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Markets Welcome Solid Economic Data and Ignored Coronavirus Numbers

Markets looked rather indifferent to the resurgence of coronavirus infections. Daily new cases surged to new high above 200k. Total cases broke 11m while deaths is closing in to 530k. But traders and investors couldn’t care less. Instead, sentiments were lifted by hope of recovery ahead, with Q3 already started. US ISM manufacturing turned back into expansion while non-farm payrolls grew 4.8m. France PMIs also turned back into expansion while UK PMIs steadied. China’s PMI services even suggests strong growth ahead.

Positive sentiments were reflected in NASDAQ and China’s Shanghai SSE, but not so much in other stock indices. While commodity currencies ended the week higher together with Sterling, strength is Aussie is far too weak considering the late rally in Chinese stocks. Euro also ended as one of the weakest together with Dollar and Yen. It might take a couple of weeks more for the markets to sort out a coherent direction among themselves.

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China Shanghai SSE staged massive rally on recovery optimism

Chinese stocks staged a massive rally last week. There seemed to be growing optimism of a solid recovery as both the official PMIs and Caixin PMIs pointed to underlying strengthen in services. The optimism was not much reflected in other markets, including currencies yet. But as China was the first economy hit by the coronavirus, it could also be the first, to come out of the impacts. We’ll see if the rally in Chinese stocks could spread to other markets in Q3.

Shanghai SSE’s strong break of 3127.16 resistance should confirm completion of the medium term corrective pattern from 3288.45, with three waves to 2646.80. Further rise should be seen to 100% projection of 2440.9 to 3288.4 from 2646.8 at 3494.35 next. That would be the key hurdle for the index, as it’s close to 38.2% retracement of 5178.19 to 2440.90 at 3486.54.

NASDAQ extended record run but up trend looks stretched

US stocks were relatively sluggish except that persistent strength is seen in NASDAQ. In a holiday shortened week, NASDAQ hit record high of 1310.36, before closing at 10207.63. Still, the current up trend looks a bit stretched with bearish divergence condition in both daily MACD and RSI. It’s also closed to 100% projection of 6190.17 to 9838.37 from 6631.42 at 10279.62.

Break of 9663.61 support should indicate that the overdue pull back is starting. Nevertheless, NASDAQ has been defying out calls for tops so many times. Sustained trading above 10279.62 would pave the way to 138.2% projection at 11673.23 next.

Dollar index staying in sideway consolidations

Dollar index continued to gyrate in range last week. Price actions from 95.71 short term bottom continue to look corrective. Hence even in case of another rise, upside would likely be limited by 38.2% retracement of 102.99 to 95.71 at 98.49, or even lower at 55 day EMA (now at 98.09). Another fall could be seen through 95.71 to 94.65 key support before forming a bottom.