Will Tesla Deliver on “Battery Day” Hype?

For months, CEO Elon Musk has been teasing the world about the company’s potentially game-changing developments in battery technology. Even as recently as September 11th, he tweeted saying that “many exciting things” will be announced at the event. Such has been the excitement that Tesla has even become the world’s most-read about company over the past one month!

And so far this month, shareholders have been taken on a wild ride. Since Tesla posted a record high on August 31st, which also coincided with its 5-for-1 stock split, its stock has been buffeted by moves either way that averaged over six percent per trading day. Despite the volatility, Tesla’s market cap is still 437.12 percent higher compared to the start of the year!

What’s so exciting about a battery?

Investors are now speculating that the world’s largest maker of electric vehicles (EV) could unveil their “Million-Mile” battery on Tuesday. This is a monumental development, given that the batteries that are currently in Tesla vehicles has a warranty that lasts 150,000 miles or eight years, whichever comes first.

You would clock up a million miles if you circled the globe 50 times! However, before you get your hopes up over such a feat, although the million-mile battery promises to hold up during the journey, the other parts of the car would likely wear off well before you can conclude such an epic road trip.

Still, EV makers have taken giant strides in bringing down the cost of these batteries, chipping away at the premium over their counterparts with internal combustion engines. Although the battery accounts for roughly about half the total EV’s cost at present, it is expected to make up just 20 percent of the total EVs cost by 2025, according to a BloombergNEF estimates.

The US Department of Energy has also set out a target to ultimately lower the cost of EV batteries down to $80/kWh. Such a benchmark would guide investor expectations on Tuesday, and they’ll be eager to see if Musk could even announce cost parity for its batteries, while gleaming for clues over Tesla’s road map towards incorporating these new batteries into its production vehicles.

Ultimately, any major improvements to this crucial component in electric vehicles could make the cars more affordable, boost the company’s fundamentals, and potentially even whip up more positive sentiment towards Tesla’s stocks.

Musk to markets: Hold your horses

Aware of the risk of misaligned expectations, Musk has already, pre-emptively, poured some cold water on the frothing frenzy.

On the eve of “Battery Day”, he tweeted that whatever Tesla announces on Tuesday “will not reach serious high-volume production until 2022”, while still aiming to ramp up battery cell purchases from its partners such as Panasonic, LG and CATL. He also forecasted “significant shortages” beyond the next two years, unless Tesla also takes action themselves.

The pair of tweets injected another bout of volatility into Tesla’s shares, which fell by as much as 8.4 percent in extended trading, after posting two consecutive days of gains during the regular session.

So, all that remains is to be seen now is whether months of pent-up hype, surging stock valuations, and a rumour mill that’s gone into overdrive will reach a climatic ending on “Battery Day”, or risk disappointing shareholders into booking their profits and heading for the exit door.

Written on 09/22/20 08:00 GMT by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Stocks Tumble After Powell’s Warnings Over US Economic Recovery

Asian equities are in a sea of red, after US stock indices posted declines on Wednesday. The Dow Jones index was the sole exception, as it eked out a 0.13 percent advance, aided by the climbs in the industrials and financials segments. The US central bank left interest rates unchanged at the record low during their meeting this week, and suggested that rates could be kept near zero until the year 2023, or at least until the US can return to maximum employment and reach the average two percent inflation. Such an ultra-accommodative interest rate environment should keep global equities well bid over the coming years. In technical terms, the Dow may be able to call upon its 50-day moving (MA) average to guide the index higher eventually. However, at the time of writing, the FXTM trader’s sentiment is short on the Wall Street 30 (Mini).

However, stocks bulls may not get the near-term boost that they desire, considering the stalemate in negotiations over the next round of US fiscal stimulus. Despite US President Donald Trump saying on Wednesday evening that he was more open to bridging the gap with Democrats, markets remain doubtful that the next support package can arrive before the elections on November 3. Global investors are also fearing a delayed outcome to the polls, with the political uncertainty further delaying the much-need financial support. Such a major event risk, if it happens, is then likely to trigger heightened volatility in global equities. At the time of writing, US stock futures are edging slightly lower.

The concerns over the delayed US fiscal stimulus are also set to colour the jobless claim data due out later Thursday, with both initial claims as well as continuing claims expected to show slight declines. Yet, with about 13 million Americans still having to rely on unemployment benefits along with the more than 800,000 still being added to that list per week, such figures only underscore the need for more financial support for the vulnerable segments of the US economy. Further signs that the recovery in the US jobs market is stalling, even as the world’s largest economy presses on with its reopening, could trigger more risk aversion which may push the Dollar index closer to its 50-day MA.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

A Not-So-Happy Birthday for OPEC

OPEC’s birthday week holds key events that could influence the near-term performance of Oil prices. Later today, OPEC is set to release its Monthly Oil Market Report, complete with its outlook on global demand and output. Then on Thursday, the OPEC+ Joint Ministerial Monitoring Committee is scheduled to meet and discuss the efficacy of its supply cuts, while assessing the level of compliance among members.

Recall that back in April, OPEC+ agreed to an unprecedented supply cuts deal, shaving off 9.7 million barrels per day (bdp) from its collective output, only to then ease off by about two million bpd starting last month in hopes that global demand will stage a sustained recovery.

