Sample Category Title

STOCKS

Low Crude prices have pulled down energy sector stocks while the tech stocks seem to be rallying.

Dow (21410.03, -0.27%) has come off in line with our expectation and while the important resistance near 21500 holds, the index could be headed towards 21300 soon. 21500 is likely to remain as a medium term top for now.

Dax (12774.26, -0.32%) came off to test immediate support near 12700 as expected but bounced back sharply to close at higher levels. While 12700 holds, we may expect a rise towards 12900 again in the coming sessions. A break below 12700 is necessary to ignore immediate rise from current levels.

Shanghai (3169.41, +0.42%) tested 3172, our upside target mentioned yesterday. Shanghai looks positive for the medium term and could move up eventually towards 3200 by the end of next week possibly. An interim dip towards 3155 is possible in the near term.

Nikkei (20118.25, -0.10%) is in a corrective phase after the sharp rally from 19970 to 20090 on Monday. The current fall could extend towards 19990 before again trying to move up towards 20300 levels.

Nifty (9633.60, -0.21%) could possibly move up today but may remain within 9600-97000 region for some more sessions. Overall near to medium term looks bullish.

COMMODITIES

Gold (1254) moved marginally higher yesterday and hovering around its key support of 1242-45. If 1245 holds, a quick bounce towards 1262 and 1295 can’t be ruled out. Otherwise it remains in a slow corrective move which may take it to the support of 1242 and 1232 respectively. We will remain bullish on gold while it is trading above 1230 levels. Silver (16.59) is also trading above its support of 16.50 and could be ranged within 16.50-16.90 regions.

Copper (2.59) is trading within the narrow range of 2.56-2.67. Only above 2.67, higher resistances of 2.84 can come into consideration. We will remain bullish on copper while it is trading above 2.55 regions.

Oil prices had failed to close higher irrespective of weekly U.S crude and gasoline stockpiles fell. Investors are now looking for more signs of production cut by OPEC and other producers to stop the free fall. Brent (44.91) and WTI (42.65) are going to test their respective supports of 43.20 and 40.80 respectively. Both Brent and WTI are highly oversold in near term time frame and we will be assured of strength of Brent and WTI only when a firm and sustainable closing above 46.30 and 44.50 are made by both of them.

FOREX

Dollar Index (97.49) is in a minor corrective mode which may end by 97.45-35 and the next leg up can push it to 98.10-40.

Euro (1.1168) remains stuck in the broader range of 1.1100-1.1300 but the immediate upside may be limited to 1.1200 levels with the major support unchanged at 1.1100-1.1090.

Dollar-Yen (111.08) correction continues but the minor decline is not expected to go beyond the support of 110.60-50 from where the larger uptrend may resume for the higher targets of 112-113.

Pound (1.2665) has already enjoyed a corrective bounce from 1.2600 to 1.2700 exactly in line with our expectations but for a reversal, a break above 1.2820 is required. For the next few sessions, the currency may trade sideways in the range of 1.2540-1.2820.

Contrary to expectations, Aussie (0.7550) has weakened below the support of 0.7570-60 which implies a loss of upside momentum. The correction may take it to the major support of 0.7490 before a short covering bounce emerges.

Dollar-Rupee (64.52) opened strong but lost almost all the gains made by the closing. The resistance of 64.70-75 has held well so far and keeps the pair in the broader range of 64.10-70 as expected.

INTEREST RATES

The US 10-5Yr (0.39%) has broken below immediate support at 0.40% but could bounce back from 0.38%, the earlier low seen in Aug’16. The US yields by themselves are trading lower and the medium term charts are working well just now. We could see a pause in the falling yields possibly in the early-next week. The 5Yr , 10YR and 30YR are trading lower by 1bps at 1.76%, 2.16% and 2.71% respectively.

The US-Japan 10Yr (2.09%) spread is looking bearish for the medium term and could move lower towards 2% in the coming sessions.

The German-US 10YR (-1.88%) could re-test levels of -1.85% on the upside before again coming off towards -1.95% in the near term. For now the yield spread is likely to consolidate sideways within the -1.85% and -1.95% region.

