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    Morning Report – Thursday 8th August




    S&P 500 erases big losses to end up; investors buy bargains, yields off lows

    (Reuters 08/08/2019) - The S&P 500 recovered from steep early losses to end slightly higher on Wednesday as investors snapped up oversold shares and bond yields rebounded from significant lows that raised fears about a recession.

    Increasing worries over a global economic downturn and bets the Federal Reserve will have to pick up its pace of interest rate cuts pushed Treasury yields sharply lower early, with 10-year yields touching their lowest since October 2016.

    “The 10-year yield has come to represent all of the concerns about global growth at this very moment, so the stock market has latched onto it, like a kid to a lollipop. So when yields started to rise today, the stock market started to rise,” he said.

    “I wouldn’t expect the market to shoot back to its high. We could be stuck in a range as this stuff sorts itself out.”

    During the session, the premium on three-month Treasury bill rates over 10-year Treasury yields, a closely watched U.S. recession indicator, was at its most elevated levels since March 2007.

    Interest rates futures suggested traders are building bets the Fed will cut interest rates three more times by year-end.

    Central banks in New Zealand, India and Thailand on Wednesday cut their lending rates amid growing fears that the U.S.-China trade war could aggravate a slowdown in the global economy.

    Trade concerns re-emerged after President Donald Trump last week threatened to slap 10% levies on the rest of $300 billion of Chinese imports and called China a currency manipulator on Monday.

    AUD/NZD: Meets its first sign of resistance just shy of the 1.05 handle

    (FXStreet 08/08/2019) - AUD/NZD spiked on yesterdays surprise 50 basis point interest cut by the Reserve Bank of New Zealand as the market had only expected a 25 basis point cut upon a neutral statement with a slightly more dovish press conference - Instead, it was majorly dovish all around. RBNZ Governor Orr: "... we will have to lower the interest rate further"

    AUD/NZD has shown little signs of a pullback at this stage with a slightly, yet very cautious, improved risk tone overnight following USD/CNY repeat fixing below 7 and possibilities of trade talks taking place in September. AUD/NZD preserved yesterday’s gains and was up about 1.3% to 1.0490.

    The risk from here is further escalation of trade tensions, the possibility of comments from either side removing all prospects of such a meeting taking place resulting in major risk-off again from which the Aussie will likely to take most of the brunt of such an episode considering its closer ties to trade-related headlines and the Chinese economy.

    Looking ahead: Meanwhile, it is a race to the bottom that the RBNZ is winning, getting ahead of the Reserve Bank of Australia that decided to hold off from cutting rates this last meeting around. We will now wait to see what comes of this week's noise from the RBA for further clues as to when they might cut interest rates, for the market is pricing in at least two rate cuts before the year is out.

    Meanwhile, the market looks ahead to today's trade data from China and tomorrow's Consumer Price Index. "China’s July trade report is expected to show a pullback in the surplus from June’s hefty $51bn, to around $43bn. Exports are seen down about -1%yr in US$ terms, imports -9%yr but as always there is plenty of scope for surprise in this volatile survey," analysts at Westpac explained.

    AUD/NZD levels: A pullback to the 38.2% Fibo around 1.0430 meets the 20-day moving average and the end of June/start of July double bottom swing lows where the price rallied to the pair's first key upside target that meets the 127.2% Fibo extensions of the RBNZ fuelled rally around 1.0540.


    Below are Trading Central's Intraday preference recommendations. Short (SELL) positions and long (BUY) positions have two targets issued which may be used as take profit levels. Above or below a certain figure indicates the pivot level which may be used as a level for stop loss.

    30 Minute – Sell below 0.9254, target 0.9161.

    This is general advice only and does not take into account your personal circumstances. “It is the Policy of ForexCT to recommend the use of stop/loss function to reduce risk of significant losses to customers.

    GOLD 30 Minute – Long positions above 1488.00 with targets at 1513.00 & 1521.00.

    SILVER 30 Minute – Long positions above 16.9800 with targets at 17.3200 & 17.5200.

    USDJPY Daily – Short positions below 107.30 with targets at 105.60 & 104.80

    GBPNZD Daily – Our next up target stands at 2.0193.

    ASX 200
    Daily – Short positions below 6715.00 with targets at 6320.00 & 6210.00.

    NZDCAD Daily – The downside prevails as long as 0.8867 is resistance.

    This is general advice only and does not take into account your personal circumstances. “It is the Policy of ForexCT to recommend the use of stop/loss function to reduce risk of significant losses to customers.

    Economic Announcements
    (times in AEST)

    Posted: August 08, 2019 | 5:12 AM