What we are looking for

  • USD steady after yesterday’s late unwind: The USD was strengthening in the wake of US CPI but has since pulled back on comments from hawkish FOMC members that seem to row back on a potential 100 basis points (bps) hike. USD positive trends remain though. 
  • Indices are still cautious: European indices are playing catch up on a late Wall Street rebound, but US futures are cautiously lower this morning.
  • Data trading: On a busy day for US tier-one data, anything that helps to push the Fed towards a 100bps hike will be USD positive. US Retail Sales will be key, but also Michigan Sentiment (especially the inflation expectations). Industrial Production will also be watched.


Markets have been swinging around since the upside US CPI inflation surprise. Expectations of whether the data will push the Fed into a 100bps hike have been pulling markets lower and higher. The latest swing came in the wake of less hawkish than expected comments from two of the most hawkish members of the FOMC. This has pulled USD strength back and induced a rebound in equities. However, the tier-one data comes thick and fast today and markets will be looking for any signs that the Fed will indeed be pushed towards 100bps.

Markets are subsequently looking cautious early today and there is a sense of wait and see. The USD is still very strong but there is also a feeling that it is stretched too. Pairs such as EUR/USD and GBP/USD continue to trend decisively lower and until something material changes, this outlook looks set to continue. The elastic could easily snap back (with technical rallies), but for now, the existing trends are still holding firm. Commodities and equity indices are in a similar position. They remain in a deeply negative configuration but are oversold.  

There is plenty of tier-one US data for traders to feast on today for the economic calendar. With consumer spending generating around 70% of US GDP, Retail Sales will be the primary focus. Inflation may be biting, with monthly growth of +0.6% expected for core sales, but this would still be six consecutive months of growth. Industrial Production is expected to generate only slight growth. Michigan Sentiment will also be of keen interest. The broad Sentiment component is expected to continue to fall to all-time lows, but the Consumer Inflation Expectations caused a stir last month and will also be considered.

Today’s news

Market sentiment looks cautious: Major forex is consolidating ahead of tier-one US data. European indices are playing catch up on Wall Street, but US futures are cautious and are all but flat.

Treasury yields are dropping slightly: Yields fell into the close last night and are marginally lower this morning. Since the comments of Bullard and Waller (see below) the 2s/10s spread has rebounded to -18bps (from c. -24 yesterday). However, they remain decisively negative. 

Pricing for a 100bps hike recedes after Fed speakers: Waller and Bullard, considered the two most hawkish FOMC members have talked down the prospects of a 100bps hike in July. Waller: markets have “got ahead of themselves”. Bullard: still supports a 75bps hike. The Fed Funds futures probability of a 100bps hike has dropped from 70%/80% down to 30%/40%. 

Chinese GDP falls by more than expected in Q2: Q2 GDP fell by -2.6% which was a larger decline than the +1.5% expected. This follows +1.4% growth in Q1. In other data, Industrial Production also missed estimates in June with +3.9% (+4.1% exp) but Retail Sales were better than expected at +3.1% (0% expected).

Italian political drama: PM Draghi has tried to resign despite winning a vote of confidence. President Mattarella has rejected his resignation. This leaves significant uncertainty over what happens next.

Cryptocurrencies holding on to yesterday’s rebound: A decent risk rally took hold yesterday and is holding this morning. Bitcoin rebounded by +5% yesterday and is +0.5% this morning. The price is solidly back above $20,000.

Final Fed speakers before the FOMC Blackout: Raphael Bostic (permanent voter, very hawkish) is scheduled to speak on the final day before the Fed goes into its blackout period ahead of the FOMC decision on 27th July.

Economic Data:

  • US Retail Sales (at 1330BST). Core sales (ex-autos) are expected to be +0.6% in June (+0.5% in May)
  • NY Fed Manufacturing (at 1330BST). The survey is expected to drop slightly further into negative at -2.0 in July (-1.2 in June)
  • US Industrial Production (at 1415BST). Monthly production is expected to increase by +0.1% in Jun e(+0.1% in May) which would mean that YoY production falls slightly to +4.8% (from 5.4%)
  • Michigan Sentiment (at 1500BST). Sentiment is expected to fall slightly to 49.9 in July (from 50.0 in June).

Major markets outlook

Broad outlook: There is a cautiously positive bias to the market outlook this morning.

Forex: The USD slipped back into the close and is marginally weaker again this morning. AUD is underperforming too.

  • EUR/USD made an intraday breach of parity before rebounding from 0.9950 and closing back above parity last night. The rebound is holding today. However, we remain cautious of backing a sustained rally. Resistance at 1.0050 will be watched today, and then at 1.0120. A close below 1.0000 could open the floodgates towards 0.98/0.99 with the market already at almost 20-year lows.
  • GBP/USD continues to trend lower with a 3-week downtrend that lends resistance around 1.1900 today. Negative configuration is still deeply entrenched and intraday rallies remain a chance to sell. The initial resistance of note is the 1.1965 spike high. Below 1.1760, there is almost no support until 1.1410. 
  • AUD/USD remains in a downtrend of lower highs over the past five weeks which is currently around 0.6785. Even though the market has held up well in recent sessions there is still a continued negative configuration on the daily RSI and we continue to favour selling into strength. Initial resistance is now at 0.6800 but is strong between 0.6875/0.6895. Initial support at 0.6680 and then c. 0.6550.

Commodities: Precious metals remain under selling pressure whilst Brent Crude oil continues to threaten lower.

  • Gold has broken decisively the support at $1721 to open downside potential towards the key 2021 lows of $1676. Momentum is negative but is also oversold. We continue to see near-term rallies as a chance to sell. Initial support is yesterday’s low of $1697, with a near-term sell zone between $1721/$1745. A close above $1752 would be needed to suggest a technical rally of note.
  • Silver has accelerated lower in recent sessions and is now into a historic band of support between $17/$19 from early 2020. Momentum is very bearish but the RSI is oversold and a technical rally is looking overdue. Despite this, the strength of the selling pressure points to continued downside. There is overhead resistance now between $18.80/$19.40 and a move above $19.48 would need to be seen to suggest a notable rally is forming. Initial support is at $18.14.
  • Brent Crude oil had another wild day yesterday, initially breaking the support of the medium-term range at $98, only to rebound intraday above $100 again. However, there is still a negative configuration to momentum and intraday rallies are struggling to hold now. We favour selling into strength. There is resistance building around $100.60/$102.80 under the more considerable resistance at $105.50/$109.60. A close below $98 would be a near five-month low and confirm a key downside break, opening initially at $95 and then $90. 


Description automatically generated

Indices: Negative trends are re-establishing and intraday rallies still look to be a chance to sell. 

  • S&P 500 futures rebounded strongly from 3724 yesterday but the rally is already looking cautious this morning around initial resistance at 3810/3835. The move is also failing under the resistance of the old mini uptrend too. Given the continued negative configuration on momentum, we favour selling into strength. A 75 tick band 3875/3950 is key resistance and we look for pressure back towards 3724/3741. 
  • German DAX continues to fall away within the four-week downtrend. With a negative configuration on the daily RSI momentum, we look to use near-term rallies as a chance to sell for further pressure on the support around 12,375. The downtrend comes in around 12,800 today, with a band of resistance between 12,800/12,930. Above 13,012 is needed to induce a sustainable technical rally.
  • FTSE 100 has fallen decisively away to once more test the lows of the one-month range and support at 6970/7013. With the daily RSI consistently below 50, this still favours selling near-term rallies within the month-long range. Initial resistance is growing between 7100/7130 below the more considerable barrier to gains around 7192/7229.

Chart, treemap chart

Description automatically generated

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.