Market Quick Take - June 18, 2020

Market Quick Take - June 18, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  Yesterday saw a muted session in equities as new local highs in the US did not hold in most places and saw some gentle further consolidation lower in Asia that likewise failed to hold into early European hours. Safe haven fixed income has perked up overnight and the JPY did at times as well, but jumpy market action makes sustaining a narrative difficult.


What is our trading focus?

  • US500.I (S&P 500 Index) and USNAS100.I (NASDAQ 100 Index) – US equities continue to see notable divergence, with the S&P500 rather weaker than the Nasdaq100 and dipping back below the major 61.8% Fibonacci retracement level at 3,107 yesterday, while the Nasdaq 100 index failed to maintain above 10,000 into yesterday’s close. Significant weakness only in evidence if the S&P 500 closes back below perhaps the 3,011 200-day moving average, while for the Nasdaq 100 index, the first sign of technical weakness could be a close below the 21-day moving average (currently near 9670) that was avoided at the beginning of this week.

  • OILUSJUL20 (WTI Crude Oil) and OILUKAUG20 (Brent Crude oil) - remain rangebound within an established five-dollar range. Positive comments from OPEC on supply discipline and Trafigura on rising demand are currently being offset by rising US stockpiles as well as virus worries in the U.S. and China. We maintain skeptical about crude oil’s short-term ability to move higher with virus related demand worries putting a cap on the market. The recovery in demand is likely to be bumpy due to the slow resumption of flights, and high unemployment restricting gasoline use.

  • USDJPY – with a weak session overnight in Asia and a pickup in safe haven US treasuries, JPY crosses are back on the move, with USDJPY now poking down toward the 106.58 local lows and then the 106.00 area lows of early May. JPY implied volatility is picking up in the options market, suggesting that a more volatile period for JPY crosses may be brewing.

  • GBPUSD – sterling trading somewhat heavily just above the key 1.2500 area in GBPUSD ahead of today’s Bank of England meeting. The pair has yet to trade above the 200-day moving average (just below 1.2700) again after rallying back higher earlier this week. Market reaction to Bank of England guidance on its policy mix – particularly negative interest rates, but also possible expansion of QE – could see considerable risk of volatility in sterling crosses today.

What is going on?

  • Covid19 second wave outbreaks a source of concern with major accelerations in Texas in particular and continued concerns on the recent outbreak in Beijing.

  • Former National Security Advisor John Bolton accused President Trump of asking for Xi’s help in winning re-election by increasing purchases of US agricultural goods and in general using re-election considerations in foreign policy decisions. This according to leaks of the content of Bolton’s new book detailing his time in the Trump White House.

  • Far worse Australian job losses than expected in May, as the unemployment rate rose to 7.1% from 6.2% and payrolls declined –228k vs. -79k expected.

  • Fed Chair Powell asks House Panel not to remove fiscal support too quickly in testimony before a House Panel yesterday, saying that the economy is in a “critical phase” of the recovery and needs continued support.

What we are watching next?

  • Bank of England meeting Thursday – with sterling already under pressure on the risks of a tough stance from the EU on the post-Brexit transition period trade deal uncertainty, the Bank of England meeting this week will be interesting for whether the BoE strengthens guidance on an eventual move to a negative policy rate regime.

  • EU Council meeting Friday - This is the next important meeting for the heads of EU countries as we look for a sense of solidarity or lack thereof around the plan to expand the EU budget by some EUR 750 billion to fund a Covid19 response.

Economic Calendar Highlights (times GMT)

  • 0730 – Switzerland SNB Policy Rate announcement (no change to –0.75% rate expected)
  • 0800 – Norway Deposit Rate Announcement (no change to 0.0% rate expected)
  • 1100 – UK Bank of England Rate Announcement (no change expected to 0.1% rate – QE increase expected)
  • 1230 – US Jun. Philadelphia Fed Survey
  • 1230 – US Initial Weekly Jobless Claims and Continuing Claims
  • 1430 – US Weekly Natural Gas Storage
  • 1615 – US Fed’s Mester (FOMCE Voter) to Speak
  • 2330 – Japan May CPI

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

Apple Sportify Soundcloud Stitcher

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

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. Android is a trademark of Google Inc.

©   since 1992