However, things haven’t quite panned out as they hoped.

Both Crude and Brent are coming off back-to-back weekly drops for the first time since April. On a month-to-date basis, Brent and WTI futures have fallen by over 12 percent respectively, leaving both to be ‘scooped up’ by their 100-day simple moving averages. Both these instruments are also trying to claw themselves out of the ‘oversold’ domain, judging by their respective 14-day relative strength indices having dipped into sub-30 levels recently. At the time of writing, Brent and WTI futures are about 35 percent lower so far in 2020.

The slide in Oil prices comes amid signs that the global demand recovery appears to have stalled. Diesel stockpiles in Singapore are at their highest since 2011, while Saudi Arabia, Iraq, and other Gulf producers have slashed the pricing on their respective crude grades to the US and Asia. Oil supermajor, BP, recently cited the risk that global demand may never recover to pre-pandemic levels, while traders are buying up tankers in case they need to hold crude supplies for months. According to CFTC data, short-selling on Oil has risen to its highest levels since the historic crash in April this year, when WTI futures were sent into negative territory.

This week, investors will be monitoring how much sway the alliance could still have over global markets, even as these major Oil-producing nations aim to shore up prices. While its 60th birthday celebrations had to be put on hold due to Covid-19 restrictions, OPEC may not be able to hold off further intervention for much longer if Oil prices keep unwinding more of its recovery from the past five months.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

50-Day Moving Average to the Rescue

This technical indicator calculates the closing price over the past 50 days and averages it out, so as to give the investor a better idea about the asset’s recent trend.

This week, it played its role as a support level, and it was evident in multiple assets.

In recent days, the Nasdaq posted its fastest-ever correction from a record high, falling by just over 10 percent within three trading days. The index dipped below its 50-day simple moving average (SMA), only to rebound and register its best day since April. Market participants saw the selloff as an opportunity to “buy the dip”, and were unfazed by the recent rout that wiped out US$ 2 trillion from stock markets.

The same pattern was also evident in the S&P 500, as it bounced off its 50-day SMA before advancing two percent, which was the benchmark’s biggest single-day advance since June 5th. This technical indicator has proven to be a reliable support level, showing its worth two other times since the index broke back above the 50-SMA in April.

And this trend wasn’t just confined to riskier assets this week.

Even Gold exhibited the same pattern on Tuesday, with Bullion bulls drawing comfort from the fact that, since end-March, forays below its 50-day SMA have been short-lived. The precious metal is now on course to register its 8th consecutive quarter of gains. If Gold can post 5 more quarterly gains in a row, it would beat the run of 12 that was set between 2008 and 2011.

Gold has been able to take advantage of the weaker Dollar overnight, along with its traditional role as a hedge against inflation, considering that real yields on 10-year US Treasures remain mired in negative territory close to minus one percent. Still, Gold and the Dollar index (DXY) may see near-term gyrations, pending the US inflation data due Friday.

Other key events that could move markets before the trading week is over include the European Central Bank policy decision and the US weekly jobless claims, both due today. Ongoing Brexit negotiations, as well as discussions over the next round of US fiscal stimulus could also sway global sentiment.

Amid such uncertain times, investors can perhaps draw comfort from the notion that some things can still be relied on.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Bye-Bye “Hot Money”, Hello “Real Money”?

The Nasdaq 100’s 4.77 percent drop on Tuesday officially brings the index into a technical correction, having tumbled by over 10 percent from its record high and now testing its 50-day moving average as a support level.

The worst of the selloff though may be over, with Nasdaq futures slightly higher at the time of writing. Also note that the VIX index, also known as the fear index, has come off the 3-month high it posted last week, though still relatively elevated above the 30 psychological level and higher than its long-term average of around 20.

Prior to the recent selloff, the Nasdaq 100 was coming off the back of its fastest run this century, having doubled in the space of 20 months and crossing above the 12,000 psychological level. Much had been made about valuations reaching nose-bleed heights and pricing in perfection, while the index’s 14-day relative strength index ventured seemingly without a care deep into overbought territory.

Investors are now being made to reckon with those warning signs, as Big Tech leads this recent selloff that has wiped out trillions in overall market value. Having basked in the market’s scorching run over the summer months, a period in which multiple asset classes including stocks, gold, and even oil posted double-digit gains, investors are perhaps bracing for the chilly months ahead.

After all, the global economy is still reeling from the effects of the pandemic, with a vaccine yet to be ready for mass roll-out. The delay in the next round of US fiscal stimulus is also testing investors’ patience, while the November US elections could inject even more doses of uncertainty into global markets.

Recent media reports about Softbank Group making massive bets on tech stocks via the options market added to the narrative that equities were being fuelled by speculation, and a lot less by fundamentals. There were enough signs that a healthy pullback to more sustainable levels for tech counters was in order.

Yet the fundamentals appear to point to a supportive environment for tech counters. The social-distancing measures around the world is set to leave societies ever more reliant on tech offerings, with their business models suited for such an environment. Markets are also awash with unprecedented fiscal and monetary stimulus, while near-zero US interest rates should buffer the appeal of equities.

For proper context, even after the startling decline, the Nasdaq remains 58 percent higher and the S&P 500 is still up by 49 percent from their March troughs, and the price-to-earnings ratios for these indices remain well above their respective long-term averages. Despite such indicators suggest that there remains a fair bit of hot air that could be let out of the overly-inflated tech sector, investors may be faced with scarce alternatives in chasing returns.

