Economic Stability In Doubts

The economic calendar is a big one, compressed into a holiday-shortened week. Market participants will be checking out shortly after the Thursday morning jobs report for an extended weekend – somewhere! Employment data is the focus, but ISM manufacturing, consumer confidence, industrial production, factory orders, pending home sales, and auto sales are also all on tap. Everything except auto sales is predicted to increase smartly.

Below are thumbnail sketches of the events and data that shape the macro picture.

Country

US and the Fed minutes

1. With Friday designated a national holiday in the US for Independence Day, the Nonfarm Payrolls have been moved forward to Thursday. Payrolls are expected to grow by 3 million jobs, after last month’s blow-out total of 2.5 million jobs added. Although doubts persist about the accuracy of the data, with equity markets looking wobbly, a decent Nonfarm number is vital to keep the rally afloat. Having climbed into orbit on a combination of vapours, hope and central bank money, equity markets continue to show signs of exhaustion in the near-term. If the Nonfarm Payroll data doesn’t come to the party, the number of guests trying to leave via the single exit door may swell.
2. The Fed releases the Minutes to their last policy decision and may start to show some signs they are worried about inflation. Policymakers will likely reiterate they are flying blind given the uncertainty about the course of COVID-19 and will likely keep all options on the table for further easing. Negative rates are probably not on their radar unless we see the prospects of longer and deeper recession grow.
3. A lot of attention will fall on Texas and the halting of their reopening of its economy. Texas was one of their first states to reopen and if they end up having to return to stricter restrictions, Wall Street could anticipate a much deeper recession as the V-shaped recovery could become a W-shaped one. Coronavirus cases are growing by at least 5% in 31 states and this could see lost reopening momentum mean many-out-of-work Americans will struggle to find employment.

Brexit Progress

1. There have been some signs this week that compromise is possible on some of the more contentious areas of the trade deal but an agreement is still some way off. Thankfully an intense summer of negotiations is planned.
2. Michel Barnier warned that “the real moment of truth” will come in October, which throws the summer deadline out of the window. But let’s face it, that was never going to happen.

Australian Data

1. Australia stocks and currency could have a significant vulnerability to sudden downside shifts in sentiment as a proxy for global risk as momentum in global recovery trade appears to be ebbing.
2. Community infections are increasing again in Victoria, Supermarkets limiting supplies. Markets are negative.

Japan’s heavy data

1. Japan unveiled another disappointing data set this morning.
2. Retail Sales grew by 2.20% in May, but are down 12.30% YoY, suggesting that an economic rebound remains as elusive as ever.
3. Japan unveils Industrial Production data tomorrow, with both expected to remain firmly anchored in negative territory.

China involved In Geopolitical Conflict

1. The Caixin Manufacturing PMI data released Wednesday, should confirm the tentative recovery in China remains on track, at a still expansionary 50.5. Wednesday, in fact, sees the release of a swath of PMI data from across the region for June. Further recoveries from a low base are expected across the Asia-Pacific, with hopes high that China is not a one-trick pony for the region. Disappointing data may add to the sense of gloom weighing on asset markets for now.
2. China is embroiled in multiple diplomatic conflicts at the moment, from US-China trade, Hong kong’s security law to the standoff with India in the Himalayas. Any of these could quickly escalate and have negative repercussions across markets around the world.
3. Sunday, China releases Industrial Profits YTD for May. Expected-22.0%, a slight improvement. Worse than expected could see Asia markets sharply lower on Monday morning. Official and unofficial Manufacturing and Non-Manf PMI’s released throughout the week. Potential for short-term volatility.

Hong Kong’s security Law In Focus

1. Hong Kong security law outline poorly received.
2. Top officials are meeting in Beijing to draft the law, which is expected to come into force before Wednesday.
3. That has the potential to cause market volatility when released. Increased protests and depending on the wording, negative impact on the stock market.

