Sample Category Title

Daily Pivots: (S1) 0.9210; (P) 0.9230; (R1) 0.9267; More....

Intraday bias in USD/CHF stays neutral for the moment and outlook is unchanged. Another rise could still be seen as long as 0.9141 support holds. Break of 0.9273 would pave the way to 0.9471 key resistance next. On the downside, however, break of 0.9141 support will argue that the rebound from 0.8925 has completed, and turn bias back to the downside for this low.

In the bigger picture, medium term outlook is currently neutral with focus on 0.9471 resistance. Sustained break there will indicate completion of whole decline from 1.0342 (2016 high). Medium term outlook will be turned bullish for a test on 1.0342 high. But, rejection by 0.9471 again will revive bearishness for another fall through 0.8756 low.

The euro currency is under heavy selling pressure against the Japanese yen after the pair collapsed under a large triangle pattern on Tuesday. EURJPY bulls need to defend the 130.50 support area to encourage a retest of the triangle breakout, around the 132.10 level. If the 130.50 level is broken then the EURJPY pair is likely to fall towards the psychological 130.00 support level.

If the EURJPY pair trades below the 132.10, sellers may test the 130.50 and 130.00 support levels.

EURJPY pair is only bullish while trading above the 132.10 level, key resistance is found at the 132.50 and the 132.95 levels

The US dollar is still on the rise against the Canadian dollar currency after yesterday’s massive upside breakout towards the 1.2500 resistance level. The daily time frame shows that bearish momentum price divergence has formed during yesterday’s advance. If the bearish divergence is reversed then the USDCAD pair could correct back towards the 1.2310 price area.

The USDCAD pair is only bullish while trading above the 1.2310 level, key resistance is found at the 1.2550 and the 1.2655 levels.

If the USDCAD pair trades below the 1.2310 level, sellers may test the 1.2250 and 1.2180 levels.

US stocks were relatively mixed on Tuesday as investors focused on the activities by China. Dow Jones index fell by more than 200 points while the Nasdaq 100 rose by 24 points. Some of the biggest laggards were Chinese companies like Full Truck Alliance, DiDi, and Alibaba. Their share prices declined sharply after China intensified its crackdown on tech firms. It has already ordered DiDi not to add new customers in the country. Also, it has ordered companies like Apple and Google to remove its apps from the app stores. Analysts see this as a way of the country’s limiting the number of companies that list in the US.

The price of crude oil rose to a six year-high as investors reflected on the divisions by OPEC+ members. It then declined sharply, with Brent and West Texas Intermediate (WTI) falling to $74.40 and $73.38, respectively. This price action is mostly because the cartel disagreed on whether to gradually increase production or to maintain the status quo. The United Arab Emirates (UAE) rejected most of the proposals that members had voted for on Friday. They called for adding 400k barrels per day to the market from August to December. Investors expect more volatility as divisions between UAE and Saudi escalate. The price will react to the API weekly inventories set for later today.

The US dollar was little changed in the overnight session as investors waited for Fed minutes from the previous meeting. The minutes are expected to give investors more details about what happened during the meeting. They left interest rates unchanged and hinted that they will hike them in 2023. The currency is also reacting to the latest non-manufacturing PMI data published yesterday. The Institute of Supply Management (ISM) number declined from 64 to 60.1 while the Markit figure came in at 63.7. These numbers show that the sector is doing relatively well. Elsewhere, the key numbers to watch today will be the UK’s Halifax house price index, German industrial production data, and the Canadian PMI number.

EURUSD

The EURUSD pair is trading at 1.1823, where it has been in the past few days. The pair is trading at 1.1823, which is slightly above yesterday’s low of 1.11800. On the four-hour chart, the pair is below the 25-day moving average and between the lower and middle lines of the Bollinger Bands. The pair has also formed an inverted cup and handle pattern, meaning that it could continue falling as bears target the next key support at 1.1750.

AUDUSD

The AUDUSD pair rose to 0.7597 on Tuesday after the latest RBA interest rate decision. It then declined sharply to the current level at 0.7488. The pair has moved below the middle line of the Bollinger Bands while the signal and main line of the MACD has moved below the neutral line. The money flow index has also declined to the current level of 35. Therefore, the pair will likely remain in the current range today.

XBRUSD

Brent crude oil declined sharply in the overnight session. It moved from a six-year high of 78.42 to a low of 74.8. It also moved below the ascending trendline that is shown in red. This line connects the lowest levels since May. The commodity channel index (CCI) also declined below the oversold level while the MACD declined below the neutral level. Therefore, the pair may keep falling as bears target the next key support at 73.

