2nd July 2020 - Trade balance, risk catalysts will offer immediate direction, US NFP numbers a focus

Good Morning,

Market Headlines

Promising vaccine news coupled with better than anticipated ISM data kept positive sentiment intact which saw the third straight day of gains for the S&P 500 up 0.5% higher & the NASDAQ also rose 1.0%. US 2yr treasury yields rose from 0.15% to 0.17%, while the 10yr yield rose from 0.67% to 0.70%. On the commodities front, Brent futures were up 1.7% to $42.00, copper also gained 0.7%, iron ore declined by 0.6% to $99.45, and gold was off 0.5%


US Dollar Index closed 0.3% lower for the day.

EUR traded between 1.1185 and 1.1285.

USD/JPY ranged between 107.70 to 107.38.

AUD ranged between 0.6890 to 0.6944.

NZD traded between 0.6450 to 0.6490.

AUD/NZD traded from 1.0700 to 1.0680.

AUD Thoughts

- AUD/USD seesaws between 0.6905 and 0.6925 following its uptick to one week high of 0.6944.

- Market sentiment benefits from upbeat economics, positive news on virus vaccine despite surging

COVID-19 cases in the US.

- FOMC minutes reiterated readiness to act with clear forward guidance likely coming soon.

- Aussie trade balance, risk catalysts could offer immediate direction, US Non-Farm Payroll numbers

will be the spotlight afterward.

With a clear break above a three-week-old falling trend line, AUD/USD prices are likely to rise further towards 0.6975 and 0.7000 numbers to the north. However, relative strength index (RSI) conditions might question the bulls afterward. On the downside, the pair’s declines below 0.6900 could recall sellers targeting 0.6860 support confluence including 21-day exponential moving average (EMA) and an ascending trend line from June 15.

Event Risk Data Today

Australia: May Trade Balance numbers to be released today and likely to post a reasonable surplus given the decline in demand for imports, markets expecting an increase to $9.0bn from $8.8bn.

Eurozone: Unemployment Rate is expected to rise to 7.7% for June, this number would have been much higher without government support to reduce the impact of the virus

US: Trade Balance numbers for May is expected to come in weaker with markets forecasting -52bn. Focus will also be on Non-Farm Payrolls numbers with market expectations of job gains from 2509k in May to 3090k in June. May Durable Goods and Factory Orders will also be released

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