It’s hot outside! And although the coronavirus is still running rampant, it seems as if traders are still taking holidays. It was a slow, monotonous week, and we may see more of this heading into the end of summer. There were several “smaller” events, but nothing to get the market’s juices flowing. There has been a spike in coronavirus cases is several areas around the globe, though the markets seem a bit desensitized. The RBNZ left rates unchanged, however they did increase the size of their long-term asset purchase plan. Next week will bring the US Democratic National Convention to Milwaukee, Wisconsin, where Joe Biden will accept the Democratic nomination. In addition, we will get our first look at global August data on Friday with manufacturing and service PMIs.
Coronavirus outbreaks continue throughout the world, though the markets seem unfazed. Auckland, New Zealand has gone back under lockdown after 100 days without a single case. They are even considering postponing elections in September. Germany has seen the most new cases since early May and the Health Minister has emphasized that the people of Germany must restrict contact with others to stop the coronavirus development. In addition, France has confirmed over 2,800 new case for the 3rd straight and the 7-Day Moving Average is above 2,000 for the first time since April! Traders this week will have to see if the global trend of higher cases continues. Any headlines of vaccines have been giving stocks a pop, though not materially.
The lockdown in Auckland, New Zealand helped the Reserve Bank of New Zealand in their decision to increase the size of their long-term asset purchase program by NZD$100 billion. And with the recent bout out coronavirus cases in Victoria, neighboring Australia’s Central Bank Governor Lowe did not rule out negative rates, although he did say he would prefer the Australian Dollar to be lower.
In the US, Congress has gone into recess and will not be back until September. Therefore, President Trump’s Executive Orders (which he signed last weekend) remain in place. These include deferred payroll taxes that fund social security and medicare for people earning less than $100,000, $300/week federal unemployment insurance (if states kick in funds as well), an extension of the moratorium on servicing student loans and a renewal of the ban of some evictions and foreclosures. What now you may be asking? Nothing! When congress resumes in September, they will take up the issue again.
In the meantime, this week is the US Democratic National Convention, in which Joe Biden will be selected as the nominee for the Democratic Party to face current President Donald Trump in the Presidential election on November 3rd. Joe Biden selected a running mate this week to be his Vice President, California Senator Kamala Harris. Depending on which poll you read, Biden leads Trump by roughly 10 points. The lead will likely grow for Biden by the end of the week as candidates usually get a “bounce” after their conventions. The US Republican National Convention will be the following week, in which Donald Trump will accept the nomination for the Republican Party.
Though earnings season has all but ended, there are a few earnings reports to note this week, including BHP and JD.com on Monday, WMT and HD on Tuesday, LOW and NVDA on Wednesday, BABA on Thursday, and PDD on Friday.
On the economic data front, it will be a light week. However, we will get our first look at global PMI data for August on Friday. Traders will be watching to see if the global economy has slowed and/or halted after the initial bounce in June and July. A slowdown may have traders weary with coronavirus cases picking up heading into the fall. Other economic data is as follows:
- Japan: GDP Growth Rate QoQ Prel (Q2)
- US: NAHB Housing Market Index (AUG)
- Australia: RBA Meeting Minutes
- US: Housing Starts (JUL)
- US: Building Permits (JUL)
- OPEC – JMMC Meetings
- New Zealand: PPI QoQ (Q2)
- Japan: Trade Balance (JUL)
- UK: Inflation Data (JUL)
- EU: Inflation Rate (JUL)
- Canada: Inflation Rate (JUL)
- US: FOMC Minutes
- Crude Inventories
- Germany: PPI (JUL)
- US: Initial Jobless Claims (week of August 15th)
- US: Philadelphia Fed Manufacturing (AUG)
- Global: Manufacturing PMI Flash (AUG)
- Global: Services PMI Flash (AUG)
- Japan: Inflation Rate (JUL)
- UK: Retail Sales (JUL)
- Canada: Retail Sales (JUN)
- EU: Consumer Confidence Flash (AUG)
- US: Existing Home Sales (JUL)
Chart of the Week: Daily Spot Gold
Last Friday, spot gold (XAU/USD) put in a bearish engulfing candlestick at all-time highs near 2075, with an RSI reading near 90. It shouldn’t have been that much of a surprise that gold moved lower this week (however down nearly 5% may have been a surprise). The precious metal sold off dramatically on Tuesday from 2030 down to a low of 1901, before piercing the prior highs near 1885 on Wednesday. This allowed the RSI to unwind back into neutral territory, where it remains. XAU/USD was higher into end the week, setting up a potential consolidation pattern for another move lower, possibly targeting 1760. This is the 50% retracement level from the March 16th lows to the August 7th highs. First resistance is Thursday’s highs near 1966. Above that is horizonal resistance near 2019, and then the all-time highs at 2075. First support is Wednesday’s lows of 1863, then the 38.2% Fibonacci retracement from the previously mentioned timeframe and then horizontal support near 1818.
As far as economic events are concerned, next week could be another slow one. With US congress in recess and the Democratic National Convention taking place, expectations are low for any US political activity as well. With some market participants on holiday, it may be slow through the remainder of August. Watch the coronavirus numbers next week in order to determine market direction.
Have a great weekend, and please remember to always wash your hands!