Gold Surges Through 1800 While Currencies Range Bound

Major forex pairs and crosses are staying inside yesterday’s range as trading turned subdued. US futures are nearly flat despite mild weakness in European markets. Europe majors are currently the strongest ones for the week, as led by Sterling. The Pound is paying no attention to the deadlock in Brexit negotiations. Commodity currencies are the weaker ones together with Yen. Dollar is also soft with a failed rally attempt. On the other hand, Gold’s up trend continues today and breaks 1800 handle.

Technically, sustained trading above 1800 in gold would pave the way to 61.8% projection of 1451.16 to 1765.25 from 1670.66 at 1864.76. Elsewhere, we’d continue to see if there is follow through in risk reversal that push commodity currencies lower. In particular, 78.93 minor support in CAD/JPY and 74.32 minor support in AUD/JPY will be watched for sign of more near term decline. Meanwhile, 1.3624 minor resistance in USD/CAD and 0.6901 minor support in AUD/USD will also be watched for near term weakness in Canadian and Australian too.

In Europe, currently, FTSE is down -0.36%. DAX is down -0.59%. CAC is down -1.03%. Germany 10-year yield is down -0.0264 at -0.453. Earlier in Asia, Nikkei dropped -0.78%. Hong Kong HSI rose 0.59%. China Shanghai SSE rose 1.74%. Singapore Strait Times rose 0.30%. Japan 10-year JGB yield dropped -0.0214 to 0.018.

Germany Altmaier expects growth from October or November

Germany Economy Minister Peter Altmaier said he expected the economy to start growing again from October or November. Also, he noted that the European Commission has given its approval for the country’s Economic Stabilization Fund.

With the fund’s key framework approved, the would has capital of up to EUR 600B for offsetting the coronavirus pandemic’s impact on German economy. The ministry is already in information talks with some 50 firms about tapping assistance from the fund.

INSEE: France economy to rebound by 19% in Q3 and 3%…

France INSEE said the country’s economy has likely contracted -17% in Q2 over the quarter, unchanged from June’s forecast. Looking ahead, the economy is expected to rebound by 19% in Q3, and a further 3% in Q4. By December economic activity would be around 1-6% below pre-coronavirus levels.

For 2020 as a whole, INSEE expected GDP to contract -9%, worst since record began in 1948. Nevertheless, that was already better than the government’s own estimate of -11% contraction.

ECB Lagarde: Pandemic measures demonstrated efficiency and effectiveness

ECB President Christine Lagarde said in an FT interview that the central bank’s pandemic measures have demonstrated “demonstrated their efficiency, their effectiveness.” For now, “we have done so much that we have quite a bit of time to assess” economic data “carefully.”

ECB will meet again next week. Lagarde’s messages suggested that the central bank will stand pat and adopt a wait-and-see attitude. ECB has nearly doubled the size of its pandemic purchase program to EUR 1.35T in June.

Japan Nishimura: No need to declare new state of emergency

Japan Economy Minister Yasutoshi Nishimura warned today that “untraceable” coronavirus cases among older people are “gradually rising”. He emphasized it’s “necessary to respond with a sense of crisis.” Yet, he reiterated that there is no need to declare a new state of emergency as the serious cases remained low, without strain on the medical system.

Released from Japan, banking lending rose 6.2% yoy in June, below expectation of 7.2% yoy. Current account surplus widened to JPY 0.82T in May, larger than expectation of JPY 0.71T.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2472; (P) 1.2532; (R1) 1.2601; More….

Intraday bias in GBP/USD remains on the upside at this point. The pull back from 1.2813 should have completed at 1.2251. Further rise would be seen to 1.2587 and then 1.2813 high. On the downside, break of 1.2437 minor support will turn bias back to the downside for 1.2251 support instead.

In the bigger picture, while the rebound from 1.1409 is strong, there is not enough evidence for trend reversal yet. Down trend from 2.1161 (2007 high) should still resume sooner or later. However, decisive break of 1.3514 should at least confirm medium term bottoming and turn outlook bullish for 1.4376 resistance first.

Economic Indicators Update