 test has gathered momentum, the daily volume weighted average price has now flipped bearish, without a snap back rally and close back above 1.0935, price looks poised retest support back to 1.08, a failure here would be a further bearish development opening a move to test the downside equality objective at 1.0630 and the current year to date lows. UPDATE after the topside breach of triangle resistance price appears to be addressing momentum divergence, as yesterday’s highs contain the current cycle there is the potential to retest the apex of the triangle back towards 1.09 before making an attempt at the 1.11 upside objective</span></p>
<p><img class="aligncenter size-full wp-image-44328" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.31.53.png" alt="" width="2149" height="1183" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.31.53.png 2149w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.31.53-300×165.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.31.53-1024×564.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.31.53-768×423.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.31.53-1536×846.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.31.53-2048×1127.png 2048w" sizes="(max-width: 2149px) 100vw, 2149px" /></p>
<p><b>GBPUSD Bias: Bearish below 1.23 targeting 1.20 bullish above 1.23 targeting 1.25)</b></p>
<p><span>GBPUSD From a technical and trading perspective, the momentum trendline failure forewarned of the price decline through 1.23 support, as this level contains upside attempts look for a move to test the pivotal support cluster to 1.20 It is noteworthy demand has picked up for GBPUSD FX options that would allow holders to sell the pound at 1.2000 and below over coming weeks. There’s already been demand for early July downside options as concern grows over the June 30 Brexit deadline If buying interest isn’t sufficient to defend 1.2150 then bears will press for a test of the 1.20 target. UPDATE a breach of 1.23 opens a move to the equality objective at 1.24 UPDATE as 1.2360 equality objective contains upside attempts focus shifts back to the 1.20 downside objective a close through 1.24 opens 1.25 test</span></p>
<p><img class="aligncenter size-full wp-image-44329" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.33.33.png" alt="" width="2154" height="1183" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.33.33.png 2154w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.33.33-300×165.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.33.33-1024×562.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.33.33-768×422.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.33.33-1536×844.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.33.33-2048×1125.png 2048w" sizes="(max-width: 2154px) 100vw, 2154px" /></p>
<p><b>USDJPY Bias: Bearish below 108.50 targeting 1.0465)</b></p>
<p><span>USDJPY From a technical and trading perspective, as 1.0850 contains the upside drift, look for a move back through 1.07 to develop downside momentum,however, a topside breach of 108.50 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-44330" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.36.25.png" alt="" width="2154" height="1187" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.36.25.png 2154w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.36.25-300×165.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.36.25-1024×564.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.36.25-768×423.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.36.25-1536×846.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.36.25-2048×1129.png 2048w" sizes="(max-width: 2154px) 100vw, 2154px" /></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. Note considerable momentum divergence developing this will likely be addressed in a move to test range support back to .6400 before a final attempt to make the .6700 primary upside objective. UPDATE as .6550 support look for a test of offers and stops above .6700, this level will likely see profit taking on the first test and could prove pivotal in a move extended corrective phase</span></p>
<p><img class="aligncenter size-full wp-image-44331" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.38.33.png" alt="" width="2152" height="1185" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.38.33.png 2152w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.38.33-300×165.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.38.33-1024×564.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.38.33-768×423.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.38.33-1536×846.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-28-08.38.33-2048×1128.png 2048w" sizes="(max-width: 2152px) 100vw, 2152px" /></p>
<p>&nbsp;</p>
<p><i><span>Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.</span></i></p>
<p><i><span>High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.</span></i></p>
<p>The post <a rel="nofollow" href="https://blog.tickmill.com/uncategorized/daily-market-outlook-may-28-2020/">Daily Market Outlook, May 28, 2020</a> appeared first on <a rel="nofollow" href="https://blog.tickmill.com">Tickmill</a>.</p>