What are we looking at

  • USD starting to strengthen into the European session: The USD slipped back yesterday in the absence of US traders. However, into the European session this morning there has been a shift back towards USD outperformance across major forex. 
  • Indices edge higher but may be losing momentum: After gains on Friday, indices struggled to sustain momentum yesterday in the absence of US trading desks. These struggles have continued early today. How US markets react later today could be key, as rallies have consistently been seen as a chance to sell.
  • AUD weakens despite RBA rate hike: A +50bps rate hike was fully expected and with no new hawkish hints as it re-iterates forward guidance on rates. AUD has fallen. 
  • Data trading: After the European PMIs this morning, it is fairly quiet for the rest of the day for data traders. US Factory Orders later will be watched. Data disappointments in recent weeks have tended to drive safe-haven flows, which have favoured the USD. 


With US traders off for the Independence Day public holiday yesterday, major markets stuttered slightly. There has been a positive bias to sentiment since Wall Street rallied into the close on Friday to start Q3 off on the front foot. This positive bias remains, but there is a more cautious and somewhat tentative feel to it. How US traders react as they come back to their desks today could be very telling, as risk rallies have consistently been used as a chance to sell throughout 2022. It has not been a question of “if” the selling will resume, but “when”. The only change to this might be that with the beginning of Q3 and a clean slate, perhaps traders can approach things with a more positive mindset. 

Already we are seeing the USD bulls waking up to flex their muscles this morning. A stronger USD has tended to go hand in hand with renewing negative risk appetite. The Reserve Bank of Australia hiked rates by 50 basis points early this morning. However, this was fully expected and with no new hawkish hints, we have seen the AUD falling back. 

After the final PMIs for European countries this morning, the economic calendar turns to US data again. Today is fairly quiet, but the US Factory Orders for May will be watched. Month on Month orders are expected to grow by +0.5%.

Today's news

Market sentiment is mixed as the USD strengthens again: A strengthening of the USD tends to come with negative risk appetite. However, European indices are mixed to slightly higher, whilst US futures are trading higher.

Treasury yields tick slightly higher: Bond yields have resumed trading after the US public holiday market closure. Yields are higher today with the 10year yield +4bps and the 2-year yield +9bps.

Caixin Services PMI jumps into expansion: The services PI is up to 54.5 with the composite PMI at 55.3. Both are well above expectations. This helps to support a more positive risk appetite. 

Reserve Bank of Australia hikes by +50bps as expected: The increase to +1.35% (from +0.85%) was fully expected. The RBA said that while inflation was high, it is not as high as in other countries and is forecast to peak this year. 

Eurozone final Composite PMI slight upward revision: The final PMIs were slightly revised higher. Services increased to 53.0 (from 52.8) and Composite to 52.0 (from 51.9) 

Cryptocurrencies move higher: Crypto has been edging higher in recent days and continues to move higher today. Bitcoin has seen a positive close in the past couple of days and is higher again this morning. The price is +2% and is above $20,000. 

Economic Data:

  • UK final Services PMI (0930BST) Forecasts are now looking for any change to the 53.4 flash Services and the flash Composite at 53.1.
  • US Factory Orders (1500BST) Analysts are looking for MoM growth of +0.5%.

Major markets outlook

Broad outlook: Sentiment is positive this morning, but renewing USD strength is leaving markets cautious again

Forex: The AUD is the main underperformer, with NZD not far behind. USD is outperforming major forex.

  • EUR/USD is resuming the move lower and is now below the 1.0350/1.0380 support area. In four of the last five sessions, we have seen intraday bull failures to post a negative candle. Momentum is faltering, with downside potential. A close below 1.0350 opens the 1.0325 December 2016 low as the next support, but then there is little to stop the pair from moving to parity. With this morning’s failure at 1.0450 the run of lower highs continues. The resistance band at 1.0600/1.0640 is increasingly important.

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  • GBP/USD is resuming the move lower. With another bull failure yesterday in the resistance band 1.2160/1.2205 the lower highs are mounting and the downside pressure growing. Momentum is negatively configured with the 4-hour chart RSI again failing at 50. This points to testing Friday’s low at 1.1975 but the June low of 1.1933 is increasingly likely to be tested too.
  • AUD/USD rallied yesterday into the overhead supply of the old big support band 0.6830/0.6870 and the barrier of a 4-week downtrend, only to be hit this morning in the wake of the RBA decision. A sharp move lower since the RBA suggests a bull failure and opens moves lower once more. Friday’s low of 0.6735 is likely, with the next real basis of support around 0.6650/0.6680. The bull failure is strengthening resistance overhead, posting a high at 0.6895. 

Commodities: Precious metals remain a sell into strength, whilst oil is posting mixed signals in the range.

  • Gold rebounded well with Friday’s bull hammer, but has been unable to turn the momentum of that move into something positive. With a slip back lower yesterday and the struggle for positive traction today, we continue to prefer selling into strength. The big 4-month downtrend sits around $1831 today, with price resistance of lower highs between $1814/$1825 seen as an initial “sell-zone”. Pressure on $1784/$1786 is likely.
  • Silver has ticked higher in the past 36 trading hours, but this looks to be a bear rally into the resistance of the old support band of $20.45/$20.60. With momentum still negatively configured, we favour using rallies as a chance to sell for what is likely to be a move lower to retest the $1938 recent low and likely towards $18.95. 
  • Brent Crude oil has become very choppy over the past couple of weeks, swinging higher and over for a few days at a time. The most recent move is higher to move above the old mid-range pivot area of $112/$116. This would need a move above $119.65 to suggest decisive positive momentum is developing.  Support is initially at $113.25 and then $111.00.

Indices: There is a slight positive bias to Wall Street in recent sessions, but European markets are struggling for traction. 

  • S&P 500 futures come back from the Independence Day holiday with a slight positive bias, but that move needs to be sustained. However, there is plenty of overhead supply and resistance that will be restricting a recovery, whilst the market has edged back from 3856 this morning. Ongoing reaction around resistance between 3840/3950 will be important. Support is forming at 3741.
  • German DAX rebounded on Friday but with the old support between 12,820/12,930 becoming the basis of resistance again, the market found resistance at 12,954. Despite US futures trading higher today, the DAX is struggling for traction. We continue to favour using rallies as a chance to sell 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 was tentative yesterday after Friday’s rebound. This tentative move has continued today and a bull failure at 7290 is a worry for the bulls. For now, the outlook is mixed but given the slightly corrective bias to momentum and the resistance between 7315/7370 remaining intact we favour a test of 7104. Below that opens a move back towards 6970/6995.

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