Still, it remains to be seen how much of a drop would be enough to entice “real money” investors back into US equities. Perhaps long-term investors are just waiting for the dust to settle before buying the dip.

Written on 09/09/20 08:00 GMT by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Crude’s Golden Cross May Be a Short-Term Dud

Having flirted recently with the $44/bbl handle and reaching a near 6-month high in late August, crude has since pulled back on signs that the demand recovery may not be as robust as expected.

From a technical perspective, Oil prices have formed a ‘golden cross’, with its 50-day simple moving average just about breaking above the 200-day simple moving average. Such a technical event typically heralds more gains for the asset. However, the fundamental outlook remains mired in downside risks, which has served as a drag on prices.

The concerns over the waning demand were evident in Saudi Arabia’s decision to lower its prices for October sales of its Arab Light grade to Asia, which is the largest oil-importing region in the world. Asian refiners appear hesitant to import more Oil, with India’s transport fuel demand in July and August still over 20 percent lower compared to the same period last year.

For WTI crude in particular, with the summer road trip season in the US coming to a close, transportation fuel demand is expected to be dampened as the world’s largest economy remains a long way from fully reopening. According to data from the US Energy Information Administration (EIA), US oil demand is stuck around 85 percent of 2019’s levels. Saudi Aramco also lowered the prices of its shipments to the US for the first time in six months.

Keep in mind that the above events are coming at a time when OPEC+ had decided to pare back its output cuts from 9.7 million bpd to 7.7 million bpd starting in August. Yet there are signs of rising inventories around the world. Traders are looking to store crude in tankers out at sea in Northwest Europe and the Mediterranean. They hope to sell the Oil that’s currently stored at a higher price in a few months.

Yet, such profits remain contingent on a global economic recovery that is still uncertain. Traders will be getting more crucial data over the coming days to help refine their outlook on Oil markets. The EIA will be releasing its short-term energy outlook on September 9, before announcing the US inventory report on September 10.

What is more certain is that China will have a major role in helping to support global Oil markets. With the world’s second largest economy leading the way in the post-pandemic era, its recovery will help to chip away at the excess output and inventories. Although China’s imports of the commodity have not been able to replicate the record high in June of nearly 13 million barrels per day (bpd), its August imports still registered a 12.6 percent year-on-year increase to about 11.18 million bpd. China’s air travel is also recovering rapidly, with the levels of Oil use in the world’s largest importer rising by almost 20 percent in July!

But China cannot do it all alone. The rest of the world has to pull their weight in getting a grip on their respective outbreaks, and getting their domestic economies back on track. Then only will Oil’s upward climb be more assured, unless we get a vaccine over the near term.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

New-Look Hang Seng Gains as Global Selloff Takes a Breather

The stock benchmark managed to overcome early losses to climb higher as the new trading week got underway, with all three debutants also attempting to start off on the right foot. At the time of writing, Xiaomi shares are edging higher, while Alibaba and WuXi Biologics are in the red.

Still, the inclusion into the city’s benchmark index had been a boon for the three new entrants since the announcement was made on August 14th. Over the past three weeks, Alibaba’s shares in Hong Kong had climbed by over 12 percent, Wuxi Biologics advanced more than 16 percent, while Xiaomi surged nearly 60 percent!

Asian stock markets are mostly in the green on Monday, as it tries to bring a halt to the selloff in global stocks. The MSCI’s flagship global equity index fell 2.28 percent last week, its largest since the week ending June 12th, which brought an end to a run of five consecutive weekly gains.

Investors’ nerves have been left understandably raw after last week’s selloff, led by US tech stocks. US futures are now mixed, with the slight gains in the Dow Jones futures offset by the declines in their Nasdaq 100 counterparts. European futures however are moving decisively into the green at the time of writing.

The rest of the world will have to tow their own line today, with US markets closed for Labour Day. Perhaps US market participants could use the longer weekend to mull decisively whether to extend the slide in US equities or bring a halt to the latest selloff.

Investors will also be eyeing key event risks, such as the fate of the next round of US fiscal stimulus measures, in perhaps deciding how US equities should fare over the near-term. A longer delay to another injection of support for the US economy however could mean further losses in US tech counters, with the Nasdaq 100 having already flirted with a 10 percent correction last week. The resumption of Brexit talks, as well as the ECB policy decision later this week, all add to the potential event risks over the coming days.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

AUD Drops as Australia’s Recession Confirmed

It posted a seven percent quarter-on-quarter contraction in Q2, its steepest-ever plunge, and was one percentage point worse than what markets had expected. This latest GDP reading follows the minus 0.3 percent q/q print in Q1. Two consecutive quarters of quarter-on-quarter GDP declines meet the criteria for a technical recession.

In the hours leading up to the GDP release, AUDUSD had been paring back its recent gains and fell by as much as one percent from its latest two-year high, with the 0.741 mark last seen in August 2018.

The Aussie has taken a pause so far in September, after posting five straight months of gains versus the Greenback. The breather is allowing its 14-day relative strength index to moderate from the 70 mark, which denotes overbought levels, before potentially resuming its quest to claim the 0.75 handle. However, a break below 0.73 could call upon the 0.71 mark to intervene with stronger support, although such a scenario appears less likely, barring a sudden burst of USD strength.