Markets

Risk off held sway across most markets yesterday. European stocks lost about 0.8-1%. An intraday rebound limited losses on WS to 0.6% (DJI) or even brought the green back on the scoreboard (0.17% Nasdaq). Core bonds went through the roof. Sure, the US services ISM disappointed, declining from a historical 64 to a still-lofty 60.1 (63.5 expected) on easing momentum in business activity and hiring (again sub 50). However, it only strengthened, not triggered, the existing trend. The US yield curve bull flattened with jaw dropping yield changes varying from -1.5 bps (2y) to -7.6 bps (10y). Perhaps some liquidity issues (going into the Summer lull) as well as technical elements had their share in yesterday’s dazzling session as well. The US 10y yield fell through 1.43% support and went straight for a test of June low around 1.35%. The 30y gave way to the 2% too, forcing some UST shorts to throw in the towel. The German 10y (-5.8 bps) tanked sub -0.25% support (finished at -0.268%). The 30y took it up a notch, shedding 7.4 bps to finish at the lowest level in three months. Somewhat not fitting the general risk off idea however, is the steep fall in EMU peripheral yields basically as much as Germany’s. Gold initially traded according to the script, taking out $1800 again only to pare all gains even as sentiment remained dire and core bond yields extended losses. One element thwarting the rise of the precious metal was the USD. EUR/USD’s attempt to take back the high 1.18 area failed and instead visited intermediate support at 1.181. The real outperformer was the yen though. USD/JPY dropped from 110.97 to 110.63. EUR/JPY intraday ditched a full big figure (close 130.81). EUR/GBP tested the 0.853 support area, the last line of defense before the April low (0.8472), but eventually closed unchanged around 0.857. Oil dipped $2.5/b, whacking the likes of CAD and NOK.

Most Asian stocks are losing ground this morning. Japan underperforms following yen strength. US bond yields are licking their wounds (up about 1 to 1.5 bps). The dollar trades marginally on the back foot. EUR/USD holds near yesterday’s close.

We’re very keen to see market dynamics play out after yesterday. A day like Tuesday usually doesn’t just come and go. The hefty bond market moves and the (US) tech and dollar outperformance are a chill reminder to the 2020 trade when corona casted a large, dark shadow over the economy. Are markets again worried about growth going forward now that the easy part, more so in the US, is behind us? The topic could serve as a theme in coming days, especially with the remainder of this week’s economic calendar, including today (interim EC forecasts and Fed meeting minutes only due this evening), eying pretty empty. Both core bond yields and EUR/USD are not out of the woods yet.

News headlines

The Central Bank of Hungary announced to have reviewed its Green Monetary Policy Toolkit Strategy. As a first step, the Monetary Council launched two new programmes to promote and boost green mortgage lending: The Green Mortgage Bond Purchase programme and the FSG Green Home Programme. The Green Mortgage Bond Purchase Programme aims to contribute to the development of the domestic green mortgage bond market through targeted purchases and, through this, encourage green mortgage loan activities. The Bank set an initial target of HUF 200 bln for this scheme. Under the second scheme, the central bank will launch cheap loans for banks in October to encourage green mortgage lending, with a total limit of 200 billion forints. Under the scheme, loans of up to HUF 70 million and a maximum term of 25 years can be granted for constructions or purchases of new, highly energy-efficient residential real estates.

Yesterday, European Commissioner Maros Sefcovic again raised the proposal for the UK to agree on a Swiss style veterinary agreement to avoid Sanitary and Phytosanitary checks for agri-food products. Under such an arrangement, the UK and EU rules would be aligned, removing the need for safety and animal health checks at the broader on the Irish Sea. Until now, the UK has rejected such a solution on the basis of sovereignty concerns

Market movers today

• Today's main release is the FOMC minutes from the June meeting, where the Fed was more hawkish than anticipated. Still, we doubt that the minutes will be a major market driver, as we have heard a lot from individual FOMC members since the meeting.
• Besides that we get industrial production data for May for Norway, Germany and Denmark this morning. Also the monthly GDP estimate for Norway in May is due out this morning.
• In Sweden, Swedish household consumption in May is due out at 09:30 CET.

The 60 second overview

Global bond markets rally: Global bond yields declined yesterday as the US ISM service index released yesterday afternoon undershot expectations. Furthermore, the oil price declined modestly although we are still awaiting a deal among the OPEC+ countries.

