Market Quick Take - August 20, 2021 Market Quick Take - August 20, 2021 Market Quick Take - August 20, 2021

Market Quick Take - August 20, 2021

Macro 6 minutes to read
Saxo Strategy Team

Summary:  The US equity market staged a partial recovery yesterday, but only after a steep extension of the recent sell-off, as futures trade this morning near the same level they closed on Wednesday. In FX, the US dollar remains pinned near the top of its recent move, as EURUSD trades below the key 1.1700 area. And the yen pulled back broadly higher, trying to maintain pace with the greenback. Commodities took a beating led by those dependent on demand from top consumer China.

What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities bounced back late in yesterday's session following a sharp technical selloff driven by fears over the economic slowdown related to the delta variant. Asian equities are lower today, but Nasdaq 100 is holding the line in early European trading hours. The 14,895 level is the first key support level to watch and if broken could extend the selloff to 14,809.

EURUSD – watching for closing levels for the week today as the pair has done the deed in breaking below 1.1700 but has yet to follow through notably to the next targets of 1.1600 and possibly 1.1500 or possibly eventually the 1.1290 level, which is the 61.8% Fibonacci retracement of the entire post-pandemic rally, but would likely only extend the sell-off to this degree on a significant deleveraging across global risk assets. Implied options volatility remains very quiet, with 1-month and 3-month implied volatility both below 5.5%.

USDCAD – with the break down in oil prices, USDCAD has screamed higher from its levels at the start of the week to above 1.2850 this morning, with yesterday’s breakdown in oil prices to the lowest levels since May and likely crowded positioning (on the Bank of Canada’s relative hawkish stance, although that story has become stale since early July, given the Fed’s shift toward a tapering stance and a tightening of the spread from July lows in the US dollar’s favour). Yesterday’s extension of the rally was particularly sharp and the huge 1.3000 level is now suddenly not far away, a level that proven pivotal not only late last year, but also before the pandemic outbreak.

Gold (XAUUSD) trades up on the week, thereby building on the strong technical signal from the previous week. This despite a challenging backdrop which has seen commodities suffer their worst week in a couple of months in response to a stronger dollar and the prospect for Fed tapering to start sooner than previously expected. The relative support for gold, despite the stronger dollar, compared with others has been driven by some haven demand, as virus woes dent the general risk appetite, thereby supporting bonds with yields holding steady despite increased taper risks. However, for gold to shine again it still needs to break decisively above $1830/oz.

Crude oil (OILUSSEP21 & OILUKOCT21) found a fresh bid in Asia after slumping to the lowest since May in response to Covid-19 risks to demand in China and other major consumers, a stronger dollar and US shale production rising to a one-year high. Further weakness from here would once again turn the spotlight back on OPEC+ with verbal market intervention potentially being followed by talks of pausing agreed production increases until a clearer demand picture emerges. Brent managed to find support ahead of the May low at $64.5/b.

Copper (COPPERUSDEC21) slumped to a four-month low before finding support below $4/lb, and so far, it is holding above the 200-day SMA at $4.03. The metal together with iron ore, the most China-centric commodity has been hurt by the recent weakness in Chinese macro numbers, the spreading of Covid-19 in China and now also a stronger dollar. While the short-term technical outlook has deteriorated, the long-term bullish outlook for copper remains as demand for green transformation metals heat up.

What is going on?

Global container shipping rates continue to rise with the Drewry Composite Container Freight rate rising to $9,600 per 40 ft box compared with a long-term average around $1,600. The biggest rise seen on the U.S. west coast, as the biggest trade gateway with Asia is clogged with inbound container vessels, thereby delaying turnarounds and the availability of containers. Furthermore, the world’s third-busiest container port, China’s Ningbo-Zhoushan has remained partially closed for a prolonged period due to a Covid outbreaks. 

China-centric commodities, led by iron ore, took a beating yesterday before attempting to recover during today’s Asian session. Iron ore trades down by 12% this week while copper sank to its lowest price since April. Still down 7% it has nevertheless managed to climb back above its 200-day SMA at $4.03/lb. The main culprits behind the weakness which also helped drive crude oil to a 3-month low are concerns about growth in top consumer China, the delta coronavirus variant, and the fear the Fed could taper quickly, driving the dollar to the highest since November. Bar a few which included gold, these developments helped trigger multiple sell signals driving down the Bloomberg Commodity index 3% on the week.

KOSPI 200 and CSI 300 are sounding the alarms bells. The South Korean and Chinese equity markets are declining again today with the CSI 300 down 9% for the year and KOSPI 200 touching the lowest levels since the first trading day of the year. The technology crackdown and changing priorities in China including its new data privacy law are causing global flows to reverse across Asian markets.

China’s Evergrande told to fix its debt situation by financial regulators. The PBOC and China Banking and Insurance Commission issued a statement after meeting with Evergrande representatives yesterday demanding the company stop spreading false information and telling it to get its house in order, a sign that regulators are losing patience with the company, the largest real estate developer in China. Evergrande’s debt has been in a downward spiral since June and pushed lower this week, with one 2025 Evergrande bond trading below 40 cents on the dollar overnight.

Investors buy inflation protection securities amid stagflation worries (TIP). Yesterday’s reopening sale of 30-year US Treasury Inflation-Protected Securities attracted strong demand and awarded a high yield of –0.292%, the highest on record. The auction came after a volatile day in markets where risky assets plunged, and safe havens such as Gold and nominal US Treasuries were well bid. It is a sign that investors are increasingly concerned about the growth outlook.

What are we watching next?

Broadening evidence of the risk of a significant market decline. Yesterday we penned a longer piece and an abridged version breaking down the evidence that this market could face a significant setback in coming weeks as the post-pandemic stimulus cycle has largely played itself out. 

Jackson Hole next week - the bottom line in the wake of the FOMC minutes is that most on the Fed seem ready to taper and before the end of the year – but when? The next steps will include any hints from Fed Chair Powell himself at next week’s Jackson Hole Fed symposium, which may offer clues on whether the September 22 FOMC meeting is “live” for an actual taper announcement, with purchases to actually slow starting October 1, for example.

Earnings to watch today. Today’s earnings focus is Deere which is one of the largest manufacturers of farming equipment and a good read into the demand outlook for the agricultural sector.

  • Today: Deere

Economic calendar highlights for today (times GMT)

  • 1230 – Canada Jun. Retail Sales
  • 1500 – US Fed’s Kaplan (non-voter) to speak

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.