Keep in mind that the currency pair had strengthened nearly 20 percent since March 31, making the Australian Dollar the best-performing G10 currency since Q1. Perhaps of more significance for Aussie traders, back in June, AUDUSD was able to break out of its long-term downward trend since 2018.

The fundamental picture appears to justify the gains over recent months. Given that the Aussie is seen as a liquid proxy to the Chinese economy, the post-pandemic recovery in the world’s second largest economy has fuelled gains in the AUD. The currency has also enjoyed tailwinds from the recovery in commodity prices since Q2, along with attempts to restart the Australian economy. Such a context has made for a condusive environment for the AUD to take advantage of the weaker US Dollar. The greenshoots in Australia’s economic recovery had also been enough to allow the Reserve Bank of Australia to adopt a less dovish earlier than some of its G10 counterparts, while keeping the cash rate target at the record low of 0.25 percent.

Still, at the September RBA meeting just yesterday (Tuesday), policymakers decided to boost a key feature of its support programme in order to offset the downside risks to the Australian economy. The resurgence of cases in the Victoria has curtailed Australia’s recovery prospects, although restrictions to economic activity in Australia’s second largest state are expected to be eased in the middle of this month. Once Australia’s post-pandemic journey resumes, that may pave the way for more Aussie strength, barring any intervention by the RBA.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Powell Could Jolt Dollar, Gold

The DXY bounced off the 92.1 support level last week to now stay closer to the 93 psychological mark, as it maintains its month-to-date sideways trend.

Meanwhile, Bullion prices have been contented staying in sub-$1950 levels, perhaps still reeling from the August 19th drop of 3.67 percent, as well as the 5.69 percent plunge on August 11th.

However, all this could drastically change tomorrow.

On Thursday, global investors will be paying close attention to Federal Reserve chair Jerome Powell’s speech at the virtual Jackson Hole Symposium, which is a key annual gathering of the world’s leading central bankers. Powell is expected to give markets a heads up on the Fed’s new approach to US inflation.

For context, the Fed embarked on a review of its monetary policy framework last year, which is focused on the central bank’s strategy on dealing with inflation. This could mean significant changes are afoot for the Fed’s two percent inflation target, which was first announced back in 2012; a target it has mostly missed in the years since.

So why is this important for Dollar and gold traders?

Keep in mind that the primary driver for the Greenback and Bullion of late has been the shift in expectations surrounding US inflation over the past couple of months. The narrative has been that the Fed would tolerate faster US inflation, which erodes the Dollar’s purchasing power, prompting investors to ditch the Greenback and swarm towards Gold, with the yellow metal traditionally being seen as a hedge against inflation.

On Thursday, markets expect Powell to at least suggest that the Fed is willing to aim for inflation that’s above its two percent target.

Should the Fed chair confirm such a notion during his speech on August 27th, that could shove the Dollar and Gold out of their respective sideways trends, with the former potentially resuming its decline while restoring the precious metal to its upwards trajectory. But if Powell were to disappoint investors with vague words on Thursday, it then sets up the September 15-16 FOMC meeting for when the Fed’s new strategy could be officially unveiled.

As and when such an announcement is made, it could still jolt not just the US Dollar and Gold, but global markets as well. After all, the Fed’s rhetoric matters greatly to the markets. We only need to look at how the Dollar and Gold responded to the July FOMC meeting minutes, which were released on August 19th.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Twin Storms Could Lift Oil Prices Higher

Hurricane Marco is set to make landfall in the state of Louisiana on Monday, with the larger and potentially more damaging Tropical Storm Laura following hot on Marco’s heels. About 58 percent of Oil output and 45 percent of natural gas production in the Gulf of Mexico have already been shut, according to the US Department of the Interior.

Although hurricanes are an annual phenomenon for these oil platforms, to have two in quick succession could ensure that Gulf output stays lower for longer, potentially lifting Crude prices higher.

On the daily chart, note that Crude has edged above its 200-day simple moving average (SMA) over recent days, aided by last week’s 1.6 million-barrel drawdown in US crude stockpiles.

Looking ahead, the extent of the storms’ impact on US oil output could determine whether Crude prices can push meaningfully higher above that technical indicator (200 SMA), even as it remains guided upwards by its 50-day SMA. Crude Oil remains set to carve out a fourth consecutive monthly gain, with its benchmark futures contract having already advanced by over 4.5 percent thus far in August.

Even though five storms have already hit the US so far this year, the recovery in global Oil prices has lured producers back into the game. The total number of active Oil rigs in the US rose by 11 to 183 last week, according to Baker Hughes data. The prospects of more incoming supply could still dampen Oil’s upside.

On the demand-side however, investors are still concerned over the flare-up in coronavirus cases in Europe and Asia. South Korea is at risk of a “massive nationwide outbreak”, with the government mulling bringing back the highest level of social-distancing measures, which would hit its economic recovery. With global cases now topping 23.3 million, while deaths have exceeded 807,000, the global economic recovery could be severely hampered as major countries struggle to get a grip on the pandemic.