 

Market

Oil prices retreat but show resilience

1. Oil prices on Friday retreated, but not markedly so. that is in contrast with the heard like behaviour seen in times past, notably when equites have had a very bad day. That suggests that physical demand continues to improve globally, and particularly in Asia. High OPEC+ compliance appears also, to be supportive of energy prices.
2. Brent crude fell 1.75% to $40.70 a barrel on Friday, with WTI easing 2.25% lower to $38.25 a barrel. Oil prices have fallen again this morning; Brent crude falling 1.25% to $40.20 a barrel, and WTI falling 1.75% to $37.70 a barrel.
3. That does not mean that oil prices are out of the woods though. Critical support for both contracts lies nearby at $39.80 a barrel for Brent crude, and $37.00 a barrel for WTI.
4. A daily close below these points will signal that a much deeper correction is upon oil markets; potentially taking both contracts back to their 100-day moving averages. These are $37.00 a barrel for Brent crude, and $32.50 a barrel for WTI. The most likely driver being a deteriorating COVID-19 picture in the United States.

Gold remains resolute in the face of downward equity pressure

1. Gold prices probed the downside on Friday in lockstep with wilting equity markets, falling 15 dollars to $1748.00 an ounce at one stage. However, gold shrugged of the selling pressure and reclaimed all of its intraday losses, finishing the session 0.45% higher at $1771.50 an ounce.
2. Gold’s fortitude will be pleasing for gold bulls, who have watched upward momentum fade after it broke out of its monthly highs at $1765.00 an ounce last week. Gold’s main supporter is likely US Treasury yields, which continued lower on Friday, powered by fears over US economic growth prospects.
3. With yields on the floor, any dips in gold are likely to find plenty of enthusiastic buyers for now. Only a daily close below $1745.00 an ounce would call this into doubt. Gold has edged slightly higher in Asia to $1773.00 an ounce with initial resistance being last week’s highs at $1780.00 an ounce. Gold still faces formidable multi-year resistance in the $1800.00 an ounce region thereafter though.

Here’s a look at all the important market-moving factors for the week:

Week Ahead

All times listed are EDT

Monday

10:00: US – Pending Home Sales: seen to surge to 19.7% from -21.8%.

21:00: China – Manufacturing PMI: anticipated to edge down to 50.4 from 50.6. 

Tuesday

2:00: UK – GDP: probably remained flat at -1.6% YoY and -2.0% QoQ.

5:00: Eurozone – CPI: looks to remain steady at 0.1%.

8:30: Canada – GDP: forecast to further decline to -12.0% from -7.2%.

10:00: US – CB Consumer Confidence: likely to have climbed to 91.6 from 86.6.

19:50: Japan – Tankan Large Manufacturers Index: predicted to have dropped to -31 from -8.

19:50: Japan – Tankan Large Non-Manufacturers Index: expected to slumped to -18 from 8.

21:45: China – Caixin Manufacturing PMI: seen to edge down to 50.5 from 50.7.

Wednesday

3:55: Germany – Manufacturing PMI: probably stayed steady at 44.6.

3:55: Germany – Unemployment Change: expected to halve to 120K from 238K.

4:30: UK – Manufacturing PMI: anticipated to have remained flat at 50.1.

8:15: US – ADP Nonfarm Employment Change: forecast to soar to 3,000K from -2.760K.

10:00: US – ISM Manufacturing PMI: expected to rise to 49.0 from 43.1.

10:30: US – Crude Oil Inventories: printed at 1.442M last week.

14:00 – FOMC Meeting Minutes

Thursday

8:30: US – Nonfarm Payrolls: predicted to have gone up to 3,074K, up from 2,509K.

8:30: US – Unemployment Rate: expected to edge down to 12.3% from 13.3%.

21:30: Australia – Retail Sales: anticipated to jump to 16.3% from -17.7 percent.

Friday

4:30: UK – Services PMI: like other UK data, expected to remain steady at 47.0

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

Chat with us to know more: wa.me/971581958582
Register to open your account: http://bit.ly/OpenFxAccount
Join Our Telegram Channel: https://t.me/ForexFundManagers
Subscribe to Our YouTube Channel: https://youtu.be/AnTlQd-FQxc