What we are looking for

  • USD gaining on safe-haven flow: Although US Treasury yields are falling (buying bonds is a flight to safety), the US dollar is benefiting as a safe-haven play.
  • Indices falling: Wall Street fell slightly into the close and US futures are lower again today. This is weighing on European indices. 
  • Commodities mixed: Gold is holding up well, but the more risky plays such as oil and silver are falling.
  • Data trading: Canadian Manufacturing PMI may derive some volatility for CAD trades. The US JOLTS data is the only data to impact the USD on a relatively quiet day for data traders.


There is a nervous look to major markets this morning. US House Speaker Pelosi is on a trip to Asia and is expected to visit Taiwan today. This is seen as an affront to China and would be seen as a contravention to the “One China” policy. China’s warships are massing close to Taiwan and there could be a significant response. With elevated geopolitical risk, financial markets are seeing a flow into safe-haven assets. The USD has picked up this morning, whilst the JPY continues to recover strongly. Gold is also outperforming other higher-risk commodities. Indices have fallen back overnight and are now at risk of some profit-taking to the recent recoveries.

The biggest underperformer in the forex space is the AUD. The Reserve Bank of Australia hiked its interest rate by +50bps this morning to 1.85%. Some had felt that it might go a little further, to round number the rate at 2.00%. However, the dominant reaction is coming from the RBA noting that it was not on a pre-set path. This is very similar to what the Fed said last week. It is seen as a dovish lean as it is more of a nod towards acknowledging the risks to growth which may result in a lower peak in interest rates. 

The rest of the day is a little quiet for the economic calendar. There is nothing in the European morning. However, into the US session, the Canadian Manufacturing PMI will be watched and is expected to decline slightly. The US Jobs Openings and Labor Turnover Survey (US JOLTS) is expected to show openings and the number of people quitting their jobs is now falling. Any downside surprises to these will be an indication of further tightening in the labor market.

Today’s news

Market sentiment turning nervous: Markets will be nervously watching Nancy Pelosi’s visit and the subsequent response from China. In the meantime, there is a bias toward a move into safety and out of higher risk.

Treasury yields falling: Longer-dated yields (US 10yr) continue to fall, whilst the shorter end (2yr) holds up relatively well. The spread between 2s/10s continues to move even more negative (or inverted) at -0.31%

US House Speaker Pelosi expected to visit Taiwan today: The Speaker (acting alone and not instructed by President Biden) is to be the first to visit Taiwan in 25 years. The visit could provoke China into a significant response if they feel it breaks their “One-China” policy. This response could be a military one. Subsequently, there is elevated geopolitical risk around this visit.

Reserve Bank of Australia hikes by 50bps: The rate hike to 1.85% (from 1.35%) was as expected. There were no hawkish surprises. Also, the RBA said that it was not on a pre-set path. Similar to the FOMC decision last week, the AUD has fallen on the back of this as it is seen as a dovish lean.

Saudi Arabia to push for higher oil output within OPEC: Following US President Biden’s visit to Saudi Arabia in July there is an expectation that Saudi will push for OPEC+ to increase production in the meeting on Wednesday. Oil prices fell back on this yesterday.

Cryptocurrencies dropping back: After falls over the weekend and on Monday, cryptos are lower again today on the flight to safety. Bitcoin is over -1% lower and is back below $23,000.

Economic Data:

  • Canada Manufacturing PMI (13:30 GMT) – Consensus is expecting a slight decline to 54.0 in July (from 54.6 in June)
  • US JOLTS (14:00 GMT) – The Job Openings are expected to reduce to 11.0m in June (from 11.254m) whilst the Quits rate is also expected to reduce to 4.250m (from 4.270)
  • New Zealand Unemployment (10:45 GMT) – The jobless rate is expected to reduce slightly to 3.1% in Q2 (from 3.2% in Q1)

Major markets outlook

Broad outlook: Negative risk appetite means safe havens are performing well. The JPY is very strong, with the USD clawing back previous losses. Commodities are lower (aside from gold which is holding ground) whilst indices are falling back.

Forex: JPY is very strong, with USD also performing well. AUD is a big underperformer, along with NZD. 

  • EUR/USD has been ticking higher and was looking to breakout above the resistance at 1.0275 overnight. However, the flight to safety has kicked in for the European session this morning and the market has pulled lower. We need to wait and see this move as the buyers were looking ready to make a key move. The RSI remains stuck under 50 so we remain cautious of backing a recovery without a confirmed upside break. Reaction to initial support at 1.0145 will be a gauge, with important higher low support at 1.0095.
  • GBP/USD completed another strong session yesterday with a move above 1.2250. However, the early decline today needs to be watched now. We are happy to continue to play this recovery in GBP/USD but the near three-week uptrend needs to hold. The RSI also needs to hold in the 50s to sustain the improving outlook. Reaction to initial support around 1.2160/1.2185 will be a gauge, but the important first higher low is at 1.2060. 
  • AUD/USD closed higher last night but has fallen sharply on the RBA decision today. Reaction to the 0.6910 support is the first key test. A close below the support would be disappointing and question the recovery. Resistance at 0.7045/0.7070 is growing now too. Below 0.6860/0.6875 support would begin to turn the market corrective again. 

Commodities: Precious metals are consolidating around key technical barriers. Oil has swung sharply lower again.

  • Gold has rallied over the past four days and is now testing the barrier of a four-month downtrend (at $1776). This now becomes an important first next step in the recovery. If this downtrend can be broken then the prospect of a more sustainable recovery increases. The RSI is more positively configured now but needs to hold above 50 ideally to still improve. The $1745/$1752 breakout support needs to hold on a correction. If so, then we look for pressure towards a test of the next resistance band between $1785/$1805.
  • Silver has just begun to see the recovery stall around the overhead supply resistance at $20.45/$20.60. This is the next important test for recovery and needs to be overcome. RSI momentum is confirming the improved momentum and for now, the potential is for weakness to be used as a chance to buy. Initial support is at $19.85/$20.08 with $19.40/$19.50 now key. A close above $20.60 opens $21.53 and above.

Silver chart

  • Brent Crude oil has once more swung around, with the bull failure around the resistance band $107.65/$109.65. The RSI failing around 50 (where recent rallies have faltered) is concerning for the bulls too. The market fell sharply yesterday and is lower again this morning. A close below support at $101.60 opens $98/$100 once more.

Indices: Wall Street is just beginning to ease lower, with European indices also slipping back from recent recovery highs

  • S&P 500 futures have just eased off from yesterday’s high of 4147 and is now starting to pull lower. This is only a near-term move at the moment and could be a degree of profit-taking from the sharp gains. However, this is all coming around the important resistance band between 4070/4200, so the bulls will be mindful not to ease off too much. We would still be looking at near-term weakness being used as a chance to buy into this recovery. Initial support is now at 4080 and strengthening between 3994/4042.
  • German DAX having broken decisively clear above 13440 resistance the market is just easing off slightly. An unwinding move from 13567 is now testing the initial support at 13330 but with intraday momentum already unwound, the bulls will need to return quickly to support to prevent a corrective slip. A break below 13035 would turn the market corrective again. 
  • FTSE 100 eased back from a high of 7474 with a bit of profit taking. However, the run of higher lows is intact for now whilst 7309 support holds. Momentum indicators on the 4-hour chart suggest this is a chance to buy. The daily RSI is still around 60 which reflects the strengthening positive momentum.

Support and resistance levels

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.