Risk-on, Risk-off most of October so far

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Daily Outlook – 9 Oct. 2020

By: Andria Pichidi

  • Yield has dropped, laying the ground for further gains in EGBs at the end of a week.
  • Hopes strengthened that the European central bank will add further stimulus measures as the resurgence of virus case numbers and the tightening of restrictions threatens the still-fragile recovery.
  • Brexit talks are going nowhere fast, but the general sense is that there will be a deal eventually, even if it is likely to be less comprehensive than hoped, which will mean disruptions at the border and further stress for economies on both sides of the channel at least in the short term.
  • President Trump apparently calling for a comprehensive stimulus deal rather than a piecemeal approach after all.
  • GER30 and UK100 futures are currently up 0.1% and 0.2% respectively, US futures are posting gains.
  • China bourses meanwhile rallied after returning from the extended break – the CAIXIN services PMI surprised on the upside.
  • UK monthly GDP growth came in below expectations at 2.1% m/m

EUR – choppy close to 20DMA at 1.1770.

GBP – continues to lack directional bias overall, but intraday remains to the upside. Currently at 1.2950

JPY – fell back to 105.8. Rebounded towards EU open.

CAD – has extended lower, turning below 1.3200

AUD – supported retesting 0.7200

Oil – closed above $41

Gold – broke 1900 on USD weakness but remains shy of October’s peak.

TODAY: ECB’s Schnabel, BoE Bailey, SNB Jordan, BoC Macklem, ECB Merch, ECB Guindo are set to speak today. Also on tap are ECB Monetary Policy Meeting Accounts and US Jobless Claims

Biggest gainer – USDCNH -1.04% – Drifted lower by approx. 400 pips, posting a new lower low with daily indicators extending further to the downside. Intraday has currently rebounded from R3 as it looks oversold. However, the sharp decline suggests that any rebound could be seen as a correction a less it manages to reverse back above 6.7220. MACD is negatively configured, RSI ready to cross the above OS area. 1H ATR at 0.0.0068 and Daily ATR at 0.03554


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