With Oil prices stuck between the potential supply-side tailwinds and the demand-side drag, Oil prices could well stick to its tight range until the supply-demand dynamics can demonstrate a more obvious tilt either way.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

S&P 500 Hits New Record, Now what?

After teasing investors over multiple attempts in recent trading sessions, the benchmark US stock index has finally registered a new record high after closing at 3389.78 and fully wiping out its losses since the global pandemic began. The S&P 500 is now up nearly five percent on a year-to-date basis, and US equity futures are inching higher at the time of writing.

Looking back at past instances when the benchmark index broke even following a bear market, the S&P 500 has historically added another 4.5 percent over the ensuing six months, with the next peak arriving after climbing 71 percent on average.

Still, this does not mean that US equities are now immune from further corrections or a new bear market. The lessons from 1989 and 2007 show that US equities can enter another bear market within 12 months despite fully exiting the previous bear market. In fewer words, further gains are not a foregone conclusion.

From a fundamental perspective, equity bulls are hoping that the next round of US fiscal support measures can be rolled out sooner rather than later, in order to preserve the economy’s recovery momentum. House Speaker Nancy Pelosi’s recent suggestion that Democrats are willing to compromise with Republicans may pave the way for the stimulus package’s eventual approval, potentially translating into more near-term gains for equities.

Investors also have to remain vigilant over the rising US-China tensions, which threatens to meaningfully erode big tech earnings. Such a risk could hobble the S&P 500’s primary driver that has propelled the index back to its lofty heights.

At least the Fed is ensuring a steady tailwind for equities, having rolled out unprecedented monetary stimulus. Considering the ultra-low yields in fixed-income assets, all that money in the system is finding its home in stocks.

And once a vaccine is ready for mass rollout, that could be the “pedal to the metal” signal for more market participants to charge head on into equities, potentially at the expense of safe have assets such as Gold.

Dollar in the doldrums

Looking beyond US equities, the Dollar index (DXY) has pushed itself off the 92.1 support level, even as it remains near its lowest levels since May 2018. Markets are expecting more Dollar-weakness to come, which is what the world needs in order to improve the global economy’s prospects at a post-pandemic recovery.

The upcoming release of the latest FOMC minutes could trigger another leg down for the Greenback, especially if there is an obvious sign that the Fed is willing to tolerate faster US inflation. The US central bank’s forward guidance, or potential cues on its asset-purchase plans, could also make for a more conducive environment for equities to explore new record highs, while potentially unravelling more of the Dollar’s gains from the past two years.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

HSI50 Gains After New Index Lineup Announced

Alibaba Group Holding, Xiaomi Corp., and Wuxi Biologics Cayman Inc. will be taking the place of Sino Land Co., Want Want China Holdings, and China Shenhua Energy Co. on the list of 50 companies included in the city’s benchmark index. Surprisingly, Meituan Dianping didn’t make the cut this time around.

Since it was first published on July 31, 1964 with a base of 100 points, the Hang Seng index climbed to a record closing price of 33,154.12 on January 26, 2018. However, since that all-time peak, it has declined by 24 percent until last week’s close on August 14. Still, the uptrend over the past 50 years remains intact.

Looking ahead to September 7, 2020, the changes to the its list of 50 constituents could shift about US$30 billion worth of pension funds and ETFs that are linked to the index. The inclusion of these tech behemoths such as Alibaba and Xiaomi will also reduce the index’s reliance on financial stocks.

However, Alibaba will only account for a maximum of five percent of the index, which is the maximum allowed for secondary listings under the rules by Hang Seng Indexes. Recall that Alibaba’s shares listed in Hong Kong in November last year, some five years after it went public on the New York Stock Exchange. The lower weightage comes despite Alibaba’s market cap of HKD 5.3 trillion (US$ 680 billion) in Hong Kong being larger than Tencent’s HKD 4.85 trillion (US$ 630 billion) market value, as of August 14, 2020. Yet, Tencent accounts for some 11.2 percent of the index, AIA Group has a 10.5 percent weighting, with HSBC’s 8.5 percent weight rounding up the top three biggest members of the benchmark index. Still, market observers expect Alibaba’s weightage to gradually be increased.

With this change in three weeks, perhaps it could be the catalyst for the index to break out its multi-year slump and keep it above its 200-day simple moving average (SMA). After all, the HSI50 has clearly lagged its regional peers, despite gaining some 20 percent since its March 19 trough which was its lowest level since 2016. For comparison, the MSCI Asia Pacific index and Alibaba’s stocks in Hong Kong both climbed 40 percent respectively since March 19.

The addition of Alibaba and Xiaomi could help the HSI50 reflect the outperformance of tech stocks amid the pandemic. After all, the tech sector has been the driving force behind the S&P 500 nearing its record-high of late, despite the economic woes wrought upon by the pandemic.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

US Stock Futures Pointing Towards a Positive Start Despite Rising US-China Tensions

After a mixed performance at the start of the trading week, stocks across key Asian markets turned green with Australia’s ASX 200 and South Korea’s KOSPI outperforming their peers and gaining 1.7% and 1.5% respectively. European benchmarks are also expected to start the week on a positive note, while the three main Wall Street indices are all indicating a green start.

