TRACKRECORD DAILY
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TRACKRECORD DAILY

Volatility Remains High

Size your trades to last the distance

All the trades that were doing well all week retraced ahead of the weekend as Nasdaq and precious eased off the highs and USD recovered from the lows. The overall trend remains intact, but the market rarely goes up in a straight line. Volatility will remain high, hence it’s important to size trades to last the distance and not to be taken out by random noise.

TRADING PLAN

  1. AUD — Having reduced longs ahead of resistance at 0.7140, dips to 0.7030–40 can now be bought. Uptrend intact.
  2. Gold & Silver — Retracement is here and that is to be expected. Long term uptrend is intact.
  3. EUR/JPY losing some ground due to USD strength vs the EUR. 123.80–90 is the strong support

WHAT HAPPENED YESTERDAY

As of New York Close 7 Aug 2020,

MARKET MOVEMENTS

  • Dollar bounced on Friday after U.S. job growth for July surpassed low expectations but still showed a sharp decline from June, while investors kept an eye on ongoing stimulus talks in Washington. The U.S. Labor Department’s report showed nonfarm payrolls increased by 1.76 million in July. While that was better than the 1.6 million forecast, it was still sharply lower than the record 4.8 million jobs added in June.
  • The Employment Situation Report for July can fairly be labeled better than feared given the surprisingly weak ADP Employment Change Report seen earlier in the week. The government’s official report indicated that private-sector payrolls increased by 1.46 million in July. The nonfarm payrolls number was even larger at 1.76 million. The key takeaway is that the labour market is recovering from the shock of the COVID-induced seizure, but still has a long way to go, as evidenced by the 10.2% unemployment rate (expected 10.5%) and a 55.1% employment-population ratio that is far below the 60.7% level seen a year ago.
  • Notably, the market didn’t show too much concern over the lack of a coronavirus relief bill or Trump signing executive orders banning U.S. citizens from using TikTok and WeChat 45 days from Thursday, unless they are sold to other companies beforehand.

HEADLINES:

WeChat U.S. BAN CUTS OFF USERS LINK TO FAMILIES IN CHINA

Trump’s ban on transactions using popular Chinese messaging app WeChat will cut ties to families and friends in China, millions of users in the United States fear, as they become the latest casualties in the standoff between the two nations.

WeChat, owned by Chinese internet giant Tencent Holdings Ltd (0700.HK), is popular among Chinese students, expats and some Americans who have personal or business relationships in China. Most popular messaging apps in the United States, including Facebook Messenger (FB.O), Whatsapp and Telegram have been blocked in China.

The ban will cut off far more than the up to 6 million Chinese people who live in the United States. In the past three months, WeChat has had an average of 19 million daily active users in the United States, according to analytics firms Apptopia.

Thematic Context: In an increasingly polarized world caught in a Thucydides trap (US vs China) which could possibly split the world monetary order into two hegemonic zones,

  1. Pro-China aligning with One Belt One Road initiative (commodities priced in RMB) and
  2. Pro-U.S. aligning with Blue Dot Programme (commodities priced in USD).

TRUMP SIGNS VIRUS RELIEF ORDERS AFTER TALKS WITH CONGRESS BREAK DOWN

Trump signed executive orders on Saturday partly restoring enhanced unemployment payments to the tens of millions of Americans who lost jobs in the coronavirus pandemic, as the United States marked a grim milestone of 5 million cases.

Trump said the orders would provide an extra $400 per week in unemployment payments, less than the $600 per week passed earlier in the crisis. Some of the measures were likely to face legal challenges, as the U.S. Constitution gives Congress authority over federal spending.

Trump also said he was suspending collection of payroll taxes, which pay for Social Security and other federal programs, an idea that he has repeatedly raised but has been rejected by both parties in Congress. He said the suspension would apply to people making less than $100,000 per year. His orders would also stop evictions from rental housing that has federal financial backing and extend zero percent interest on federally financed student loans.

PELOSI, MNUCHIN SIGNAL OPENNESS TO RESUME COVID-19 AID TALKS

Both sides appeared willing to consider a narrower deal that would extend aid until the end of the year and then revisit the need for more federal assistance in January, after November’s election.

“Let’s pass legislation on things that we agree on,” Mnuchin told Fox News in an interview.

“We don’t have to get everything done at once,” he added. “What we should do is get things done for the American public now, come back for another bill afterwards.”

Pelosi, in a separate interview on “Fox News Sunday,” dismissed the executive orders and memorandums Trump signed on Saturday as “illusions” that would not quickly or directly help Americans, and said a deal between congressional Democrats and the White House was still needed.

Thematic Context: “We can move very quickly with the Democrats on these issues. We’ve moved quickly before, and I see no reason why we can’t move quickly again,” Mnuchin said. “And if there are issues that take longer, we’ll deal with those as well.” — 27th July 2020

“ We believe Mnuchin, and this impasse is a movie we have seen before. A deal will come, or the markets will force it out of their hands. Any dips in the Nasdaq is a gift to be bought.” — 3rd Aug 2020

DAY AHEAD

Congressional Talks Take Centre Stage

Congressional talks in the United States on a new virus relief package will dominate the market headlines yet again in the coming week as the durability of the latest risk-on episode rests on a deal being reached. But investors will also be keeping a close watch on US retail sales figures to gauge how well consumption is holding up amid renewed virus restrictions. Progress on the recovery will be preoccupying the GBP too as UK GDP numbers for Q2 and June are due, while the Reserve Bank of New Zealand is unlikely to be fazed by the improving mood when it meets for its latest policy decision.

SENTIMENT

FX

STOCK INDICES

Trading Tip (Click Pic for the full tip)

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