Daily Market Outlook, May 27, 2020
<h2><span>Daily Market Outlook, May 27, 2020 </span></h2>
<p><span>The Asian equity market was more mixed overnight with China and Hong Kong leading the declines. That follows reports that the US is considering a range of sanctions against China for its proposed new national security legislation to rein in dissent in Hong Kong. President Trump promised a “very interesting” response before the end of the week. </span></p>
<p><span>Risk assets had been rallying on optimism that the reopening of economies will lead to a sharp rebound in global activity. </span></p>
<p><span>There are no major European or US data releases today. The focus will probably be on the European Commission which is set to unveil a new EU budget and recovery fund, building on last week’s proposals by Germany and France for a €500bn fund to combat the economic impact of Covid-19. A big package might reduce the pressure on the ECB to provide additional stimulus, although more measures are expected to be announced in June. </span></p>
<p><span>Today, ECB President Christine Lagarde takes part in a Youth Dialogue at 8.30am, while Vice President Guindos participates in a Spanish Chamber of Commerce event from 9.30am. Speculation is growing that the ECB is set to increase its stimulus measures next month. The most likely policy change is that it will raise its Pandemic Emergency Purchase Programme (PEPP) from the current €750bn limit. At the current pace of purchases under that scheme, the amount will have to be increased if it is to run to the end of the year and possibly beyond. </span></p>
<p><span>This afternoon’s US Richmond Fed survey usually receives limited attention, but its headline index nevertheless is predicted to rise to -40 in May after plunging to -53 in April. More attention will be given to the Fed Beige Book report which provides an anecdotal update of current economic conditions. The Fed’s Bullard is scheduled to discuss the economy during the coronavirus pandemic at 5.30pm, while fellow FOMC member Bostic takes part in a discussion on the economy at 8pm.</span></p>
<p><span><em><strong>CitiFX Quant Asset Rebalancing Model notes a rotation from equities into bonds at the May month end. The signal is moderately strong coming in at -1.4/+1.3 historical standard deviations (hist. std. dev.) for equities and bonds respectively. Almost all, but LatAm equities, are likely to see outflows with US and Canada receiving the strongest signals. In bonds, UK, US and Canadian markets are set to receive inflows. The FX impact notes the selling of USD against EUR and GBP at month end.</strong></em></span></p>
<h3><b>Today’s Options Expiries</b><span> for 10AM New York Cut (notable size in bold)</span></h3>
<ul>
<li><span>EURUSD: </span><b>1.0925-35 (1.4BLN), 1.0950-60 (1BLN), 1.0990-1.1000 (1.8BLN)</b></li>
<li><span>USDJPY: 107.25-35 (750M), 107.45-50 (700M), </span><b>107.80-90 (2BLN)</b><span> 1.0800-05 (500M), </span><b>108.15 (1BLN)</b></li>
<li><span>AUDUSD: </span><b>0.6600 (1.2BLN)</b><span>, 0.6650 (633M)</span></li>
</ul>
<h3><span>Technical & Trade Views</span></h3>
<p><b>EURUSD Bias: Bullish above 1.09 targeting 1.1050</b></p>
<p><span>From a technical and trading perspective, the rejection and reversal from last weeks 1.10 test has gathered momentum, the daily volume weighted average price has now flipped bearish, without a snap back rally and close back above 1.0935, price looks poised retest support back to 1.08, a failure here would be a further bearish development opening a move to test the downside equality objective at 1.0630 and the current year to date lows. </span></p>
<p><img class="aligncenter size-full wp-image-44228" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.32.31.png" alt="" width="2153" height="1183" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.32.31.png 2153w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.32.31-300×165.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.32.31-1024×563.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.32.31-768×422.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.32.31-1536×844.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.32.31-2048×1125.png 2048w" sizes="(max-width: 2153px) 100vw, 2153px" /></p>
<p><b>GBPUSD Bias: Bearish below 1.23 targeting 1.20 bullish above 1.23 targeting 1.25)</b></p>
<p><span>GBPUSD From a technical and trading perspective, the momentum trendline failure forewarned of the price decline through 1.23 support, as this level contains upside attempts look for a move to test the pivotal support cluster to 1.20 It is noteworthy demand has picked up for GBPUSD FX options that would allow holders to sell the pound at 1.2000 and below over coming weeks. There’s already been demand for early July downside options as concern grows over the June 30 Brexit deadline If buying interest isn’t sufficient to defend 1.2150 then bears will press for a test of the 1.20 target. UPDATE a breach of 1.23 opens a move to the equality objective at 1.24 UPDATE as 1.2360 equality objective contains upside attempts focus shifts back to the 1.20 downside objective a close through 1.24 opens 1.25 test</span></p>
<p><img class="aligncenter size-full wp-image-44229" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.35.42.png" alt="" width="2151" height="1130" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.35.42.png 2151w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.35.42-300×158.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.35.42-1024×538.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.35.42-768×403.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.35.42-1536×807.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.35.42-2048×1076.png 2048w" sizes="(max-width: 2151px) 100vw, 2151px" /></p>
<p><b>USDJPY Bias: Bearish below 108.50 targeting 1.0465)</b></p>
<p><span>USDJPY From a technical and trading perspective, as 1.0850 contains the upside drift, look for a move back through 1.07 to develop downside momentum,however, a topside breach of 108.50 would delay downside objectives opening a retest of range resistance above 109 before lower again.</span></p>
<p><img class="aligncenter size-full wp-image-44230" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.36.24.png" alt="" width="2152" height="1159" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.36.24.png 2152w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.36.24-300×162.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.36.24-1024×551.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.36.24-768×414.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.36.24-1536×827.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.36.24-2048×1103.png 2048w" sizes="(max-width: 2152px) 100vw, 2152px" /></p>
<p><b>AUDUSD Bias: Bullish above .6450 targeting .6700)</b></p>
<p><span>AUDUSD From a technical and trading perspective, price testing pivotal .6568 prior cycle highs area if sufficient supply is seen here look for another leg lower to test trend support back to .6330 before another attempt to base and make another run towards the .6700 primary upside objective. Note considerable momentum divergence developing this will likely be addressed in a move to test range support back to .6400 before a final attempt to make the .6700 primary upside objective</span></p>
<p><img class="aligncenter size-full wp-image-44231" src="http://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.37.13.png" alt="" width="2155" height="1138" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.37.13.png 2155w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.37.13-300×158.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.37.13-1024×541.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.37.13-768×406.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.37.13-1536×811.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/05/Screenshot-2020-05-27-08.37.13-2048×1081.png 2048w" sizes="(max-width: 2155px) 100vw, 2155px" /></p>
<p> </p>
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