President Trump’s executive orders to ban the use of WeChat and TikTok by mid-September did little to curb investor’s appetite to risk. Similarly, the announcement of a fresh round of sanctions on 11 individual Chinese and Hong Kong officials, including leader Carrie Lam, has not hurt sentiment. Losses were limited to China’s giant Tech firms Tencent and Alibaba.

US investors did not see these actions as harmful to the latest surge in equity prices, at least not yet. Chinese authorities have not responded on how or whether they will retaliate, but we will probably get to know later this week when senior officials from both countries review the implementation of the Phase 1 trade deal.

Investors are also keeping a close eye on Washington, after the collapse of negotiations on new stimulus measures led President Trump to sign executive orders aimed to extend Covid-19 economic support including unemployment benefits, payroll tax holidays and suspending student loan payments. This move seemed more of a tactical one to force Democrats to return to negotiations and it’s likely to work.

Looking through all this background noise, most economic data continues to beat economist forecasts with the latest non-farm payrolls report adding almost 1.8 million jobs and dragging the unemployment rate lower to 10.2% from 11.1%. The improvement in economic data by itself is not enough to justify the near record high levels in the S&P 500 especially as economic activity is nowhere near pre-Covid era levels, but when combining it with near zero interest rates, floods of liquidity through monetary policies and continuous fiscal stimulus, it does make sense. This should continue as long as valuations remain reasonable but given a P/E ratio of 36.4 on the Nasdaq 100, it does seem somewhat extreme and should be concerning for the Tech sector. In such a market environment, few analysts dare to call market tops, especially when many investors believe that Tech is the solution for all our problems and want to continue participating in this bull market. However, it is becoming more critical to hedge at least a portion of investor’s portfolios and certainly those heavily weighted towards Tech and FANGS in particular.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

BOE Economic Forecasts Could Sway Sterling

The Pound could react to the Bank of England’s outlook on the UK economy later today, depending on how far it deviates from market expectations.

The Pound has gained another 0.3 percent against the Greenback so far this month, adding to July’s 5.5 percent advance, which was the biggest monthly gain since the Global Financial Crisis. In fact, Sterling has posted a quarter-to-date advance against most of its G10 peers, except for the Swedish Krona and the Norwegian Krone. Traders also appear content keeping GBPUSD in overbought territory for now, with its relative strength index well above the 70 line which denotes overbought conditions.

Such gains are rather uncanny, given the lingering threat of a no-deal Brexit by year-end, as well as market forecasts that the UK could adopt negative interest rates by February. Still, those are concerns with a longer runway, as investors are more preoccupied with the BOE’s verdict in just a few hours from now.

The central bank is widely expected to leave interest rates unchanged at 0.1 percent, and maintain its asset-purchase programme at 745 billion Pounds. Perhaps more pertinent for investors today is the BOE‘s updated projections on growth and inflation, as well as any clues about potential policy tweaks.

Considering that the UK economy is struggling to break free from the coronavirus’s grip, a more downcast outlook should strengthen the case for additional monetary policy support. Keep in mind that, on the fiscal side, the UK government’s support measures for workers are set to expire in October. Pound bulls may feel uneasy at the threat of financial support being withdrawn at a time when the economy could still be struggling to stage its post-pandemic recovery. The notion that the economy will remain adequately supported is a necessary component to the Pound holding on to recent gains.

Markets will also be looking out for signs as to how much policymakers are open to lowering the benchmark interest rate into negative territory in order to help offset the economic pressures heaped on by the pandemic. More dovish signals surrounding the BOE’s policy outlook could see the Pound unwind some of its recent gains against the US Dollar.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

AUDUSD Awaits RBA’s Reaction to Melbourne Lockdown

The Australian Dollar has been on a remarkable rise, having strengthened against all of its G10 peers since March 31. AUDUSD has surged over 29 percent since its March 19 low, with the Australian Dollar taking advantage of the weaker Greenback while riding the optimism around China’s post-pandemic recovery.

However, in the days leading up to the central bank’s meeting, AUDUSD has fallen away from the 0.72 psychological level. Aussie traders now stand ready to use any cues out of the RBA to determine how this G10 currency will fare for the rest of this week.

Investors will assess Australia’s monetary policy outlook in light of Victoria state having declared a state of disaster amid a resurgence in coronavirus cases. Victoria is home to about 20 percent of the nation’s population and accounts for about a quarter of Australia’s GDP. With residents of the city of Melbourne now subject to a curfew between 8:00PM and 5:00AM, every day until at least September 13, such lockdown measures are expected to have a major impact on the Australian economy.

The RBA’s previous optimism after the country’s swifter-than-expected reopening following the first wave of Covid-19 cases could be dampened by the realities unfolding in Victoria state. It remains to be seen how the RBA will factor this latest lockdown into its quarterly economic projections due Friday, or if it would make any more policy adjustments to offset the economic effects.

A surprise rate cut today, or any dovish tones out of the central bank this week, could heap more downward pressure on AUD. Still, policymakers might welcome a weaker currency as it helps alleviate Australia’s economic pressures. However, should the RBA stick to its wait-and-see approach, then AUDUSD could resume its upward trajectory, with the recent drop being interpreted perhaps as nothing more than a technical pullback since reaching overbought conditions last week.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Can Oil Register a 4th Consecutive Monthly Gain?

