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S&P500 Within 1% of Record High!

EUR/USD – 4hr Candlesticks
Source: GKFX / MT4 (August 10, 2020)

EUR/USD has been trending higher but having touched long-term trendline resistance, is now forming a double top pattern, which would be completed by a break below the neckline at 1.17. The height of the pattern is 200 pips, which if projected lower would target 1.15.
 

TAKEAWAYS


•    US dollar continues recovery to 1-week high since NFP
•    Gold and silver rally again but fall short of highs
•    Cyclical stocks jump as Trump executive orders backstop stimulus talks
•    DAY AHEAD: UK unemployment, German ZEW, SoftBank earnings
 

MARKETS


The dollar continued to make headway on Monday with the dollar index managing a 1-week high, although momentum was limited. It is an extension of the gains made after Friday’s better-than- hoped NFP report.

It was cyclical stocks such as Caterpillar and Boeing that led a rally in the Dow Jones and Russell 2000 indices. The S&P 500 was nursing declines in tech stocks but still notched up a seventh day of gains to come within 1% of a record high. 

China stocks fared well after strong factory orders data and banks led a rally on Australia’s ASX 200 index, though US-China tensions appeared to weigh on other markets in Asia. On Monday China retaliated by sanctioning 11 prominent American persons for interfering with Hong Kong affairs. 

Gold closed higher on Monday but remained below the record high reached last week. Silver shot higher by over 5% to again top $29 per oz. Hopes for rising oil demand after solid China and US data lifted oil prices on Monday with Brent crude reaching $45 per barrel.
 

GURUS

All our dreams can come true, if we have the courage to pursue them.” – Walt Disney
 

Executive orders


Investors are viewing Donald Trump’s executive orders to extend extra unemployment benefits, create a payroll tax holiday, prevent evictions and stop student loan payments as a stopgap solution that prevents a ‘cliff-edge’ moment in case a new stimulus bill doesn’t get signed off soon.

It will also hopefully put political pressure on Democrats to come to a compromise with Republicans. There is however a risk that it creates further political divisions and Democrats divert their energy to fighting the new orders in the courts.
 

EUR/GBP

While the pound pulled back against the dollar, it made an almost one-month peak over the euro (EUR/GBP) and gained over other currencies including the Aussie (GBP/AUD).

British Prime Minister Boris Johnson will set out at end of the week whether to push ahead with the already delayed final reopening measures. UK unemployment data due out tomorrow is expected to rise to 4.2% from 3.9% in the three months through June. However the furlough scheme, which is set to end in October, is distorting the data since many people are out of work but having wages supplemented by the government. 
 

 

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