Trading Plan – Monday 15th June 2020: Covid cases rise in US and China

Mark NugentJune 2020, Trading Plan

Trading Plan – Monday 15th June 2020: Covid cases rise in US and China

Last Week

Events and Calendar
The Fed was gloomy on Wednesday, saying they are “not even thinking about thinking about raising rates”.
Industrial production in Germany was down 18%.
In the UK, the Brexit narrative went negative on Thursday and GDP printed at -20.4% on Friday, the worst performance ever.

Risk Sentiment
The week started positively on the ongoing Covid-19 recovery narrative, but it did not last. Tuesday and Wednesday were moderately risk-off before moving to strongly risk-off on Thursday as fears of a second Covid-19 wave took hold. Friday saw a chink of light and was moderately risk-on.

Asset Classes
Equity indices, thanks to Thursday, saw a significant fall over the week. Oil turned down. GOLD rose from the bottom to the top of its current range.

In FX, the JPY moved up over the week, and reflected the sentiment perfectly on both the weekly and daily charts. The USD dropped until the Fed on Wednesday and then rose, ending up over the week. Commodity currencies were all down over the week although choppy on the daily chart. The GBP was down, taking most of the loss on Thursday and Friday, with the Brexit sentiment and the horrendous GDP print. The EUR was just up on the week.

Trades
No trades closed in Week 24.

This Week
The week starts with risk-off sentiment due to an increase in Covid-19 cases in China and multiple states in the US. I think the risk sentiment is skewed to the downside. What I mean is that I think the chance of the markets being risk-off is greater than being risk-on. The reason is that the easing of Covid-inspired restrictions is clearly causing a spike in cases. I think this will continue and governments will be loath to reverse the easing. In addition, markets have been rebounding on positive sentiment as the easing has been rolled out across the developed economies. This gives prices somewhere to go if negative sentiment takes hold, which, as I have said, I feel is likely.

So, in a risk-off environment we know what to do. I discuss the finer detail in the video.

Have a great week.

VIP Club members can watch the video HERE