What we are looking for

  • USD stabilises in front of US inflation: There was a wobble for USD after EUR/USD hit parity yesterday but this has stabilised overnight. Traders will be looking towards US CPI to drive direction later in the session.
  • Indices have slipped back: After slipping back early this week, equity markets are at an important crossroads. Will the selling pressure simply continue, or is there a change of outlook to the long-held “sell into strength” strategy?
  • Data trading: The Eurozone industrial production may move the EUR if there is a significant surprise. However, US CPI will be in mind for all traders and will be the big mover for the session. Last month’s upside surprise in the headline caused a surge in USD buying. The Bank of Canada is fully expected to hike, so the forward guidance will be the main driving reaction. 


The early part of the week has been dominated by the move of EUR/USD falling to parity. Yesterday’s intraday rebound from the massively psychological $1.0000 level was encouraging, but this move may be short-lived as another retreat has parity in focus again today. This comes ahead of crucial US CPI inflation data later today. The world’s most widely traded forex pair is significantly oversold but a data surprise, either way, could induce another decisive move. Higher than expected CPI could wipe out parity and lurch the market below. Whereas, a downside surprise could induce a key rally.

Equity markets are also around key levels today. Recent recoveries have been rocked by two days of selling pressure re-emerging. Especially for Wall Street, recovery uptrends are now under threat and given the consistent strategy of selling rallies, the support of higher lows will be tentative. This could be a pivotal moment. 

It is a busy day on the economic calendar. The Eurozone Industrial Production is expected to hold up well in May and recover the year-on-year production back into a position of (small) growth. The US CPI inflation will be key today, with the headline expected to show an increase to 8.8%, but interestingly, the core CPI is forecast to fall (having been flat last month). The Bank of Canada is expected to hike interest rates by +75bps but it will be more focused on how much further they are willing to go which will take the market's attention.

Today’s news

Market sentiment is mixed ahead of US CPI: European indices are playing catch up on a late sell-off into the close on Wall Street last night. US futures are relatively stable this morning, in wait-and-see mode. Major forex is mixed, with the drop back in EUR a concern. GBP is performing well after UK GDP surprised to the upside.

Treasury yields are waiting for US CPI: Yields rebounded into the close last night and are all but flat this morning. US CPI will likely drive a key reaction later.

The RBNZ hikes by +50bps: The Reserve Bank of New Zealand increased the OCR by +50bps (+0.50%) to 2.50% as expected. It remains appropriate to tighten policy and will tighten conditions at a pace to maintain price stability by also supporting maximum sustainable employment. The decision was consistent with previous messaging, however, there was a slight balancing to the message with mention of sustainable employment. NZD dropped slightly on the announcement.

China's trade surplus improves: The surplus jumped to +$97.9bn in June (from +$78.8bn in May) driven by higher than expected exports of +17.9%. Imports were +1%, slightly lower than forecast.

UK monthly GDP for May upside surprise: After 3 months of flat or negative monthly GDP prints, May GDP posted a surprisingly positive +0.5% (-0.1% forecast). GBP has found strength and outperformance on this.

Cryptocurrencies tick higher after another fall: Bitcoin has unwound almost all of the recovery gains of the past two weeks, falling almost -5% yesterday. However, the price is slightly higher this morning, by +1% up to $19,600.

Economic Data:

  • Eurozone Industrial Production (at 1000BST). Production is expected to grow by +0.3% in May which would improve the 12-month production to positive at +0.3% (from -2.0% in April).
  • US CPI (at 1000BST). Headline CPI is expected to increase by +1.1% in the month, increasing the YoY CPI to 8.8% in June (from 8.6% in May). Core CPI is expected to fall to 5.7% (from 6.0%) 
  • Bank of Canada interest rates (at 1500BST). A +75 basis points hike to 2.25% is forecast (from 1.50% previously)
  • Fed Beige Book (at 1900BST). The economic outlook of the Federal Reserve in more detail is published.