Recall that more supply is entering the markets this month, after OPEC+ agreed to ease up on its production cuts from the 9.6 million barrels a day in July to 7.7 million in August. Investors may begin to grow concerned that global demand may not yet be solid enough to soak up the restored supply.

At the time of writing, Brent Oil is dipping further away from the psychologically-important $45/bbl level.

Meanwhile WTI crude is threatening to falter back into sub-$40 territory and test its 5-day simple moving average as a support level.

The PMI readings from around the world due on Monday would offer the latest signals about the state of the global economy. China’s July Caixin PMI posted a better-than-expected reading of 52.8, compared to the median estimate of 51.1. Having now registered a PMI reading above 50 for a third consecutive month, China’s manufacturing conditions are firmly in expansionary territory. However, other major economies must also report a similar trend today in order to offer Oil bulls some measure of solace.

Considering the incoming OPEC+ supply, along with the still-tentative recovery in global demand, markets are already expecting Saudi Aramco to indicate that the world isn’t yet ready to tolerate higher prices. The oil giant is slated to lower its selling prices of Arab Light crude to Asian customers for the first time since May in order to help offset the incoming supply. Such a move would suggest that further gains for Oil would be much harder to come by, potentially bringing an end to Oil’s run of three consecutive months of gains. The official September selling price is set to be unveiled within the first five days of this month.

As things stand, major economies across Asia and the Americas are struggling to break out of the pandemic’s grip, which in turn is choking economic activity and the demand for Oil. The longer that daily lives are disrupted by the pandemic, such as commuters being barred from driving to work or to send students to school, the longer Oil prices risk unravelling recent gains.

At least in the interim, Oil prices can enjoy support from the weaker US Dollar and any bouts of risk-on sentiment, as the world continues to wait for more clarity on the global economic outlook.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

The Importance of Stock Markets

The majority of people turn to the performance of a country’s stock market as the best indicator of how well that economy is doing. Stock markets cover all industries across all sectors of the economy. This means they serve as a barometer of what cycle the economy is in and the hopes and fears of the population who generate growth and wealth.

Stock markets have existed for centuries and will no doubt go on being the main public, regulated marketplaces where people can buy and sell shares of different companies.

Of course, today’s markets are very different from share trading in the Dutch East India Company back in 1602, but stocks still remain the most popular investment choice thanks to their potential for returns and their opportunity to invest directly in individual companies.

Why are stock markets essential?

  • Stock markets enable companies to be traded publicly and raise capital. The transfer of capital and ownership is traded in a regulated, secure environment.
  • Stock markets promote investment. The raising of capital allows companies to grow their businesses, expand operations and create jobs in the economy. This investment is a key driver for economic trade, growth and prosperity.
  • For investors, stock markets provide a way to invest money in order to potentially earn a share of the company’s profits (knowing that the risk of losses exists too). Active investors and traders can easily buy and sell their securities due to the abundant liquidity in most major stock markets.

Why trade stocks?

There are numerous reasons why companies, banks, funds, investors and traders buy and sell company stocks:

  • Investment Gains

Stock ownership may help your money grow. Over the long-term, the benefits of investing in stocks typically far outweigh those of holding money in lower-return assets like cash.

  • Diversification

Trading a variety of stocks can help you spread your risk across different asset classes, economic sectors, and geographical locations. This will expand the potential for positive returns in your portfolio.

  • Income

Some stocks provide income as regular dividends, even if the stock has lost value. That is income you can keep or reinvest. You can also register votes in company activities.

  • Control

Stocks trade by the millions every day so you can easily trade, buy and sell stocks and shares when you want. This flexibility also means you decide which company to invest in and when.

Trading stocks let you own a part of a company’s present and future. Depending on your risk tolerance and timeframe, the benefits can be many and varied.

Written by Han Tan, Market Analyst at FXTM

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Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Q2 Earnings: Tesla Test Awaits

Even though some profit-taking resulted in the stock falling by 4.54 percent on Tuesday as it faltered below the psychologically-important $1600 level, it was a mere scratch in Tesla’s meteoric year-to-date performance. Tesla has gained nearly 275 percent since the start of the year!

The surge has propelled Tesla to becoming the world’s most valuable automaker, and CEO Elon Musk to 9th place on the world’s richest list. With a market capitalisation of just under US$291 billion, Tesla is now larger than Toyota, Volkswagen, and Hyundai combined. Given Tesla’s heft and weight in the financial markets, it appears to only be a matter of time before it’s included into the S&P 500 index; an event which could spur even more buying of the stock.

For its Q2 financial results, analysts expect Tesla’s run of three consecutive quarters of profit to come to a halt, with a forecasted pretax loss of US$289 million for the period. That’s even as the company announced earlier this month that it delivered 90,650 cars for the three months ending June, which is better than the 83,000 units expected.

The primary consideration for fundamentals-driven investors is whether Tesla’s financial outlook can justify its hefty price tag. Tesla’s price-to-earnings (P/E) ratio is currently at a jaw-dropping 9920.36. In other words, investors are paying nearly US$10,000 for every one Dollar that Tesla earns. In comparison, shareholders of the world’s most valuable company, Amazon, are paying less than $150 for every dollar the e-commerce giant earned, given Amazon’s P/E ratio of 149.94.

