Europe's Time to Step Up!

The markets are focused on developments related to the ongoing European Commission discussions regarding the European Union’s new facility titled “Next Generation EU”.  In short the discussion is focused on the Euro 750 billion, 3 year program that will pay out:

Eur 500 billion in grants(don’t need to be repaid)

EUR 250 billion in loans

These funds would go to EU members to fund projects in the face of the current pandemic.

Four countries: Sweden, Netherlands, Denmark and Austria are pushing back with the focus being on a desire for more loans and less grants, also wanting strict oversight on funds usage.

The loans and grants will be funded by long term bonds issued by the fund, which is backed by member states.

Good news is rates are low, and the market perceives that this is a permanent step towards fiscal unity. This should help the countries with high debt levels (Italy!), maintain access to affordable funding, and at the same time pushes the risk of an Eurozone breakup to very low levels.  This has been supporting the Euro lately.

The meeting tomorrow, will most likely not give us the final agreement as the “frugal four” countries will not go down without a fight, but in the end it look like the German and French initiative will carry the day.

BBC take on the gathering tomorrow (first face to face after 5 months of video conferencing) https://www.bbc.com/news/world-europe-53415783

Saxo bank review and preview of ECB meeting today and comment on EU meeting: https://www.home.saxo/content/articles/macro/ebc-preview–the-calm-before-the-storm-13072020

Other headlines:

OPEC agrees to decrease cuts: https://nairametrics.com/2020/07/15/opec-to-reduce-production-cuts-in-august-to-7-7-million-barrels-a-day/

Positive developments on Covid-19 vaccine: https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html

Chinese GDP grows 3.2% in Q2

Biden expands lead as Trump’s approval rating drops further.

Our views:

Gold, buy on dips to $1,790, we look for sideways price action short term.  Long term we like it higher, question is if we get a correction first?

Key supports: $1,790 low from 14th, $1,780 trendline  Key resistance: $1,810 Moving averages, $1,815/20.

Brent Crude: We are in a range of $40 to $45.  This is after OPEC agreed to reduce cuts to meet increasing demand.  There seems to be a balance in the market and we expect the range to sty intact for the next few weeks.  This price level is interesting as it is too low for the big producers in OPEC and Russia, and just enough to keep a good portion of the Shale Oil capacity on life support.  Seems to be a price everyone is mildly unhappy with, but with the lows we saw at the $20 level, this price is a relief.

Key supports: $42.80, $42.00, $40.00  key resistance:  $44.00, $45.20 (gap opening from move lower in March)

S&P 500: For the past month we have been in a range of  2,950 to 3,250 with a rising wedge forming.  Potential vaccine and QE, 0 rates and Fiscal fireworks vs slower growth and Pandemic.

We elect to watch from sidelines for a breakout.

Key support: 3,150, 3,125, 3,090, 2,950  Key resistance: 3,250!

Contact us if you are interested in receiving real time trading signals. In doubt? Check out our track record below!

TickerDate OpenedEntry PriceStopTarget PriceCurrent Price% Change
LONG Austevoll Seafood ASA (AUSS:xosl)2020/06/0276.7572.00SPREAD TRADE79.45+3.52%
SHORT Leroy Seafood Group ASA (LSG:xosl)2020/06/0256.75SPREAD TRADESPREAD TRADE54.40+4.14%

Visit our Position Tracker to look at all of our realized trades and proven track record! 
2018: 45 Trades, Hit Ratio 53,66%, Profit +35,87 %
2019:   31 Trades, Hit Ratio 45,16%, Profit +26,97%

– Mark W

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