The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75 percent.

Global economic growth has increased and become more broad-based. However, major challenges remain with on-going surplus capacity and extensive political uncertainty.

Headline inflation has increased over the past year in several countries, but moderated recently with the fall in energy prices. Core inflation and long-term bond yields remain low. Monetary policy is expected to remain stimulatory in the advanced economies, but less so going forward.

The trade-weighted exchange rate has increased by around 3 percent since May, partly in response to higher export prices. A lower New Zealand dollar would help rebalance the growth outlook towards the tradables sector.

GDP growth in the March quarter was lower than expected, with weaker export volumes and residential construction partially offset by stronger consumption. Nevertheless, the growth outlook remains positive, supported by accommodative monetary policy, strong population growth, and high terms of trade. Recent changes announced in Budget 2017 should support the outlook for growth.

House price inflation has moderated further, especially in Auckland. The slowdown in house price inflation partly reflects loan-to-value ratio restrictions, and tighter lending conditions. This moderation is projected to continue, although there is a risk of resurgence given the on-going imbalance between supply and demand.

The increase in headline inflation in the March quarter was mainly due to higher tradables inflation, particularly petrol and food prices. These effects are temporary and may lead to some variability in headline inflation. Non-tradables and wage inflation remain moderate but are expected to increase gradually. This will bring future headline inflation to the midpoint of the target band over the medium term. Longer-term inflation expectations remain well-anchored at around 2 percent.

Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.

The Reserve Bank of New Zealand surprised no one this morning by leaving the official cash rate on hold at 1.75%.

While there is no Monetary Policy Statement for release with today's decision (or press conference from Governor Wheeler for that matter), the RBNZ did say that monetary policy would remain 'accommodative' for 'a considerable period'.

Markets have digested this as being a clear neutral stance on rates from Wheeler as the expectation continues to be that they will not be raising rates into 2018.

Forex traders pushed the kiwi slightly higher in the wake of the interest rate decision as the Kiwi rose from US 72.31 cents to US 72.51 cents and also gained about 0.20 cents against the Euro within minutes of the statement.

But while price rocketed up to NZD/USD trend line resistance, half of those gains were given back once technical resistance was touched. Not much has changed fundamentally and this is reflected in the Kiwi daily chart below:

NZD/USD Daily:

This level is still key heading forward and any intraday shorts will depend on it holding. Remember, if you're trading NZD/USD then screenshot your chart and be sure to mention @VantageFX on Twitter to contribute to the discussion.

Oil is working its way back into the central banking and economic equation with prices now down 19% since the May 25 OPEC meeting. GBP was the top performer Wednesday while CAD lagged. The RBNZ held rates at 1.75%, as expected. A new NZD Premium trade has been issued in addition to the 7 existing trades.

Especially worrisome about the $1.00 fall in WTI on Wednesday to $42.50 was how it got there. The news was constructive and technical support was in place, yet crude hit the lowest since August.

First, OPEC tried a bit of jawboning. Iran's oil minister Zanganeh said consultations were ongoing about a further production cut. That comment barely had a positive effect on prices. Second, the US inventory report was mildly bullish as oil inventories fell 2451K compared to 1200K expected. Initially, WTI climbed more than 50-cents on the headlines but the spike was erased in an hour and then crude prices stated to swoon.

Finally, WTI easily slid below the intraday lows, yesterday's lows and the important November bottom with barely a sign of buyers. The low on the day was $42.05 compared to $52 on the day of the OPEC meeting.

The combination of those factors made it an even worse day for oil than it seemed. It could also make for some bad days for central bank hawks. The drop in crude is deflationary and will undercut hopes for a return to 2% inflation any time soon. Yes, it's temporary but the optics of hiking rates with 1% headline inflation is a major turn off for all global central bankers.

What's more, is the risk of economic impacts. A prime potential victim is Canada and the timing couldn't be worse for the BOC as they've just shifted to a hawkish stance and declared that energy worries are behind the economy. A reversal in position would send USD/CAD sharply higher.

