LONDON — The S&P finished the day up again Wednesday for the 4th consecutive day albeit in a more subdued session. The market seems to be focused on vaccine and stimulus hopes for now. The Democrats have said that they will not back short-term jobless aid extension, so we expect to get more back and forth. It is unlikely a deal will be reached until August sometime. One thing to note however, we are seeing unprecedented results in the VIX with it falling 15 out of the last 18 weeks. Even less extreme historical cases led to subsequent VIX spikes and stock market pullbacks. US-Sino tensions continue with the US telling China it will close its Consulate in Houston, risk did come off a little on this but subsequently rallied as for now markets don"t think that this tit for tat will result in anything too serious. Overnight Chinese equities retreated, although it has been mixed trade in other Asian stock markets. The caution in Chinese equities comes from the tensions with the US with President Trump commenting that he can always close more embassies. We now await China"s retaliation as we are sure there will be something. It seems now that consulates are the new tariffs. France have also said they no longer want the new Huawei and China has taken the English Premier league off air (need to bear in mind there is only 1 game left of the campaign). The PboC sets USDCNY at 6.9921(from 6.9718). Looking at the FX markets it seems as though we are in a cycle of USD selling and it’s difficult to see what will break this. The announcement of the EU Recovery Fund now looks as though it was priced in and markets were just waiting for it to be agreed. The driver in the market is therefore the USD not the fund announcement. The market is ready to sell USD on any risk off induced rallies as we can see from the reaction to the closing of the Chinese consulate yesterday. The first support in EURUSD is now 1.1500 as we based ahead of this level Wednesday. After such a powerful move waiting to buy a dip ahead of 1.1500 (1.1507 Wednesday’s low) as expecting the 1.1600 (1.1601 Wednesday’s high) resistance to hold for now. Bearish AUD and NZD still offer attractive risk reward, with the impact of the virus lockdown still weighing heavy on their tourism and education sectors. Something that is likely to continue into next year. Recent consumer and business confidence numbers out of Australia have shown how the renewed lockdowns have negatively impacted sentiment. After such a strong rise in NZD the RBNZ may be more inclined to act in August. It is surprising that the move higher in USDCNH hasn’t weighted on AUD and NZD more. Being short both here against USD and looking to buy a dip in EURUSD to turn those into long EURAUD and EURNZD as it seems the trend is USD lower. EUR is becoming the safe haven of choice. Brexit talks yielding neither a breakthrough nor a breakdown according to UK officials. Next round of talks next week then more likely in August. In Australia the NAB Business Confidence came in weak at -15. RBA Governor Lowe made it clear this week that further support for Australia‚Äôs economy is unlikely to come from the central bank. He again pushed back against negative rates, he said they could cut from 0.25 to 0.10 but sees little benefit in doing so. USDJPY — the pair found support yesterday with the rally in JPY crosses and our support area of 106.70/80 held well. Overnight we had a high of 107.18. For now, we have no real conviction in the direction and we would like to see what happens to the USD generally however, the levels pretty much remain the same. 107.30/35 is the first resistance followed by 107.80 whilst on the downside support is at 107 and then 106.70. We feel the USD may have done in the short term and are expecting some kind of pull back. The DXY at the moment is trading around 94.80 and we see strong daily and YTD support around 94.20, which we expect to hold. Also, USDCNH is not really playing anymore and the USD falls much easier when USD/Asia is falling. Later today we have US jobless claims EURUSD — the common currency is now enjoying the effects of a weaker dollar as we feel the effects of the EU summit have come and gone. We did manage to break the 1.1600 level Wednesday just (1.1601) and then came off and sat around 1.1575 for the rest of the session. We did manage to close just below the 1.1570 level Weednesday night and whether this makes a difference or not is yet to be seen. We still feel that ultimately, we will go higher but feel we are due a pullback. If we can"t get back above 1.1600 soon then a move back towards 1.1520 and even 1.1480 could occur. The behavior of the Greenback will be the main driver for now. On the topside 1.1600 and 1.1620 are the resistance levels. GBPUSD — was initially on the backfoot Wednesday on the back of the Telegraph report regarding Brexit hitting a low of 1.2635/40 and then seeing a very good bounce on the back of broad-based USD weakness and right now we feel this is the only reason it remains bid. Brexit still remains a major headwind and the possibility of a no deal looms ominously on the horizon. As we saw Wednesday it reacts very badly to any negative news and this is what we are very mindful of. We are now in our sell zone and advocate selling around here, 1.2740/50, will add more towards 1.2770/1.2800 and are looking for a break of 1.2680 and then onto 1.2630 initially. FTSE 100 — saw the third consecutive close in the red for the FTSE 100 as it reached our short entry support target at 6220 while we print around the 200 period SMA in early session today. On one hand, fading hopes for a Brexit deal is weighing down on the index while a rally in US equities on the back of further stimulus promises is keeping risk on sentiment alive. An hourly close above 6220 resistance level, which coincides with the 200 period SMA, will favor higher prints with 6,270 as the closest resistance target. DOW JONES — Pfizer shares boosted higher prints on the Dow after the US agreed to pay the drug maker $1.95B to secure 100 million doses of their experimental COVID-19 vaccine, while increasing geopolitical tensions and global virus cases topping 15M continue to weigh down on risk sentiment. An hourly close above our resistance at 27000 will favor a retest to the latest highs with 27,175 as the next target. DAX 30 — Wednesday’s session on the Dax was mostly flat, as it traded in a tight consolidation range while holding above 13100, a sign of building bullish momentum. Better than expected Gfk German Consumer Climate (Aug) data released early today pushed the index higher as we look for an hourly close above our resistance at 13135 to favor a retest to the latest highs with 13,270 as the closest resistance target. GOLD — a fourth consecutive close in the green for the yellow metal as it hit our long entry resistance target at 1,870 driven by an escalation in US-China tensions after the US shutdown China’s Houston consulate with China looking to close the American consulate in Chengdu as retaliation. Investors focus on Initial Jobless Claims data today as we look for our resistance level at 1870 to turn into support, favoring higher prints with 1900 as the next resistance target. US OIL — a build-up of 4.892Mb vs. a forecasted drawdown of 2.088Mb, according to EIA weekly crude inventory data, weighed down on WTI Crude while optimism around another round of US fiscal stimulus and potential Covid-19 vaccines supported higher prints as we trade below $42 pbl in early session today. Prints above $42 will favor a retest of the latest highs coinciding with our resistance at $42.50.