Tonight we will get the minutes from the most recent FOMC meeting and the market will be looking for comments on tapering etc. However, given a balanced view then the market impact should be limited and 10Y US Treasury yields should remain below 1.4%.

OPEC+ deal: The Biden administration held talks with Saudi Arabia, UAE and other members of OPEC in order to facilitate a deal on oil production. Hence, the market is looking towards a deal and thus the oil price declined.

Equities: Global equities slightly lower yesterday as even S&P500 broke a seven-day streak of gains. Big flattening move in yields extended value names underperformance from last week. Financials, energy and materials were all lower, while tech and bond-proxy real estate led. VIX ticked up slightly. In the US, S&P 500 closed down -0.2%, Dow -0.6%, Nasdaq up 0.2% and small caps underperforming 0.3%. Risk off continuing in Asia this morning, with most markets lower. US futures are roughly unchanged.

FI: Positive sentiment in the European government bond markets as yields decline in Europe and US. 10Y US Treasury yields declined some 4bp as the curve flattens between 2Y and 10Y as oil prices decline modestly.

FX: Yesterday, dollar strengthened and the NOK sold off as markets further faded the cross asset theme of inflation. We see further upside for dollar and downside to Scandies over the coming quarters. EUR/GBP has moved slightly lower in recent days, as GBP got support from the UK government's decision to go ahead with the easing of restrictions 19 July amid a big delta outbreak. We think EUR/GBP will continue to trade around current levels (plus/minus) in July. After the summer holiday, we expect EUR/GBP to start trading lower.

Credit: CDS indices were hit by weaker market sentiment on Tuesday. iTraxx Xover widened around 6½bp (closed at 232.75bp) and Main was 1bp wider (closed at 46.5bp). HY cash bonds widened slightly less than CDS (+3.65bp) however IG cash bonds were largely unchanged.

Nordic macro

Norway: In Norway, the gradual lifting of coronavirus restrictions has boosted private consumption. Hence, we expect mainland GDP climbed 1.0% m/m in May, i.e. marginally more than Norges Bank assumed in its June monetary report at 0.8 %. Given how unemployment moved in May, there is also some upside risk to our forecast.

Sweden: Several data out of Sweden tomorrow. Private consumption (May) should recover after an unexpected large drop (5.1% m/m) in April. We do not see any particular reasons why consumers suddenly would sit on their hands. Also private sector production (May) which has recovered strongly since the pandemic lows last spring however more recently at a somewhat slower pace.

Also tomorrow, the Riksdag will vote on Stefan Löfven as old/new Prime Minister. There is still some outstanding uncertainties about the vote and a late infight between the Centre Party and the Greens but we would say that the most likely result is that Löfven will collect enough support to be elected. But it will be a weak government indeed and far from certain that the new government will be able to get the budget passed later this year. If not, Löfven has warned that he will resign again but there are reasons to doubt that considering the short period of time until the next general election in September 2022.

General trend

• Oil cos. trade weaker after decline in oil prices.
• Nikkei has pared some of the opening decline [Topix Banks, Air Transportation and Iron & Steel indices drop >1%].
• Shanghai Composite traded modestly higher during the morning session [Consumer, IT and Industrial indices rose; Financial and Property firms lagged].
• Hang Seng has remained lower, the index is currently off of the lows [TECH index drops over 1.5% amid continued regulatory concerns; Financials also trade generally weaker]; XPeng declines in HK debut.
• S&P ASX 200 rebounds from loss seen during prior session [Consumer and Financial indices rise; Energy index declines].

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened flat.
• (AU) Sydney confirms lockdown to be extended 1 additional week through July 16th.
• (AU) Australia Jun AIG Services Index: 57.8 v 61.2 prior.
• (AU) Australia sells A$1.0B v A$1.0B indicated in 1.50% Jun 2031 bonds, avg yield 1.332%, bid to cover 3.67x.
• (AU) Reserve Bank of Australia (RBA) Deputy Gov Debelle and Board Member Harper to serve addition 5-years.
• (AU) Reserve Bank of Australia (RBA): Excess cash at exchange settlement (ES) accounts at A$321.9B v A$318.2B prior (Record high).
• (NZ) Westpac expects RBNZ to start raising OCR rates in Nov 2021 [brings forward prior call].

