What we are looking for
- USD slipping again: There was a fightback against a corrective move during the Wall Street session yesterday, but the USD is slipping back again this morning and is underperforming major forex. We still look at resistance around 1.0200 on EUR/USD as a gauge.
- Indices trying to recover again: Wall Street fell into the close, pulling European indices lower this morning. However, US futures are looking to stabilise.
- Data trading: Eurozone inflation is a final reading and is not expected to see any revisions. There are also some minor US housing data. All in all, not a great deal for data traders to go on today. BoE Governor Bailey could move GBP later too.
Overview
There is a lack of decisive newsflow to drive major markets in the early part of the week. The FOMC is into its blackout period ahead of next Wednesday’s monetary policy announcement, so there is no steer there. Furthermore, there is a lack of tier one US data releases until next week either. Subsequently, the hints of a USD correction that began last Friday are just popping up again this morning.
This comes as major currencies tick higher and take another look at the barriers that prevented dollar pairs from engaging decisive USD corrective moves yesterday. Notably, the AUD and EUR are leading the way this morning. Indices have also been hinting at a sustainable technical rally. However, the news that major corporates in the US such as Apple and Goldman Sachs were set to slow their hiring has caused a few ripples in this recovery. US futures are rebounding this morning, but the moves are still a little cautious for now.
With UK employment data showing few surprises, it is another fairly quiet day on the economic calendar. Midway through the European morning, the final Eurozone HICP inflation is expected to be unrevised from the flash data a couple of weeks ago. However, any upside surprise would still be market-moving for the EUR. Then a little later, US Housing Starts are expected to be slightly up, with Building Permits slightly down. However, GBP traders will be keeping an eye out for Bank of England Governor Bailey who is speaking at 1600BST.
Today’s news
Market sentiment looks positive today: There are decent conditions to continue the recovery in risk appetite of recent days. The USD correction is re-engaging, whilst newsflow is light.
Treasury yields are stable once more: Yields are a shade higher. Once more these are good conditions for a risk recovery.
RBA meeting minutes show more action is to come: the board remains committed to doing what is necessary to tackle inflation. There was an agreement that further steps will need to be taken, with either 25 or 50 basis points hikes on the table. Rates need to rise to neutral and RBA Governor Bullock agrees that neutral is still a fair bit higher. AUD has been supported by these comments.
UK unemployment in line: Unemployment held at 3.8% in May. Average weekly earnings ex-bonus has ticked slightly higher to 4.3% (from 4.2%).
UK race to be Prime Minister continues: The voting run-off is now down to the last four candidates. There have been no surprises yet.
Cryptocurrencies trying to rebound: After paring gains into the close last night, Bitcoin rebounded early today, only to slip back again. There is a feeling that the market wants to rebound but is struggling to make it hold. Bitcoin is currently +1% on the day.
BoE Governor Bailey to speak: There are no Fed speakers this week, but the Bank of England Governor Bailey is speaking today at 1600BST. GBP traders will be watching.
Economic Data:
- Eurozone final inflation (1000BST) – Final HICP is expected to be unrevised at 8.6% headline and 3.7% core.
- US Housing Starts (1330BST) – Starts are expected to improve to 1.560m in June (from 1.549m in May)
- US Building Permits (1330BST) – Permits are expected to reduce to 1.680m in June (from 1.695m in May)
Major markets outlook
Broad outlook: A risk positive bias continues, with USD weighed down.
Forex: USD is a solid underperformer, with AUD, NZD and EUR performing well.
- EUR/USD has accelerated higher leaving parity behind and is now testing the resistance around 1.0190/1.0220. If this can be breached then it opens for a more considerable rally towards 1.0350. A daily RSI momentum buy signal improves the outlook near term and has further room to unwind to the 50/60 area where technical rallies tend to hit. Support is building initially around 1.0120.
- GBP/USD has again rallied through the resistance at 1.1965 and is eyeing a test of the first important resistance at 1.2055. If this can be breached then it would open a recovery towards 1.2160. The RSI continues a near-term unwinding of negative momentum configuration, but we remain mindful that unwinding moves tend to falter around 45/55 on the RSI. This still looks to be a near-term technical rally and will favour selling into strength once the rebound has played out. Initial support at 1.1925 and then 1.1875.
- AUD/USD is in recovery mode but needs to break clear above the resistance of the old lower highs at 0.6875/0.6895 to open a move towards the three-month downtrend currently around 0.6995. Initial support at 0.6780/0.6835.
Commodities: Precious metals are struggling for upside traction, can oil continue to recover?
- Gold has ticked higher to leave a low at $1697 above the key 2021 low of $1676, but the recovery is a struggle. Yesterday’s session closed near the low of the candlestick and today there is a consolidation. Momentum is struggling to engage in a recovery and shows no decisive rallying signals. A test of the initial resistance of near-term overhead supply around $1723/$1732 is restrictive right now, and that is before the main resistance comes in at $1745/$1752. We continue to see near-term rallies as a chance to sell.
- Silver is struggling, like gold, but is showing at least a few more hints of recovery. A tick higher on the RSI, back above 30, is encouraging, however, the resistance between $18.90/$19.48 remains a barrier to a continuation of a technical rally. Above $19.48 would open towards a recovery into $20.2/$20.45. Initial support is at $18.57 above the low of $18.14.
- Brent Crude oil has rallied strongly in the past few sessions and is holding on to yesterday’s strong gains. For now, this remains a rebound within a downtrend channel of the past 4 to 6 weeks. However, the resistance at $107.65/$109.65 is being tested. The RSI needs to be watched as the recent rallies have failed around 50, whilst the falling 21-day moving average (c. $109) is also a gauge of resistance. Initial support is now $102.80/$104.00.
Indices: As Wall Street falls over around key resistance this is a crucial moment for the recovery.
- S&P 500 futures fell into the close last night, but more importantly the move looks to have been another bull failure around the resistance of the four-month downtrend (today c. 3895). The failure has also come in the near to medium-term resistance band of 75 ticks between 3875/3950 whilst the daily RSI has again fallen over around 50/55 area. Is this another bull failure to sell into? As support forms today the reaction to today’s Wall Street session could be crucial. Initial support at 3820.
- German DAX saw a rebound failure yesterday at 13,058 to form a negative candle (arguably a shooting star) into the close. The move early today has been struggling to re-engage the recovery momentum too. If there can be a close above 13,012 it would still complete a small double bottom reversal pattern and imply a recovery of c. +600 ticks. However, intraday charts are reflecting the struggle for positive traction. Initial support is at 12,645/12,800.
- FTSE 100 has pulled back from a possible test of the resistance around 7300/7370 which marks the top of a one-month choppy trading range. With the RSI having unwound to 50 there is a sense of neutral to slightly negative bias that points to the continuation of the range. Initial support is at 7162/7180.
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.
