Market Quick Take - May 29, 2020

What is our trading focus?

• US500.I (S&P 500 Index) and USNAS100.I (NASDAQ 100 Index) – The S&P 500 managed to pull to new highs for the cycle briefly yesterday above 3050, while the Nasdaq100 came up a bit short. Both averages pulled back later in the day to finish the day unchanged. The two averages are in somewhat different places, as the S&P 5000 has crossed above a key retracement level and the 200-day moving average around 3000 over the last few sessions, while the Nasdaq 100 has yet to close above last Wednesday’s high.
  
  
• OILUSJUL20 (WTI crude) and OILUKJUKL20 (Brent crude) - have both spent the week consolidating below key resistance at $35/b on WTI and $37.30/b on Brent. Both levels representing their 38.2% retracement of the January to April sell-off. EIA’s weekly stock report showed a surprise 8-million-barrel rise in US crude stocks. Mostly due to arriving barrels from Saudi Arabia after their short-lived dump and pump strategy in April sent millions of barrels towards US refineries. Gasoline demand meanwhile continued to recover while oil stocks at Cushing was down for a third week.
  
  
• XAUUSD (Spot Gold) - trades close to $1720/oz for a second day following the failed correction attempt earlier in the week. Tensions between the US and China may rise further ahead of the weekend with Trump expected to announce new policies on China. Dollar weakness and softer US real yields (as breakeven yields move higher) have also added to the underlying support for bullion. A break above $1723 potentially signaling renewed strength into the weekend.
  
  
• XAGUSD (Spot Silver), one of the best performing commodities this week, is once again challenging resistance at $17.50/oz with its discount to gold falling to a ten-week low.
  
  
• TWTR:xnys (Twitter) - shares down 7% over two sessions as the company launched a fact-checking label on some of Trump’s tweet two days ago, and Trump’s response yesterday signing an executive order on social media under section 230 of the Communications Decency Act that social media companies cannot keep their liability shield if they engage in censoring political content.
  
  
• EXV5:xetr (European carmakers) - Renault announces this morning that it is cutting 14,600 jobs globally to slash costs. With an industry price-to-book ratio of 0.6x the market is pricing in disastrous profitability and low growth. But despite this backdrop European carmakers have technically been strong for weeks and charting into new territory since the rally started in March. Renault news this morning could fuel further positive sentiment.
  
  
• EURUSD – EURUSD has followed through higher and done so with more conviction than other USD pairs, with EURCHF also trading above recent resistance. The confirmation of euro strength after the fitful initial move above 1.1000 in EURUSD comes after the EU this week announced major fiscal efforts to bring stimulus to the EU economy now and in the future 7-year budget. The move has opened up the range toward 1.1400 and higher on the chart.
  
  
• USDJPY – the USD outlook has been particularly pivotal of late, with the chief thing holding back any more notable signs of broadening USD weakness the lack of participation of EURUSD and the very quiet USDJPY. The former is clearly on the move since yesterday, and USDJPY has dipped to a new low for the week overnight.
  
  
• USDCNH – as we have noted in previous days, we continue to watch China’s currency closely for signs of an intent to devalue in response to tensions with the US. Another CNH is of increasing interest as well – the EURCNH, which is now trading within a percent of what many might consider an important resistance level toward 8.00 - which has capped the action on multiple occasions since back in 2017.

What is going on?

US Weekly Initial Jobless Claims were in at over 2.1M, largely in line with expectations, while the Continuing Claims number dropped sharply, a possible sign of good news for those out of work finding new positions as the US economy opens up. Next week, the overall payrolls numbers are expected to show a fall of about 9.5 million in the case of the US May ADP private payrolls data and 8M for the official May Nonfarm Payrolls Change data series – this compares with –20.2M and –20.5M for the two series in April, respectively.

What we are watching next?

US President Trump announcement on policy directed at China: President Trump yesterday said yesterday that “We’ll be announcing what we’re doing tomorrow with respect to China. And we are not happy with China.” No time specified for the Trump press conference.

Economic Calendar Highlights (times GMT)

• 0730 - Sweden Q1 GDP
• 0800 – Norway May Unemployment Rate
• 0900 – EU Flash May CPI
• 1230 – US Apr. PCE Inflation
• 1230 – Canada Mar. GDP
• 1340 – Sweden Riksbank Governor Ingves to Speak
• 1345 – US May Chicago PMI
• 1400 – US May Final University of Michigan Sentiment
• 1500 – US Fed Chair Powell to Speak