The US isn't immune either. Another round of layoffs in the shale industry would come at a delicate time and worries about corporate debt could re-emerge.To be sure, those factors aren't yet in play but if oil falls below $40, they will come to the fore.

In early Asia-Pacific trade, the New Zealand dollar jumped after the RBNZ said the growth outlook remained positive. They pledged to continue with accommodative policy and added some anti-NZD jawboning but it wasn't effective as NZD/USD rose 60 pips initially to 0.7260.

AUDUSD - The pair continues to hold on to its downside pressure leaving risk lower. On the downside, support resides at the 0.7500 level where a breach will aim at the 0.7450 level. Below that level will set the stage for a run at the 0.7400 level with a cut through here targeting further downside pressure towards the 0.7350 level. On the upside, resistance lies at the 0.7600 level. A cut through here will turn attention to the 0.7650 level and then the 0.7700 level where a violation will set the stage for a retarget of the 0.7750 level. On the whole, AUDUSD remains biased to the downside nearer term.

Opportunistic price action

Hawkish central bank rhetoric, the largest first-half slide in oil since 1997 and global political risk have imparted a level of uneasiness in currency markets. The squally trading conditions across most asset classes have traders looking every which way for select opportunities as both risk and uncertainty abound.

There has been little follow through on the USD revival that started the week as in the absence of any actionable US economic data the dollar bulls are erring on the side of caution

But with the with the GOP struggling to push through economic agenda, it's difficult to envision an extended US dollar rally until the US administration gets their ducks in a row.

As for the rest of the street, traders are looking for short term selective opportunities as opposed to perusing any trend in this turbulent market.This environment supports chasing opportunistic price action, and dealers found a sweet spot in both Oils and the Pound

WTI

Oil prices spiked after the EIA weekly crude stock data showed a decline in US inventories. But Bears prowling the oil patch cut that rally short in a heartbeat as WTI plunged to 42.05 before pulling back into the close of NY futures trading.The Oil Bears are steering this tanker as the weekly inventory decline failed to put a dent in the overwhelmingly bearish market sentiment. The currency market spillover saw the Canadian dollar, which correlates to the movements of oil prices, trade lower while equity markets continue trading with a softer bias weighed down by energy sector stocks

The Pound

BoE's Chief Economist Haldane through a spanner in the works when he flew out of the dove's nest right into the Hawks. Coming on the heels of BOE Governor Carney Mansion House dovish tilt, it added another level of confusion to the already muddled UK currency market landscape. The hawkish surprise saw cable gap 65 pips to 1.2700 as the market got caught short again toward the lower end of recent ranges

Japanese Yen

Despite the ripples of risk aversion the USDJPY move towards 111.75 overnight which seemed to coincide with 10:00 AM NY option expiry and cross yen demand after BoE comments. But falling oil prices and weaker equity sentiment carried the day which continues to weigh negatively in early APAC trade.Without a rebound in oil prices, risk sentiment remains extremely fragile, and we could see a push lower

Australian Dollar

The hawkish Fed narrative combined with metal weakness has taken the wind out of AUD mainsail despite an upturn in domestic economic data. While the Aussie remains offered vs. the dollar, it came under further duress on the crosses particularly against the pound after the surprising hawkish tilt from BoE's Chief Economist Haldane

The oil price gusher is not helping commodity sentiment, and with the market still clinging on to some small longs a convincing push below .7550 could trigger stops and a risk for a deeper correction to .7525-15 level. But given the focus remains in the USD narrative, I suspect the Aussie will hold current ranges in the absence of any tier one useful US economic data to support current USD strength.

New Zealand Dollar

The RBNZ left the OCR unchanged as expected at the June OCR review, and the overall policy assessment is also consistent. With very little to glean from the RNBZ assessment, but in the absence of any dovish suggestion, it should prove mildly supportive of the KIWI.The market was poised for dovish expectations as some expected the RBNZ re-instate its concern about currency over-valuation. So .we could see the Kiwi return to favour on any hint USD selling pressure

Chinese Yuan

$CNH seems to be moving on its own accord, and with the realisation, the MSCI inclusion shouldn't have much of a currency effect in the near-to-medium term, it's back to the USD narrative and extremely vulnerable risk narrative.

