TRADESETUP

September 25, 2020

The Morning Jumpstart

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OVERNIGHT MARKET SNAPSHOT FOR FRIDAY 25/09/20 (as at 7:15am AEST)

  • SPI200 (Sept) overnight futures up 7 pts to 5862
  • SP500 up 9.67 pts to 3246.59
  • NASDAQ up 39.28 pts to 10,672.27
  • Dow Jones up 52.31 pts to 26,815.44
  • FTSE100 down 76.48 pts to 5822.78
  • DAX30 down 36.40 pts to 12,606.57
  • GOLD futures US session (Oct) up $4.20 to $1864.7 an ounce
  • COPPER futures (Comex Dec) down $0.0275 to $2.9655 a pound
  • OIL futures US Session (Nymex Oct) up $0.26 to $40.19 a barrel
  • CRB Index up 0.62 pts to 148.36
  • AUDUSD trading at 0.7048
  • EURUSD trading at 1.1672
  • GBPUSD trading at 1.2752
  • USDJPY trading at 105.4100
  • USD Index US Session (ICE Dec) down 0.053 to 94.390

US indexes remained under pressure on continued negative data even as price ended the session higher. Key indexes found some bargain hunters on the open to lift prices only to give up most of the gains back into the close. Traders were not happy holding risk and remained on the sidelines as the action was relatively range bound. The weekly jobless claims data came out worse than expected seeing more people filing for unemployment benefits. The figures show that the labour market is faltering and supports the Fed Reserves view that more stimulus is needed from Congress. Unfortunately it is looking increasingly likely that the US will not see any further stimulus package prior to the elections at a time when funding for unemployment benefits is quickly running out. The DOW closed back up 0.20% while the broader SP500 ended up 0.30% and the Nasdaq closed up 0.37% for the session. In Europe, major Indexes came under pressure to follow on from the US selloff in the previous session. Trader were happy to be risk off until they hear further news on US stimulus and on concern for further lockdowns that will hamper the EU recovery.

In a meeting with Powell in Congress, Mnuchin said that there is up to $380 Billion of unused funds from the last big coronavirus aid package that could be re-allocated to business and households for support. This shows the line the Trump government is taking that there will be no new funding and the number will fall well short of analysts expectations for $500 to $1 Trillion. Powell said that the funding will eventually run out and households will have to cut back spending to save homes and therefore derail the recovery as the labour market falters.

The USD Index found some late sellers into the US close to fend off the bulls. Price has been on the march higher on the back of safe haven buying but mixed expectations for a further stimulus package saw some buyers close out long positions. News that the Democrats are working on a $2.2 trillion coronavirus stimulus package that could be voted on as early as next week, helped support the sellers although this seems unlikely to be passed and we expect further upside pressure on the USD in the near term. The EURUSD managed to find some buyers as the dollar fell to lift price up off the 1.1640 area. If price is to find support we expect to see a higher low as a retest from sellers fails. This will depend purely on the USD and also how traders react to the worsening covid numbers in Europe. The GBPUSD faired better than the Euro as price was roughly supported on the earlier USD strength and was quick to rally on the dollar pullback. Price was supported by news of a new jobs support program which may lead to a short term squeeze on sellers. The AUDUSD finally found some respite from the selloff which started 300 pips higher. We expect that there may be a further squeeze on recent sellers as the dollar pauses its rally and US Indexes hover around lows. The USDJPY continued higher although the rally is running out of steam as sellers edge into the action around 105.500.

SPOT GOLD was continuing to move lower in the Asian session but found some support late in European trade as the USD turned down. Bulls are still not out of the woods as lower highs continue to hold. Crude Oil found support as buyers were happy to step in below 39.50 and push prices higher through the Asian session into the close of the US. The action remains choppy though and will not take much prompting to selloff if share markets get hit again as Oil demand concern remain. Copper was hit hard again late in the European session but managed to bounce back just as hard to end well up off the session lows. The flush may be what the sidelined bulls are waiting for so watching now for a higher low to hold above the 1.9555 area for a squeeze higher.

Cryptocurrencies bounced back overnight to make back some of the previous losses. Bitcoin is currently trading at $10652.6 up 4% while Ethereum is at $346.07 up 6.86% and Ripple is at $0.23152 up 3.12%.

The ASX200 managed to fend off a lot of the selling pressure yesterday to minimize losses into the close as the index ended down 48 points to 5875.9. All sectors were weaker at the close as the Gold sector took the brunt of the selling ending down 4.03% while IT was next ending down 2.71%. Falling stocks outnumbered advancing ones by 921 to 369 and 302 ended unchanged.

The ASX200 is expected to open up 10 points but may have a relatively flat session into the weekend and be contained in a narrow range.

ECONOMIC DATA OUT TODAY (AEST)

GBP Public Sector Net Borrowing 4pm

USD Durable Goods Orders Data 10:30pm

USD FOMC Member Williams Speaks 5:10am

SPI200 INTRADAY LEVELS TO WATCH

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