Weak data from the US and Japan, rising tensions and dollar

29 Mei 2020

Yesterday, important statistics on the United States were published. As we warned, the data came out very weak and generally did not inspire any optimism. The increase in jobless claims is still more than 2 million per week. This means that the number of unemployed in the United States for a couple of weeks replenished by 40 million people. US GDP for the first quarter was revised downward (from -4.8% to -5%). Durable goods orders decreased by another 17.2% (after a decrease of 16.6% in March).

In general, economic statistics continue to go worse than ever. However, in we can see that situation can go even worse after the data on US GDP for the second quarter will be published. According to various estimates, it will show a decrease of 30-40. This is very hard to imagine, but it’s a part of the current reality. Apparently the impossibility to perceive the scale of what is happening is explained by the stubborn reluctance of stock markets to at least try to take into account the state of the economy in prices.

Oil stocks in the United States grew by almost 8 million barrels per week, which was the reason for us to close most of our long positions, since we expect correction and plan to restore these positions by cheaper prices.

Friday in terms of data will also be quite a busy day: consumer inflation in the Eurozone, retail sales in Germany, personal income and spending in the USA, as well as Canadian GDP and US sentiment indices practically guarantee that Friday will be a busy day in the financial markets.

In addition, data on Japan has already been published. Industrial production in April fell by -9.1% m / m with a forecast of -5.7% m / m, while retail sales in April showed a decrease of -9.6% m / m with a forecast of -6.9% m / m. Actually, we did not expect other data. What we expect is that when the markets begin to respond to the data and at least try to take them into account in prices.

Speaking of other news, we note that the United States overcame the 100K deathmark, while the chief infectious disease specialist in the United States noted that the appearance of the vaccine should not be expected earlier than November-December.

Chinese lawmakers have approved a proposal to implement new national security legislation in Hong Kong. We are waiting for the US reaction and are preparing for the increase of tensions between the countries to a brand new level. Trump, meanwhile, is attacking social networks. In general, we would like to talk about the good thing, but cannot.

Our trading recommendations for Friday: since the Dollar Index broke through the basic support yesterday, while it is below it, we will sell the dollar within the day. Accordingly, today we are looking for points for buying pairs EURUSD, GBPUSD, AUDUSD, as well as selling USDJPY. Sales in the stock market do not lose relevance for us, despite the continuous price growth there.