Major markets outlook

Broad outlook: Risk appetite is mixed this morning ahead of US CPI.

Forex: The USD is slightly outperforming, with EUR and JPY under pressure. NZD is slightly weaker too.

  • EUR/USD rebounded from parity yesterday but has slipped back from the initial resistance around 1.0070 and is again testing parity. The level continues to hold for now, but the reaction to US CPI will likely be a massive driver for the near-term outlook. A close below 1.0000 could open the floodgates, with the market already at almost 20-year lows. Above 1.0070 suggests an improvement and potential technical rally towards 1.0190/1.0220 and maybe 1.0350.
  • GBP/USD has rebounded from 1.1807 and has held up well since the UK GDP surprise. The hourly chart shows an attempt at a recovery base pattern, needing to hold a break above 1.1920. However, the two-week downtrend is a basis of resistance now at 1.1965 and needs to be broken for a sustainable near-term recovery. Below 1.1807, there is almost no support until 1.1410. The first resistance of note is Friday’s high of 1.2055 and then 1.2165.
  • AUD/USD is in a slow, stepped decline having seen a rally fall over around the overhead supply between 0.6830/0.6870. A minor rebound yesterday from 0.6710 and a slight gain early today brings the next potential bull failure into view. The resistance of the downtrend of lower highs over the past five weeks is currently around 0.6815. We continue to favour further downside towards the 0.6650 area in due course with near-term rallies as a chance to sell. Resistance at 0.6875/0.6895 is key near term.

Commodities: Precious metals remain under selling pressure whilst oil is scrambling for support after another big sell-off yesterday.

  • Gold has drifted lower again as $1732 support has given way. This now means a test of the next support at $1721. Near-term resistance is growing around $1740/$1745 and momentum on the 4-hour chart is beginning to turn with a negative bias. A clean break of $1722 opens downside potential towards the key support at $1676. A close above $1752 is needed for an improvement.
  • Silver has drifted back below $18.91 which means further two-year lows with the next support c. $18.40. There is still a consistent feel of selling intraday rallies. The caveat is that the daily RSI remains around the mid-20s and is oversold, so the threat of a near-term technical rally remains. Initial resistance around $19.48 needs to be broken to open the way towards the more considerable resistance between $20.20/$20.45.
  • Brent Crude oil has jagged lower once more to test the support of the medium-term range lows which comes in around $98/$102. An initial tick higher this morning is looking to firm the support again, but the downside pressure is mounting. A close below $98 would be a near five-month low and begin to look at a key downside/$ break. Resistance is firming around $108/$110. Momentum is taking on an increasingly corrective configuration., with the RSI having faltered around 45. 

Chart, histogram

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Indices: A pivotal moment for a Wall Street rally. 

  • S&P 500 futures have reversed the recovery from last week, firming the resistance in the 75 tick band 3875/3950. With two solid bear candles, this would normally be the sort of move that would open the floodgates of selling pressure once more. However, there is a three-week uptrend (currently around 3800) and if the bulls can fight back then this could begin to turn the tide of “selling into strength”. As such, it could be a pivotal moment. A breach of the uptrend would test 3740 the first key higher low of recovery. 
  • German DAX slipped back again yesterday and this is firming a now four-week downtrend and bolsters resistance at 13,012. This level will now be seen as an important marker for a potential sustainable near-term recovery. However, as the market has fallen again early today the support of yesterday’s low at 12,643 will be watched as a break would re-emphasise the lower highs and lower lows move of early this week.
  • FTSE 100 remains highly uncertain and lacking conviction as a third long-legged/small-bodied candle formed yesterday on the daily chart. Viewed on a one-month horizon, we still see the market is in a choppy range between support at 6970/7013 and resistance at 7300/7370. However, momentum remains correctively configured with the RSI consistently below 50 and this still favours selling near-term rallies within this month-long range. Initial support is now at 7071 as resistance has formed at 7229.

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.