What are we looking at
- USD slips back on improved sentiment: Although markets are lacking direction from the US today, there is still a slight USD corrective move that is being seen on the risk positive bias to major markets.
- Indices tick higher: European indices are higher after Wall Street rebounded into the close on Friday.
- US Independence Day public holiday: With US trading desks off for the day we are expecting low trading volumes and thin market conditions. Volatility might be erratic but generally, this leads to quiet markets.
- Data trading: It is a quiet day for economic calendar traders. Some interest in CAD positions may come from the Canadian Manufacturing PMI.
Despite US markets being closed for the Independence Day public holiday, there is still an early sense of the glass being half full today. There was a decent rebound into the close for Wall Street on Friday and this has helped to sustain an early tick higher on European markets today. It is interesting to see this positive bias leaking into major forex too, with the AUD and NZD bouncing. Given the news of renewed COVID restrictions in China and a Chinese corporate debt default, how sustainable these moves will be is questionable, especially when US traders return tomorrow.
With the US on holiday for Independence Day, it is a quiet day for the economic calendar. The only real data of note is the Canadian Manufacturing PMI. As with the PMIs of other major economies, a decline is expected.
Market sentiment recovers on Monday: European indices are higher, although some of this is playing catch up on a late Wall Street rally on Friday. AUD and NZD outperforming whilst JPY underperforms is an indication of this. However, US futures are indicative of a move lower on the markets reopening tomorrow.
Treasury markets are closed today: Bond markets are shut for Independence Day in the US.
China COVID concerns continue: As the zero COVID strategy continues, some cities in eastern China have tightened restrictions, with public venues and restaurants closed.
Cryptocurrencies fall again: The crypto space remains under pressure as Bitcoin falls again on Monday morning. The price is down c. -1.5% and is close to $19,000.
- Canadian Manufacturing PMI (1430BST) The forecast is for a decline to 56.0 in June (from 56.8 in May)
Major markets outlook
Broad outlook: Sentiment has picked up this morning, but the lack of US steer leaves this as a cautious move.
Forex: The AUD and NZD are the biggest outperformers in early moves, with JPY the main underperformance along with the USD.
- EUR/USD fell on Friday and survived an initial look at the 1.0350/1.0380 support area. The market is a shade higher this morning, but the trend of lower highs continued and near-term rallies are still seen as a chance to sell for further pressure on the key lows. Resistance is growing around 1.0490 with the band at 1.0600/1.0640 increasingly important.
- GBP/USD rebounded from just above the 1.1930 June low on Friday. The is a marginal tick higher this morning, but the outlook continues to suggest further pressure on the lows and resistance around 1.2160/1.2205 is growing. The resistance at 1.2330 is increasingly important.
- AUD/USD fell sharply on Friday to break the big support at 0.6830/0.6870 taking the Aussie to a 2-year low. This old support band between 0.6830/0.6870 is now a basis of resistance and there is also a barrier of a 4-week downtrend that is restricting the market on a rebound this morning. We look to use near-term strength as a chance to sell. The RBA meeting will be a risk factor for volatility this week. Initial support at 0.6765 from Friday’s low is standing in the way of a move lower towards the next basis of support around 0.6680.
Commodities: Precious metals remain a sell into strength, whilst oil remains mixed in the range.
- Gold rebounded well on Friday from the test of support at $1786 (the May low) to form a bull hammer. However, the broad technical outlook remains negative and rallies look to be a chance to sell for further pressure towards $1784/$1786 and a possible move back towards the $1750 area cannot be ruled out. RSI momentum is confirming the growing negative momentum but also has downside potential in a move. There is a growing overhead supply now between $1814/$1825 as an initial “sell-zone”.
- Silver has fallen hard following the break below the key support of a trading range at $20.45. It has also not managed to recover to the extent of gold and still looks to be very negatively configured. This points to selling into near-term strength for a move towards the next main support around the $18.95 area. Momentum is very negatively configured now and any rallies back towards $20.45 is now a chance to sell.
- Brent Crude oil has become very choppy over the past week and lost a sense of direction within the broad trading. Range. Trading around the old mid-range pivot area of $112/$116 leaves a neutral outlook to the $98/$127 range once more. Momentum is all but neutral too. Levels to watch for direction come from the $107.65 June low and the resistance at $119.65.
Indices: Indices have rebounded but key overhead supply is a barrier to recovery.
- S&P 500 futures rebounded into the close on Friday to leave the support at 3741 and post an encouraging bull candlestick. However, there is plenty of overhead supply and resistance that will be restricting a recovery. A growing band of resistance between 3840/3950 is likely to be seen as the basis of a sell zone now.
- German DAX rebounded on Friday but already we are seeing the old support between 12,820/12,930 becoming the basis of resistance again. We continue to favour selling near-term strength for what is still a likely test of the 12,436 key March low. The resistance at 13,375/13,430 is now key. Initial support is at 12,600.
- FTSE 100 ticked higher on Friday and is higher again early this morning. However, the outlook is mixed and will edge towards a slightly corrective bias whilst the resistance between 7315/7370 remains intact. There is initial support at 7104 that is protecting a move back towards 6970/6995.
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