• China to implement sanctions on US officials, entity over Hong Kong.

The headline follows  U.S. President Donald Trump signing of the HK executive order: Trump’s US President Donald Trump: Signed executive order to hold China accountable for its actions against Hong Kong

 Trump on Tuesday signed an executive order blocking the US property of persons who undermine democratic institutions in Hong Kong and other measures following Beijing’s tightening of control on the city.

The text of the order released by the White House also revokes license exceptions for exports to Hong Kong and eliminates the preference for Hong Kong passport holders as compared to China.

US President Trump: You’ll see more coming on actions towards China

In retaliation, China to implement sanctions on US officials.

Key points

  • Trump says Hong Kong’s people’s freedom has been taken away.
  • Trump says he signed executive order ending preferential treatment for Hong Kong.
  • Trump says he has convinced many countries not to use Huawei.
  • Trump says he holds china fully responsible for concealing the coronavirus and unleashing it on the world.
  • Trump says the rise of China is not a positive development for US.

more to come…

The People’s Bank of China (PBOC) injected 400 billion yuan via one-year medium-term lending (MLF) facility on Wednesday.

The Chinese central bank issued the one-year MLF at 2.95%, unchanged from the previous operation.

more to come …

The Guardian reported that Chief health officer, Prof Brett Sutton, has warned that there will be more deaths from the current wave of coronavirus cases in Victoria.

When we have 238 cases every day we are looking at 2-3 deaths in a week’s times, so we have to have these numbers decrease.

He said the numbers appear to be stabilising right now, but said there is “no guarantee of a drop off” in case numbers. Whether it happens will depend on how well people are obeying the stay at home orders, he says.

Meanwhile,  Sutton also says the fact that the daily numbers have not consistently fallen yet, despite the hotspot postcodes being locked down for two weeks now, does not necessarily mean the lockdowns have not worked.

He said it is possible that restrictions could be “stepped up”.

I don’t know, I honestly don’t know how likely it is to step up or the opportunities to step down. We have set that six week period because I am absolutely confident that that is length of time that is required to get those case numbers down

This is a wave that is very different to the first wave… this wave is trickier so it won’t be as easy to drive numbers down with the community transition that is out there.

  • AUD/USD Forecast: Unable to attract investors

  • USD/JPY refreshes the intraday high following a U-turn from 107.15.
  • Increasing hopes of virus vaccine follow Wall Street’s performance to recall the bulls.
  • News that Tokyo will raise the pandemic to the highest levels, fears of an escalation in the US-China tussle challenge sentiment.
  • BOJ will be the key despite no change expected in the monetary policy.

USD/JPY seesaws around the intraday high if 107.30 amid the initial hour of Tokyo open on Wednesday. The yen pair gained bids as market sentiment cheers upbeat earnings from major US banks and further news suggesting the coronavirus (COVID-19) vaccine is nearby. However, the bulls remain cautious ahead of the key monetary policy meeting of the Bank of Japan (BOJ).

Cautious optimism eyes BOJ…

With the upbeat earnings from JP Morgan and Citi, Wall Street took a sigh of relief after Monday’s weakness. Dow Jones gained 2.13% to 26,642.59 whereas S&P 500 and Nasdaq also added near 1.0% profits by the end of Tuesday’s trading. To extend the optimism, updates from Moderna and US President Donald Trump, signaling proximity to the vaccine, played their role.

However, news that Tokyo will escalate alerts to the highest of four levels on Wednesday caps the risk-on mood. While conveying the  data, Reuters said, “daily coronavirus cases exceeded 200 in four of the last six days, touching an all-time high of 243 cases last Friday as testing among workers in the metropolis’s red-light districts turned up infections among young people in their 20s and 30s.” Additionally, US President Donald Trump’s threat to have more actions for China, followed by Global Times’ comments defying the warnings, offer an extra burden on the risk-takers.

While portraying the market sentiment, the US 10-year Treasury yields and stocks in Asia-Pacific remain bid.

Looking forward, the BOJ remains as the key event for pair traders even if the policymakers are neither anticipated to alter the current benchmark rate nor the bond purchase program. The reason is the presence of a quarterly economic forecast. Bears are looking for downbeat expectations to break 107.00.

Read: BOJ Preview: No changes in policy, but forecast downgrades expected

Other than the BOJ, risk catalysts will also be the key as the latest optimism has many barriers to convince bulls for a long time.

Technical analysis

A daily closing beyond 50-day SMA, currently near 107.50, becomes necessary for the bulls to recall the above-108.00 area.

 

  • Gold’s daily chart shows a bearish divergence of the MACD, a sign of uptrend exhaustion. 
  • A break below the 10-day SMA could prove costly.

Gold is sidelined around $1,809 per ounce at press time with the daily chart MACD histogram, an indicator used to identify trend changes and trend strength, reporting a bearish divergence. 

A bearish divergence occurs when an indicator prints a lower high, contradicting a higher high on price and is reflective of buyer exhaustion. 

As such, the metal looks vulnerable to price pullback. Moreover, the bearish divergence of the MACD would remain valid as long as prices are held below the recent high of $1,818. 

The immediate support is seen at $1,795 (10-day simple moving average). Acceptance under that support line could cause some buyers to exit the market, leading to a deeper pullback. This is because sellers have failed multiple times to establish a strong foothold below the 10-day simple moving average in the last four weeks. 

On the higher side, $1,818 is the level to beat for the bulls. 