China/Hong Kong

• Hang Seng opened -1.1%, Shanghai Composite -0.6%.
• (CN) China Cabinet said to step up oversight and amend rules on overseas listing of companies - financial press.
• (CN) China said to begin Graft checks in Security issuance sector; anti-graft officials in China are examining corruption related to financial risk events - Press.
• (CN) White House official: expect Biden and Xi to have some sort of engagement before too long.
• (CN) China NDRC: Sees steel scrap utilization amount at 320Mts by 2025; Nonferrous recycled production to hit 20Mt by 2025.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Net drain CNY20B v Net drain CNY20B prior [5th consecutive net drain].
• (CN) China PBOC sets Yuan reference rate: 6.4762 v 6.4613 prior.

Japan

• Nikkei 225 opened -1.3%
• (JP) BOJ said to consider raising its inflation forecast to due energy gains in its next quarterly economic outlook [due on Fri Jul 16th] - financial press.
• (JP) JAPAN MAY PRELIMINARY LEADING INDEX CI: 102.6 V 102.7E; COINCIDENT INDEX: 92.7 V 92.7E.
• (JP) Japan Jun FX Reserves $1.38T v $1.39T prior.
• (JP) Japan again considering alcohol restrictions in Tokyo area – Nikkei.
• (JP) Osaka Prefecture said to be seeking extension of its quasi emergency - Press.

Korea

• Kospi opened slightly lower.
• Samsung Electronics [005930.KR]: Reports Prelim Q2 (KRW) Op 12.5T v 11.3Te (vs 5.5T y/y); Rev 63.0T v 61.5Te (vs 52.97T y/y); Q2 earnings will reflect 1 off gain in Display.
• LG Electronics [066570.KR]: Guides Q2 Op (KRW) 1.1T v 495.4B y/y (vs 1.14Te); Rev 17.1T v 12.8T y/y (vs 17.0Te).
• (KR) South Korea confirms 1,212 additional coronavirus cases (in line with earlier reports).
• (KR) South Korea PM: To maintain current social distancing measures; Could raise measures in 2-3 days.
• (KR) South Korea May Current Account (BOP): $10.8B v $1.9B prior (13th consecutive surplus); Balance of Goods (BOP): $6.4B v $4.6B prior.
• (KR) Bank of Korea (BOK) Sells KRW2.24T v KRW2.20T indicated in 2-year Monetary Stabilization Bonds (MSB): avg yield 1.275% v 1.190% prior.

Other Asia

• (SG) Singapore to release Q2 advance GDP data on Jul 14th (Wed).

North America

• (US) JUN ISM SERVICES INDEX: 60.1 V 63.5E.

Europe

• (FR) France Finance Min Le Maire: Regret EU is not united over corporate tax deal, Ireland's reaction to OECD tax deal was measured.

Levels as of 01:20 ET

• Nikkei 225, -1.3%, ASX 200 +0.6% , Hang Seng -1.1%; Shanghai Composite +0.4% ; Kospi -0.8%.
• Equity S&P500 Futures: flat; Nasdaq100 flat, Dax -0.1%; FTSE100 +0.1%.
• EUR 1.1826-1.1815 ; JPY 110.66-110.39 ; AUD 0.7500-0.7482 ;NZD 0.7024-0.7003.
• Gold +0.3% at $1,799/oz; Crude Oil +0.1% at $73.47/brl; Copper +0.7% at $4.2797/lb.

Daily Pivots: (S1) 1.3749; (P) 1.3823; (R1) 1.3874; More....

GBP/USD dropped notably after failing to sustain above 4 hour 55 EMA, but downside is contained well above 1.3730 support. Intraday bias remains neutral for the moment. On the upside, break of 1.4000 resistance will argue that fall from 1.4248 has completed. Intraday bias will be turned back to the upside for retesting 1.4240/8 resistance zone. On the downside, break of 1.3730 support will resume the fall from 1.4248, as the third leg of the consolidation pattern from 1.4240, to 1.3668 support and possibly below.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications and target 38.2% retracement of 2.1161 (2007 high) to 1.1409 (2020 low) at 1.5134. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed and bring deeper fall to 1.2675 support and below.

Yen and Dollar surged strongly overnight, but lost some momentum after on stocks recovered from initial steep selloff. Both are still firm with Asian markets in risk aversion mode. Canadian Dollar is currently the worst performing for the week, followed by Aussie. Focus will now turn to FOMC minutes for guidance on the next moves, in stocks, yields, and currencies.

Technically, while the greenback jumped, some key near term levels remain intact for now. The levels include 1.1806 support in EUR/USD, 1.3730 support in GBP/USD, 0.7443 support in AUD/USD and 0.9273 resistance in USD/CHF. USD/CAD did breach 1.2485 resistance but there is no follow through buying yet. Additionally, Gold appears to have bottomed for the near term at 1750.49, on bullish convergence condition in 4 hour MACD, after breaking 1794.75 resistance. Dollar's weakness could still come back any time.