Investors considering Tesla’s earning potential will be closely watching its global expansion plans, with China very much central to the company’s quest of posting its first-ever annual net profit. Registrations of Tesla vehicles in China soared to a record high of 14,976 in June, which is 32 percent more than the month prior, as passenger-vehicle sales recovers in the world’s largest automotive market. It’s estimated that Tesla’s market share of China’s electric cars segment stands around 25 percent. In addition to the automaker’s deliveries out of its Shanghai factory, which commenced this year, it also has a mid-2021 target start date for its European plant near Berlin, while Musk has hinted at entering India. Such geographical diversification can help offset the waning sales in the maturing US market.

Soon, markets will find out whether Tesla’s financial realities can match up to such inflated valuations, even as investors price in their excitement over the company’s prospects. With the electric carmaker reportedly informing its staff to aim for an all-time high in vehicle deliveries this quarter, perhaps Tesla’s shareholders will be making similar pursuits and aiming for new record highs as well.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Tough Talks: Pound, Euro Swayed by Brexit and EU Recovery Package Negotiations

Brexit negotiators have descended onto London to resume talks over the course of this week, as the UK and EU seek to formulate their post-Brexit relationship.

Such concerns have clearly been reflected in GBPUSD’s performance. Last week, in the lead up to this week’s talks, the Pound was the worst-performing G-10 currency against the US Dollar. Even Sterling’s gains in the first half of this month weren’t enough for the currency pair to break out of the downtrend seen since December.

Although a “golden cross” has formed, with its 50-day simple moving average rising above its 100-day counterpart, such a technical event may prove to be a false dawn, especially if investors get a sense that a no-deal Brexit is becoming likelier, with just over five months remaining until the December 31 deadline.

As the currency pair consolidates into a tighter trading range, GBPUSD needs a catalyst to break out of that symmetrical triangle formation, which, from a fundamental perspective, could come in the form of a meaningful breakthrough in Brexit talks.

However, that remains wishful thinking at this juncture, as Brexit woes have long supressed the Pound’s performance, with GBPUSD having declined by over 15 percent since the referendum on 23 June 2016.

EURUSD lets gains slip as talks drag on

Meanwhile, the Euro is struggling versus the US Dollar this morning, as investors price in the prospects of more fiscal stimulus coming to the EU economy’s rescue having been wrecked by the global pandemic. At the time of writing, EU leaders remain deadlocked over the fate of the EUR750 billion economic support package, having held talks since Friday and through the weekend.

The early Monday performance by EURUSD appears to reflect the conflicted sentiment among investors, as they digest the softening stance from the likes of Denmark, Sweden and Finland, even as stern opposition is still coming from the Netherlands and Austria. Keep in mind that the plan requires the consent of all 27 members.

Markets are still holding on to hopes that the Euro-positive outcome, whereby all EU leaders can agree to the details of the stimulus package, may materialize by next month. On the other hand, the Euro’s recent gains could be unwound if the impasse drags on, leaving the bloc’s economy to languish in the interim.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Busy Week Ahead for Global Economic Calendar

Here are some of the key events in this week’s economic calendar, along with market expectations for each data release:

  • Tuesday, 14 July

China’s June external trade data is set to build on the recovery seen over prior months, with exports set to post a 3.5 percent year-on-year advance in Yuan terms.

Later in the day, the Eurozone’s May industrial production data is expected to post a 15 percent growth compared to the month prior, while the UK unveils its monthly GDP for May, with markets forecasting a five percent print.

  • Wednesday, 15 July

The Bank of Japan will release its GDP and inflation forecasts for the world’s third largest economy, whereby the central bank will probably have to lower its growth outlook through its 2021 fiscal year, although the rise in Oil should translate into inflationary pressures.

  • Thursday, 16 July

China’s 2Q GDP is likely to show a steep recovery, pointing the way forward for other major economies, with the forecasted 2.2 percent growth marking a sharp contrast to the 6.8 percent contraction in the three months prior. June’s retail sales is slated to return to growth for the first time in 2020, while industrial production posts a third consecutive month of on-year expansion.

The US weekly jobless claims should point to a plateauing recovery in the US jobs market, while June’s retail sales in the world’s largest economy should signal a continued improvement from May’s double-digit expansion.

The European Central Bank is expected to leave its policy settings unchanged on Thursday, having already rolled out EUR1.35 trillion in its pandemic purchase program. Still, investors will be eager to get the ECB’s latest assessment on the EU economy and its willingness to aid its still-fragile recovery.

Although some segments of the markets have been wilfully ignoring such data indicators and events in recent months, the prudent investor would do well to pay heed to the hard numbers, as opposed to relying on mere hope in forming their market outlooks. Should any of these official economic data shift the expected timeline or dampen expectations over the world’s post-pandemic response, that could prompt investors to take some risk off the table. Such a scenario would ensure that safe haven assets, such as Gold, US Treasuries, and the Japanese Yen, remain well bid.

Investors won’t just have their hands full with the expected data deluge this week, as they must also remain vigilant over the latest developments surrounding the global pandemic. After all, there has been no shortage of negative headlines, with the US state of Florida having posted 15,300 new infections in a single day, which is a record-setting figure.

Amid the conflicting narratives, considering the persistent nature of the pandemic on one hand, and the unprecedented support from policymakers worldwide on the other, market participants must ensure that they can stomach such risks until the storm clouds meaningfully disperse.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.