The Canadian dollar depreciated versus the US dollar on Wednesday as the price of oil continued falling despite a higher than expected drawdown in weekly US crude inventories. U.S. Federal Reserve speakers continue to bolster the possibility of at least one more rate hike in 2017 and the start of its balance sheet reduction program, while the hawkish words of the Bank of Canada (BoC) policy makers are now lost in last week's headlines.

Statistics Canada will release retail sales data on Thursday, June 22 at 8:30 am EDT. Analysts are forecasting a rise of 0.6 percent in the core reading after last month's contraction. Adding the volatile auto sales that grew 3.2 percent in March the overall gain was 0.7 percent as clothing sales and convenience stores offset the gains in the auto sector. Economic indicators have been positive which lead the comments from the BoC about the growing momentum opening the possibility of a rate hike this year.

The USD was mixed against major pairs with most of the gains coming off versus commodity currencies affected by the fall in energy prices. The loonie was the most affect falling 0.42 percent, but followed closely by losses in the AUD and NZD. European pairs moved higher versus the greenback with only the JPY close to flat on Wednesday's trading. The economic calendar does not offer much support for the USD outside of Fed speaker speeches that keep stoking the fire of a third rate raise in 2017.

The USD/CAD gained 0.432 in the last 24 hours. The currency pair is trading at 1.3313 with the CAD failing to catch a break this week. Lower than expected inventories were not enough to convince markets oil should be priced higher. The changes in the Saudi hierarchy could spell an escalation of diplomatic and non-diplomatic tension between Iran and Saudi Arabia which could tear the Organization of the Petroleum Exporting Countries (OPEC) apart, specially after the action against Qatar. T

The high correlation with oil has put downward pressure on the loonie and most reports around NAFTA are hardly encouraging as the relationship with Canada's largest trading partner could change if the US follows its America First doctrine. The CAD will have to depend on the retail sales data for direction as Fed speakers continue to prepare markets for an eventual rate hike later this year.

Oil price fell 2.261 percent in the last 24 hours. The price of WTI is trading at $42.29 as the market is full of supply concerns with rising animosity between OPEC partners offsetting the high compliance of the production cut agreement yet with few results to show for it. Iran hinted today that the group could be working on deeper cuts, only for those comments to be dismissed by other oil producers in the group. he Energy Information Administration (EIA) released a deeper than expected drawdown of 2.5 million barrels when 1.2 million were forecasted. Gasoline stocks surprised with a drawdown of 600,000 barrels but not enough to offset the reality of over production specially with Libya and Nigeria resuming their production at full force.

Saudi Arabia's King Salman shook up the kingdom's hierarchy as he put his son Mohammed bin Salman as next in line to succeed him. The 31 year old replaces his cousin and has been a rising star in Saudi politics and economy as he is also in charge of bringing the kingdom out of its dependancy to energy which is easier said than done. His appointment raises the stakes as to when a new confrontation will happen with Iran who sits in the other spectrum of OPEC membership. If the embargo on Qatar by other Arab states is any indication it could escalate rather quickly as Saudi Arabia wishes to have closer ties to the US and Russia.

The showdown between US shale producers and OPEC members continues and with stagnant demand for energy around the globe, prices have been caught in a tight range with only big supply disruptions having an impact, only to be cancelled once they get sorted.

Market events to watch this week:

Thursday, June 22
8:30 am CAD Core Retail Sales m/m
8:30 am USD Unemployment Claims

Friday, June 23
8:30 am CAD CPI m/m

Gold is showing little movement in the Wednesday session. In North American trade, spot gold trading at $1244.59 per ounce. In economic news, Existing Home Sales improved to 5.62 million, beating the estimate of 5.54 million. Crude Oil Inventories posted a sharp drawdown of 2.5 million, larger than the estimate of -1.2 million. On Thursday, the US releases unemployment claims.

