Even as European markets continued to struggle yesterday, with the FTSE100 sinking back sharply, more or less reversing the gains of the day before, markets in the US once again continued to set their own course with the S&P500 and Nasdaq once again closing at a new record levels.

Whether its optimism over the fact that the US and China are talking trade again, or that new cases of coronavirus in the US now seem to be in decline, the resilience of US markets is all the more surprising in that it appears to be happening on its own, though there is some evidence of a ripple out effect in markets like the Nikkei 225, which does appear to be holding up fairly well, trading up at six month highs.

The outperformance of US markets is also no doubt being helped by optimism ahead of Federal Reserve chairman Jerome Powell’s speech later this week, which is likely to reinforce the US central bank’s commitment to do whatever it takes to support the US economy, at this very challenging time.

For all of the resilience of US markets, European stocks have stayed mired below their recent July peaks, though the DAX is holding up better than most, after the latest economic data out of Germany showed that the Q2 contraction wasn’t as bad as initially feared at -9.7%, and the IFO business survey for August was slightly better than expected.

Today’s European market open is expected to be a positive one, however given the choppiness seen so far this week we’re not expecting to see significant moves one way or the other. The main drivers remain on US, China trade relations and on tomorrow’s central bank symposium, and central bank speakers.

US economic data continues to paint a mixed picture of the US economy, with consumer confidence sliding back sharply in August to its lowest level in six years, over concerns about the state of the US economy, the outlook for jobs against a backdrop of partisan politicians, and the recent lapsing of the $600 a week unemployment enhancement, which has restricted the ability of US consumers to spend any more than they have to, to get by.

This pattern of caution over spending could well be reinforced by today’s latest July durable goods orders which are expected to rise by 2%, excluding transportation, down from 3.3% in June.

Gold prices have been a little on the weak side over the past few days, though for now they are holding above support at the $1,910 area.

Treasury yields were also a little firmer, reflecting some concerns over recently higher than expected inflation numbers.   

EURUSD – continuing to range trade between last week’s peaks above the 1.1950 area, and above neckline support at the 1.1700 area. The bias remains for a pullback towards 1.1700, with a break below 1.1680 targeting a potential move towards the 1.1500 area,

GBPUSD – holding above the trend line from 7th August lows at 1.3030, after last week’s push to the 1.3270 area, While the pound continues to struggle below 1.3200 the risk is for a slide towards the 1.3000 area. A break below 1.2980 opens up the prospect of a move towards the 1.2770 area.

EURGBP – the failure below the 0.9070 area keeps the risk for a move lower on a break below the recent lows at the 100-day MA and the 0.8940/50 area. The euro needs to push back above the 0.9080 level to target the 0.9130 area.

USDJPY – failed at the 107.20 area earlier this month has seen the US dollar slide back, with support down near the 104.20 area.