GENEVA — Asian equity indices kicked off the week on a mixed note, as US stock futures recovered after a dip at the open. Stocks in Sydney (+1.68%), Seoul (+1.43%) and Shanghai (+0.42%) gained, but the Hang Seng (-0.36%) slid. Tokyo was closed due to bank holiday. Stock traders will focus on two important topics this week: the US fiscal negotiations and the review of the US-China trade deal, that could be at jeopardy due to escalating tensions over Hong Kong and technology. US policymakers couldn’t find an agreement on the much-expected fiscal relief package on Friday, as the Trump administration rejected a compromise offer from Democrats. Negotiations will resume this week, with no clarity on when or if the two parties will strike a deal. Our base case scenario is still an agreement on a $1.5-2 trillion pandemic relief package. The delay and uncertainties on the US next fiscal boost make some investors nervous, without however impacting the overall optimistic and patient wait for a further fiscal expansion. With the virus wreaking havoc on the US economy, policymakers are expected to come to an agreement sooner rather than later. Meanwhile, the COVID infections in the US exceeded 5 million, the last million being added over the last two weeks confirming that the situation is far from being under control. For investors however, it is not the number of infections per se that matter, it is how governments and central banks react to numbers that set the mood. There shouldn’t be an important deterioration in the risk sentiment unless we see another round of extended confinement measures and lockdowns that would have an impact on the economic activity. Friday’s jobs data has been a certain relief for investors, as the data confirmed that the US economy added more than 1.7 million jobs last month despite the persistent spread of infections. There is still a far way to go before the US employment market recovers to pre-crisis levels. However, any progress is cheerfully welcomed. Activity in FTSE (+0.72%) and DAX futures (+0.72%) point at a positive start to the week, but the direction could be blurred by thin summer trading volumes and a shaky global risk appetite. In the currency markets, the US dollar is stable above the 93 mark. Net speculative short positions in the US dollar are at decade-high levels, but mostly concentrated against the euro and other reserve currencies, warning against the rising possibility of a sharp upside correction in the greenback and a rapid reversal of the recent appreciation across the majors. The EURUSD was offered near the 1.18 mark on Monday. At these levels, the fundamentals do no longer support a further euro appreciation against the greenback as the long positioning in the single currency has become overly stretched. Technical indicators point that a downside correction would be healthy at the current levels. We could see a pullback to 1.1635, the minor 23.6% retracement on March–August rebound. Cable failed to extend the post-Bank of England (BoE) gains above the 1.3185 last week. Despite the BoE’s unfavorable view on negative rates that triggered a quick pop in sterling purchases post-meeting, the BoE doves will likely remain in charge of the market due to the pandemic and Brexit uncertainties. Still, the GBPUSD’s faith above the 1.30 mark depends on the US dollar appetite. Any improvement could easily throw Cable below its 200-day moving average, 1.29. Due Wednesday, the British GDP data should give an idea on the extent of the economic damage in the second quarter; analyst expect a slump over 20% in the 2Q GDP. Sterling traders will also be watching employment (Tue) and production (Wed) figures — which should confirm near 10% jump in June and temper the agony around the growth numbers. Gold started the week on the back foot as the dust started settling after the Beirut tragedy last week. An ounce of gold was exchanged within the $2,020/2,035 range. At this point, the gold market is swamped with heavy long speculative positions, if closed could send the price of the precious metal below the $2,000 per oz. Short-term support is eyed at $1,980 per oz. US crude trades little changed near the $42 per barrel. Solid resistance is expected to cap the topside potential near $43pb, the 200-day moving average. — The writer is senior analyst at Swissquote Bank