Daily chart

Trend: Buyer exhaustion

Technical levels

 

  • GBP bulls taking over and seeking out a break from key support.
  • Blue skies are on the horizon, but there is plenty of leg work to do yet.

The pound has been one of the best-performing G10 currencies of late. Investors have been encouraged by an improvement in the coronavirus statistics for the UK as well as the easing of the lockdown. 

In yesterday’s note, GBP/USD is a loaded pair of fundamentals, technically ripe for the bears, the June 24th highs were targetted for which the price met and exceeded with a bullish pin bar. 

While the fundamentals have not changed from a longer-term perspective, which could be troublesome for the following bullish technical outlook, there is still some topside analysis worth exploring this juncture. 

Let’s start at the top and work our way in. 

Firstly, we can see that the longer-term charts have the pair trapped between monthly support and weekly resistance. 

Then, we can see that the price made it back to yesterday’s said target and has held at the structure.

Blue skies on the horizon

On a wave count of impulse and corrections, we would expect to see the resistance structure, on a daily basis, be tested again.

A failure there would open prospects of the 4th wave, (correction), being supported for a higher low at current resistance before wave 5, (impulse), has a chance to test back at the resistance and break higher for blue skies. 

The only thing that is required for this scenario to unfold is nearer-term price action holding above the support structure that it has just penetrated in recent trade (early Asia).

At this juncture, a retest of the structure would be a compelling entry point if the price doesn’t just continue higher.

However, we need to see momentum in the bullish territory from a 4HR perspective for additional confirmation as well as price moving through the 21 moving average. 

 

 

 

  • WTI takes a U-turn from $41.08 to mark fifth failure to stay beyond the $41.00 threshold.
  • 21-day EMA, a three-week-old support line restrict immediate downside.
  • June month high, 200-day EMA offers strong resistance.

WTI trims early-day gains while declining to $40.72 during the initial hour of Tokyo open on Wednesday. In doing so, the energy benchmark portrays one more failure to stay beyond $41.00. The quote bounced off 21-day EMA the previous day.

With the bearish MACD joining the black gold’s repeated failures to cross $41.00, sellers are rolling up their sleeves for $40.00 psychological magnet. Though, 21-day EMA near $39.50 and an upward sloping trend line from June 25, at $39.15 now, could challenge the bears.

In a case where the oil prices remain weak past-$39.15, the late-June month’s bottom surrounding $37.10 should return to the charts.

Alternatively, a clear break beyond $41.00 needs validation from June month’s top of $41.65 and 200-day EMA, currently around $41.80, to aim for February’s low close to $44.00.

WTI daily chart

Trend: Pullback expected

 

  • EUR/USD prints a four-month high of 1.1423 in Asia. 
  • The pair witnessed a bullish breakout above 1.1349 on Tuesday. 

EUR/USD jumped to a four-month high of 1.1423 soon before press time, taking the week-to-date gain to 1.10%. 

The pair closed well above 1.1349 on Tuesday, invalidating the bearish lower high setup created on the daily chart on June 23 and bolstering the bullish view put forward by a descending triangle breakout witnessed earlier this month. 

As such, the pairs move to four-month highs is not surprising. Further gains could be seen during the day ahead as the daily chart MACD histogram has crossed into the bullish territory above zero. In addition, the 14-day relative strength index (RSI) is reporting bullish conditions with an above-50 print. 

The bullish bias, however, would be invalidated if the currency pair drops below the ascending 10-day simple moving average (SMA) currently located at 1.1316.

Daily chart

Trend: Bullish

Technical levels

 

  • NZD/USD recedes from 0.6545 following the previous day’s bounce off 0.6502.
  • Upbeat earnings report, hopes of virus cure keep buyers hopeful.
  • NZ PM Ardern cited fears of wave 2.0 leading to local lockdowns but refrained from limiting travel to Australia.
  • US President shuns Hong Kong’s special trading status but Beijing shrugs it off.

NZD/USD rises to the intraday high of 0.6547 during the initial Asian session on Wednesday. The kiwi pair recently benefited from the market’s risk-on mood while extending the previous day’s recovery moves. However, worrisome comments from New Zealand (NZ) Prime Minister (PM) Jacinda Ardern tame the bulls.

In her latest speech, NZ PM Ardern suggested increased possibilities that the coronavirus (COVID-19) re-enter the nation via borders. If that happens, the national leader said, “first response may be localized lockdowns.” Though, resistance to close borders with the largest trading partner Australia keeps the buyers hopeful.

Earlier during the day, pair traders cheered upbeat performance of Wall Street after major US banks managed to print welcome results. Further magnifying the optimism were US President Donald Trump’s signals for the nearness to the virus vaccine. The Republican leaders’ comments followed Moderna’s statements conveying ‘robust’ results of the third trial, which in turn helps to plaster the market mood and favor the NZD/USD pair.

Though, US President Trump said, “You’ll see more coming on actions towards China” and suggests escalations of the Sino-American tussle. On the other hand, Beijing frets about the cancellation of Hong Kong’s special trading session, per Global Times, while saying they were expecting more.

Amid all these catalysts, S&P 500 Futures remain on the front foot above 3,200, up 0.86% on a day, whereas the US 10-year Treasury yields extend the previous day’s rise by 2.4 basis points to .638%.

Considering the lack of major data/events, the pair traders will have to pay close attention to risk catalysts for immediate direction. In doing so, virus updates and US-China story might be in the spotlight.

Technical analysis

The pair’s failure to close below a two-month-old support line, currently around 0.6540, propels it towards the monthly top near 0.6600.