Nasdaq broke Psychological Level

If volatility should remain contained, the market is likely to grind higher. Precious metals having tried the downside for the past few sessions are now ready to push higher.

Nasdaq futures broke below the psychological level of 11,000 in the early hours of the Asian trading session. Stops were likely triggered, and bears got excited before it spent the rest of the day grinding higher. When the New York session started, tech stocks which were vilified in the past 3 sessions led the charge higher.

On the day of not much significant news, it’s just a case of weak longs having been stopped out and the short-term speculators have gotten short so it’s now just position covering and back to antagonising the bears.

If volatility should remain contained, the market is likely to grind higher. Precious metals having tried the downside for the past few sessions are now ready to push higher. In FX, all eyes on the ECB policy meeting tonight and possible headlines for the latest, and the supposed final episode of Brexit negotiations.

TRADING PLAN

Gold & Silver -Price action did get better as was indicated by the way it traded in the past few sessions. Keep long.
AUD -

AUD/USD — Stronger support at 0.7190–0.7200 almost breached but ultimately held. Take the opportunity to reduce some longs close to 0.7300

AUD/NZD — Support at 1.0790–1.0800 and resistance at 1.0890–1.0900 holding despite several attempts to break it. Reduce some to allow for dip-buying.

3. EUR/JPY — Stuck in recent range of 124.40–50 to 126.40–50. Back to middle of range. Reduce some as it’s ECB policy meeting today.

Key risks US equity market weakness and possibility of higher USD yields leading to strong USD.

WHAT HAPPENED YESTERDAY

Market Movements as of New York Close 9 Sep 2020

Dollar slid from a four-week high on Wednesday, led by losses against the EUR after a news report said European Central Bank officials have become more confident in their outlook for the region’s recovery and will likely reflect that in today’s policy meeting statement. AUD and NZD powered higher as the day progressed, tracking the gains in the US stock markets.
S&P 500 rebounded 2.0% on Wednesday amid gains across all 11 of its sectors, although the market did lose some steam into the close. The Nasdaq Composite rose 2.7% amid strength in technology stocks, while the Dow Jones Industrial Average (+1.6%) and Russell 2000 (+1.5%) underperformed.
There was no fundamental news catalyzing the buying activity, and there were several negative-sounding headlines that the market brushed aside. To name a few, AstraZeneca (AZN 53.64, -1.07, -2.0%) paused its COVID-19 vaccine trial in the UK due to a serious adverse reaction in a patient, there was some reported pessimism in Washington regarding another coronavirus relief package before the election, and several airlines remained cautious about the travel demand outlook.
The Bank of Canada on Wednesday held its key overnight interest rate steady at 0.25%, as expected, and said the bounce-back in economic activity in the third quarter looks to be faster than previously anticipated. Despite that slight optimism, the central bank noted that as the Canadian economy moves from the recovery phase to a bumpier recuperation phase it will continue to require extraordinary monetary policy support. The optimism fueled a gain of around 0.5% for the CAD.

HEADLINES:

BREXIT IN CRISIS: EU ‘VERY CONCERNED’ BY UK PLAN TO BREAK DIVORCE TREATY

Britain plunged Brexit trade talks into crisis on Wednesday by explicitly acknowledging it could break international law by ignoring some parts of its European Union divorce treaty, prompting a rapid rebuke from the EU’s chief executive.

Brushing aside warnings from Brussels that breaching the treaty would prevent any trade deal being struck, London said in the proposed legislation that it would ignore parts of the Withdrawal Agreement, which was only signed in January.

The bill says Britain may ‘disapply’ provisions including one that relates to Northern Ireland and state aid. Johnson’s team see state aid as crucial for ensuring they can incubate new global technology firms without hindrance from Brussels.

While Johnson has said he wants a deal by Oct. 15, or London would go for a no-deal Brexit, the EU says the negotiators must have had a legal text agreed by the end of October to leave the bloc’s 27 members time to ratify by the end of the year.

Thematic Context: “The bill is intended to allow all companies to be able to trade unhindered in Britain’s four nations, to transfer powers to Britain allowing it to replace some of the EU’s spending programmes, and set up a new body to monitor internal trade. Northern Ireland, which borders EU member Ireland, has always been a stumbling block in talks, and almost killed off the Brexit deal until Johnson found agreement with then Irish Prime Minister Leo Varadkar last year. Any Brexit shenanigans will weigh on the GBP, especially during an environment of a strengthening Dollar.” — 10th Sep 2020

HUAWEI FEARS IT MAY BE EXCLUDED FROM POLAND’S 5G NETWORK

On Tuesday, Poland published a draft cybersecurity law, giving interested parties 14 days to comment.

The bill says telecoms operators would not be allowed to buy new equipment from suppliers seen as “high risk” and would have to replace existing equipment from that supplier within five years. For “moderate risk” suppliers, only buying new equipment would be forbidden.

Thematic Context: “U.S. and Western Europe’s (Germany and France) relationship has been precarious since Trump took office, two of the main factors that caused fissures were the Nordstream Pipeline (preventing cheap gas supply to Europe from Russia), Huawei Issues (threatening Europe for buying cheap but quality 5G components due to espionage and security issues).

To quote a snippet from the New York Times in 2019: “The intensity of the U.S.-Polish bilateral relationship cannot be underestimated. ”We believe that Poland will stand to benefit from U.S. investments in the coming years, and the Polish Zloty will be an interesting development to watch when EM currencies come back in vogue.”

The U.S-Poland alliance is solidifying and we foresee it to be the new “power relationship” for American diplomacy in Europe and the Baltics. Watchout for more U.S. FDI into Poland and for greenshoots in the once dormant Polish economy.” — 24th Jul 2020

AstraZeneca PAUSES VIRUS VACCINE TRIAL AS PARTICIPANT ILLNESS INVESTIGATED

AstraZeneca’s (AZN.L) suspension of global trials of its experimental coronavirus vaccine after an illness in a study subject in Britain has cast doubt on prospects for an early rollout of one of the most advanced COVID-19 vaccines in development.

AstraZeneca, which is developing the vaccine with Oxford University researchers, said on Tuesday it had paused late-stage trials to allow an independent committee to review safety data, and it was working to minimize any potential impact on the timeline.

The patient was reportedly suffering from neurological symptoms associated with a rare spinal inflammatory disorder called transverse myelitis. AstraZeneca on Wednesday said a final diagnosis was still pending as more tests are carried out.

U.S. National Institutes of Health Director Francis Collins told a Senate committee hearing on Wednesday that work was underway “to see if anybody else who received that vaccination or any other might have had a similar finding of a spinal cord problem.”

DAY AHEAD

ECB

ECB is expected to keep policy unchanged, but markets will be watching ECB President Lagarde’s press conference for comments on the EUR which have risen to multi-year highs of late. Recent reports suggest several Governing Council members are uneasy about the speed and size of the euro rally. Should she address the strength in the currency, the EUR will likely retrace further.