In Asia, at the time of writing, Nikkei is down -1.26%. Hong Kong HSI is down -1.08%. China Shanghai SSE is up 0.36%. Singapore Strait Times is down -1.61%. Japan 10-year JGB yield is down -0.0011 at 0.035. Overnight, DOW dropped -0.60%. S&P 500 dropped -0.20%. NASDAQ rose 0.17%. 10-year yield dropped -0.061 to 1.370.

NASDAQ staying on bullish track after 0.17% gain

DOW had a steep pull back overnight and was once down over -430 pts. Yet, it managed to recovered most losses to close down -208.98 pts, or -0.60% only, at 34577.37. S&P 500 dropped only -0.20% while NASDAQ even rose 0.17%. Overall market sentiments remain generally positive.

NASDAQ's outlook is unchanged that further rise is expected as long as 14439.39 support holds. Current up trend should target 61.8% projection of 10822.57 to 14175.11 from 13002.53 at 15074.39. With 15k psychological level in proximity, that would be a key hurdle to overcome, that could shape the outlook for the second half of the second half of the year.

US 10-year yield dropped to lowest since Feb, more downside first

US 10-year yield dropped sharply overnight, by -0.061 to close at 1.370, hitting the lowest level since February. Some analysts noted that the move reflected believes that inflation in the US, and even the strong growth, were transitory only. The move also came in tandem with notable pull back in major stock indexes. Focuses will now turn to FOMC minutes for more guidance.

The speed of the fall in TNX was a surprise, even though the direction isn't. Prior rejection by 55 day EMA already hinted that corrective pattern from 1.765 would more likely extend lower than not. For the moment, we'd expect strong support 38.2% retracement of 0.504 to 1.765 at 1.283 to contain downside and bring rebound. In other words, there is room for further decline in the near term, but downside is relatively limited.

Australia AiG services dropped to 57.8, question on filling positions to fill orders

Australia AiG Performance of Services index dropped to 57.8 in June, down from 61.2. Sales dropped -2.5 pts to 66.1. Employment dropped -2.4 pts to 54.2. New orders dropped sharply by -11.7 to 56.6. Input prices dropped -2.7 to 65.4. Selling prices dropped -9.9 to 53.5. Average wages rose 2.9 to 66.0.

Ai Group Chief Executive, Innes Willox, said: "Some adverse impacts on demand and supply chains were associated with the COVID lockdowns and restrictions imposed by other states and territories. Businesses were also constrained by an inability to fill positions required either to maintain existing levels of activity or to expand to meet higher demand. Wages growth accelerated in June and input prices continued to rise although at a more moderate rate than in the previous month. The healthy rise in new orders came on top of the sharp rise in the previous month and points to strong demand over coming months. A key question for many businesses will be whether they can fill positions required to fill these orders."

Elsewhere

Japan leading economic index dropped to 102.6 in May, down from 103.8, below expectation of 103.5. Germany industrial production, France trade balance, Italy retail sales and Swiss foreign currency reserves will be released in European session. Later in the day, Canada will release Ivey PMI and US will publish FOMC minutes.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3749; (P) 1.3823; (R1) 1.3874; More....

GBP/USD dropped notably after failing to sustain above 4 hour 55 EMA, but downside is contained well above 1.3730 support. Intraday bias remains neutral for the moment. On the upside, break of 1.4000 resistance will argue that fall from 1.4248 has completed. Intraday bias will be turned back to the upside for retesting 1.4240/8 resistance zone. On the downside, break of 1.3730 support will resume the fall from 1.4248, as the third leg of the consolidation pattern from 1.4240, to 1.3668 support and possibly below.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications and target 38.2% retracement of 2.1161 (2007 high) to 1.1409 (2020 low) at 1.5134. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed and bring deeper fall to 1.2675 support and below.

Economic Indicators Update

DOW had a steep pull back overnight and was once down over -430 pts. Yet, it managed to recovered most losses to close down -208.98 pts, or -0.60% only, at 34577.37. S&P 500 dropped only -0.20% while NASDAQ even rose 0.17%. Overall market sentiments remain generally positive.

NASDAQ's outlook is unchanged that further rise is expected as long as 14439.39 support holds. Current up trend should target 61.8% projection of 10822.57 to 14175.11 from 13002.53 at 15074.39. With 15k psychological level in proximity, that would be a key hurdle to overcome, that could shape the outlook for the second half of the second half of the year.