What are we looking at today:
- USD continues to look more corrective: USD strength is unwinding against all major currencies.
- Indices looking on the bright side: After a hugely volatile week last week, indices settled into the weekend and are looking more positive this morning.
- Crypto steady in consolidation: With selling pressure easing on risk assets, cryptocurrencies are holding ground in recent sessions. However, there is no sign yet of decisive recovery.
- Data trading: It is a quiet economic calendar today with no significant data of note.
There is a more positive feel to markets at the start of this week. There is little real driving force behind the moves, but indices have started on the front foot, whilst the corrective move on the US dollar which has been hinting recently, is also gathering pace. The Aussie is leading the gainers after a decisive result in the federal election which has allowed for a smooth transition of government, avoiding the difficulty of a hung parliament.
However, there is mixed news out of China, with COVID cases in Beijing and Shanghai questioning the potential to ease lockdown restrictions. How this develops in the coming days and how markets respond could be a key gauge for markets and the sustainability of a more positive outlook across major markets.
With the German Ifo Business Climate having been announced, there is no other significant data on the economic calendar today.
Market sentiment is looking more positive today: Indices are higher, whilst the USD is underperforming on major forex. Commodities are also higher, whilst there is a rebound on cryptocurrencies.
Treasury yields are slightly higher: Yields have been gradually edging lower in recent sessions, but yields are slightly higher this morning.
German Ifo Business Climate better than expected: The headline Business Climate has improved to 93.0 (from 91.8) and beat expectations of deterioration to 91.4. This improvement was driven by both current conditions and expectations improving.
A new Labor Government in Australia: A new government for Australia with Anthony Albanese as the new Prime Minister.
COVID in China: New cases in Beijing and Shanghai throws lockdown easing measures into doubt. Markets will be looking at the reaction to the testing in the next few days and how Chinese authorities respond.
Cryptocurrencies continue to build support: Cryptocurrencies were relatively stable last week, despite the volatility in other major markets. Bitcoin is building higher this morning, over +3% higher on the day and back above $30,000. The first resistance of note remains $31,400.
- No significant data is due today
Major markets outlook
Broad outlook: Signs of improvement in sentiment again on Monday morning.
Forex: USD continues to be dragged lower in a corrective move. AUD is outperforming.
- EUR/USD recovery towards a test of 1.0640 continues with a seven-day uptrend forming. Reaction to key resistance at 1.0640 will be crucial to the near to medium-term outlook. Above the resistance opens 1.0750/1.0800. Support at 1.0460 is an important higher low with initial support at 1.0530.
- GBP/USD is pushing on in recovery early on Monday, moving above 1.2525 to open the key resistance at 1.2640. This is the first lower high in the sell-off and reaction to it will be a key gauge for the sustainability of a rally. Support at 1.2330 is a key higher low in the recovery now, with initial support at 1.2435.
- AUD/USD is building higher off a recovery uptrend of the past seven days and has now broken a downtrend dating back to the beginning of April. A higher low at 0.6950 is in place with 0.7000 now initial support. Resistance starts to come in around 0.7160 with 0.7265 being the key lower high.
Commodities: Precious metals continue to build on the recent improvement. Oil trades with a slight positive bias within the seven-week range.
- Gold is putting together a series of positive candlesticks in recovery and has started this morning well again. With momentum improving, the price is looking for a move above $1858 to be the next step in recovery. A decisive move above $1858 opens $1890 as the next resistance. There is a higher low at $1807, whilst $1832 is increasing as support this morning.
- Silver continues to build for a near-term recovery, testing resistance for a base pattern that would complete above $22.10. A breakout would open $23.27 as the next key test in a recovery. With a recovery in the RSI, momentum is improving for this near-term rebound. There is now a higher low at $21.28, with initial support at $21.60.
- Brent Crude oil continues to fluctuate within the seven-week trading range between $99/$116 but is once more edging higher towards a test of resistance around $116 again. The mid-range pivot area between $105/$107 is supportive and lends a positive bias. However, with momentum pointing to a neutral configuration, until there is a confirmed breakout, we would be cautious and continue to play the range.
Indices: markets are looking more positive early on Monday.
- S&P 500 futures rebounded into the close on Friday and have opened in positive territory this morning. Just as the European session has developed, the initial gains are just easing back slightly, strengthening near-term resistance 3932/3954. Although there are a few initial hints of recovery building, there are still key downtrends in place with a series of lower highs. Much needed to be done to suggest a sustainable recovery, with key resistance at 4094. Friday’s low is at 3807.
- German DAX has moved higher early today and is once more eyeing a test of the resistance at 14,260/14,320. Momentum is looking more positive in the past week and with moving averages flattening off in their recent downward trajectories, whilst the 4-month downtrend has been breached, the potential for recovery is growing. Support at 13,675 is also a key gauge as a higher low.
- FTSE 100 reacted well to close higher on Friday and is higher again this morning. Support at 7227 and adds weight to the key lows now between 7157/7227. The recent moves re-iterate the uncertainty in the near to medium-term outlook, with big swings higher and lower, but unable to sustain a move. The resistance at 7545 is the first important barrier the bulls will be looking to break. Initial support is now at 7322.
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