The Fed has tightened policy twice this year and has hinted at one more rate hike in the second half of 2017. As for the markets, they have circled the December policy meeting as the most likely date for a rate move. The CME Group has pegged the odds of a September hike at just 13%, compared to 18% a week ago. However, the odds for a December increase are at 49%, and this could increase if Fed policymakers continue to wax positive about the economy. Earlier this week, Federal Reserve of New York President Charles Dudley continued the upbeat message, cautioning the Fed against halting its current tightening cycle. Dudley said that the tight labor market should lead to higher wages, which in turn would push inflation to the Fed's target of 2.0%. The markets like what they are hearing – not just the positive spin on the economy, but also that the Fed has signaled that it plans to reduce the bloated balance sheet of $4.2 trillion.

Although gold prices remain close to 5-week lows, the uncertainty over Brexit has prevented gold from falling even lower. Just a few weeks ago, Prime Minister Theresa May was confidently peddling a hard Brexit, putting Europe on notice that if she didn't like what the Europeans were offering, the UK would leave the European Union without a deal. However, May was humiliated in the UK election, and will be forced to govern with a minority government that is dependent on the support of a small Irish party. May's defiant tone has been replaced by a more conciliatory Philip Hammond, the British finance minister. Hammond has said that he wants a business-friendly and pragmatic Brexit and that no deal would be bad for the UK, although he won't accept an agreement that is aimed at punishing Britain. At the insistence of the Europeans, there are three key issues which will lead off the negotiations: (1) the legal status of EU citizens in the UK; (2) the status of the border between Ireland and Northern Ireland; and (3) the financial obligations of the UK to the EU. This week's formal meeting between the two sides was essentially a photo-op. However, with only two years earmarked for a Brexit agreement to be reached, the talks need to become substantive very soon if an agreement is to be reached.

USD/CHF - 0.9745

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9744

Kijun-Sen level                    : 0.9750

Ichimoku cloud top                 : 0.9743

Ichimoku cloud bottom              : 0.9729

Original strategy :

Bought at 0.9705, Target: 0.9805, Stop: 0.9690

Position : - Long at 0.9705

Target :  - 0.9805

Stop : - 0.9690

New strategy  :

Hold long entered at 0.9705, Target: 0.9805, Stop: 0.9690

Position : - Long at 0.9705

Target :  - 0.9805

Stop : - 0.9690

As the greenback has retreated after faltering below resistance at 0.9771 (last week’s high), suggesting further consolidation below this level would be seen, however, as long as support at 0.9695 holds, bullishness remains for recent upmove to resume after initial sideways trading, break of said resistance at 0.9771 would confirm recent rise from 0.9613 low has resumed for test of resistance at 0.9808 but reckon previous resistance at 0.9825 would hold from here due to near term overbought condition.

In view of this, we are holding on to our long position entered at 0.9705. Below said support at 0.9695 would defer and risk weakness towards said support at 0.9641 but only break there would abort and revive bearishness, this would also suggest the rebound from 0.9613 has ended instead, bring retest of this level later.

GBP/USD - 1.2667

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2622

Kijun-Sen level                    : 1.2681

Ichimoku cloud top              : 1.2769

Ichimoku cloud bottom        : 1.2752

Original strategy :

Sold at 1.2695, Target: 1.2595, Stop: 1.2710

Position : -  Short at 1.2695

Target :  - 1.2595

Stop : - 1.2710

New strategy  :

Hold short entered at 1.2695, Target: 1.2595, Stop: 1.2710

Position : - Short at 1.2695

Target :  - 1.2595

Stop : - 1.2710

Although cable has staged a strong rebound after intra-day brief fall to 1.2589, as long as 1.2710 holds, mild downside  bias remains for another decline, below 1.2635-40 would bring another fall towards said support but break there is needed to retain bearishness and signal recent decline has resumed for weakness towards 1.2550, however, oversold condition should limit downside to 1.2520-25. 

In view of this, we are holding on to our short position entered at 1.2695. Only above 1.2720-25 would abort and suggest low has been formed instead, bring a stronger rebound to 1.2755-60 and possibly 1.2780 but price should falter below indicated strong resistance at 1.2818.