What we are looking at
- After regaining strength in the wake of the Nonfarm Payrolls report on Friday, the USD is dropping back again this morning.
- Indices are rebounding: After a decline on Friday, equity markets look to be on the front foot this morning, with European indices around +1% higher and US futures also gaining ground.
- Cryptocurrencies have rebounded strongly: After falling back on Friday, crypto is looking strong today. Bitcoin is up over 5%.
- Data trading: There are no major economic announcements today
Overview
Major financial markets have put aside a disappointing close on Friday and the glass is half full once more on Monday morning. Friday’s Nonfarm Payrolls painted a picture of a tight labour market and all but confirmed the expected course of 50 basis points hikes at the next couple of FOMC meetings. Although yields moved higher and indices fell, there has been a reversal of these moves on Monday morning. US bond yields have not kicked on after the payrolls report. This is dragging slightly on the USD this morning (although moves are fairly muted on forex) but also allows for a more positive outlook across major markets such as indices and commodities.
There has been a surprisingly sanguine reaction to arguably disappointing China Caixin Services PMI data, with market participants looking on the bright side, as China continues to ease lockdown restrictions. In the UK, it has been announced that Prime Minister Johnson will face a confidence vote by his own party’s MPs. The vote will take place on Monday. The initial reaction has been for GBP to strengthen, hardly a ringing endorsement for a prime minister.
The economic calendar is rather bare today with no major economic data announcements.
Today's news
Market sentiment looks more positive today: A weaker USD helps across forex, whilst indices and commodities are rebounding after weakness on Friday.
Treasury yields consolidating: US bond yields are fairly settled today, with the 10-year yield a shade higher.
China Caixin PMIs disappoint: The improvement in Caixin Services PMI was less than expected at 41.4 (up from 36.2 in April) but less than the 43.0 expected.
UK Prime Minister Johnson on the brink: A Vote of No Confidence has been announced by the governing Conservative Party which would put PM Johnson’s position at risk. The secret ballot of Conservative MPs will be held on Monday. GBP will be in focus in forex markets.
Cryptocurrencies rebounding well: After declines at the back end of last week, cryptocurrencies have started the week strongly. Bitcoin is up over +5% and is back above $30,000.
Economic Data:
- No major economic data is due
Major markets outlook
Broad outlook: Mild USD losses on major forex, with indices and commodities reclaiming Friday's losses.
Forex: USD is a mild underperformer across major forex, but moves are fairly muted aside from an outperforming GBP.
- EUR/USD has been choppy for the past couple of weeks. Support around 1.0640 has held well, but resistance in the band 1.0750/1.0800 has restricted upside. These will be the key levels to watch in the days ahead (the ECB meeting and US inflation will be key). A slight rebound this morning has halted USD gains from Friday’s jobs report. Initial support at 1.0704.
- GBP/USD has held support around 1.2460/1.2470 again this morning as the market has rebounded. UK political risk will be a factor with newsflow surrounding UK Prime Minister Johnson and a confidence vote. For now, though GBP is holding up well. Below 1.2460 turns the outlook more corrective again. Resistance at 1.2666 is key.
- AUD/USD retreated towards the three-week uptrend on Friday but this has again remained largely intact today. Technically a mild improvement is on track but volatility from tomorrow’s RBA meeting will be a factor here. A decisive close above 0.7265/0.7280 resistance would re-engage upside momentum. Support at 0.7140/0.7150 is key.
Commodities: Precious metals have developed into a choppy range play, but oil increasingly brought into weakness.
- Gold has turned into a choppy range play on a near term basis. Falling over at $1874 on Friday has left the price needing a closing break of $1828 support for downside direction, and above $1874 for upside. RSI momentum is also chopping around 50 to suggest an indecisive outlook.
- Silver has taken a similar path to gold recently, with a recovery uptrend being broken before the market has turned into a choppy phase of trading. Support at $21.82 is a downside gauge, but there is resistance at $22.48 that needs to be overcome for upside traction. RSI momentum is back around 50.
- Brent Crude oil has had one attempt at $24.40 rebuffed already, but weakness seems to be a chance to buy now. Using previous resistance around $115/$116 as a basis of support, a rebound late last week is now into a test of $124.40 again. The move has initially backed away this morning, but with positive momentum on the RSI, the upside pressure on a near to medium term basis is growing. Initial support is $118.25/$121.00.
Indices: Wall Street rally has been more choppy of late, but there is still a positive bias to European indices.
- S&P 500 futures have broken a recovery uptrend in recent sessions, with the market fluctuating around the 4100 pivot area. The market fell on Friday but held around 4100 only to rebound this morning. Momentum on the RSI is very choppy around 50 pointing to the indecisive outlook. A close above 4200 opens the recovery again. A close below 4071 would suggest the recovery rolling over.
- German DAX still looks strong in its recovery and is holding well above the 14,320 breakout (which is now a basis of support). Momentum retains an improving bias and pressure continues for a break clear of the 14,602 barrier which would open the bigger test of resistance at 14,800/15,000. Initial support is at 14,435.
- FTSE 100 has recovered well after a disappointing session on Friday which questioned the recovery. However, the market is again back towards the resistance of several highs at 7624/7695 which have been posted throughout 2022. Momentum retains a positive bias, but currently does not suggest this time will be different. Initial support is now at 7518.
This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
