What are we looking at

  • USD strengthening again on risk aversion: Major markets are trading with a significant safe haven bias, driving renewed USD strength once more.
  • Indices continue lower: Major indices fell into the close on Wall Street last night and continue to decline today with US futures c. -1% lower.
  • Bitcoin is surprisingly higher: Bitcoin is significantly bucking the trend this morning, with gains of +3%. However, with risk appetite so negative, can this last?
  • Data trading: EUR traders will be watching Eurozone inflation, whilst USD will be impacted by the ISM Manufacturing.


As Q2 turns into Q3 not a lot has changed. Risk appetite remains negative which is driving market participants in search of safe-haven assets. Primarily the US dollar is the beneficiary of this trend, however, as Treasury yields decline once more (investor flows into the safety of US bonds) we are seeing the Japanese yen as the big outperformer. On the flip side, we see commodities falling away, with silver falling to a near two-year low. Associated with this, we also see the sharp underperformance of the commodity currencies such as the Aussie and the Kiwi. Equity markets are also lower in early moves.

Traders will be asking themselves what can change this tide of negativity. At this stage, with stagflationary pressures mounting and the Fed still being forced into aggressive hiking, it is difficult to see the light at the end of the tunnel.

There are a couple of big tier-one data points to look out for on the economic calendar today. The Eurozone HICP inflation is expected to increase on both a core and headline basis. EUR traders will have watched the big decline in German inflation and feel that a negative surprise may be possible. The US ISM Manufacturing is expected to continue to decline in June. We have seen a safe haven bias from several negative US data surprises that have helped to support USD recently. 

Today's news

Market sentiment is negative once more: The JPY and USD are strong outperformers on forex, with commodities and indices lower.  

Treasury yields fall again: Falling yields whilst USD is strengthening reflects significant risk aversion. The decline in yields is not massive today (US 10yr is -1bps) but trends of recent days show consistent downside is growing.

Japanese Tankan survey disappoints: The survey of the Japanese economy has missed expectations on almost every metric. 

China Caixin Manufacturing rises into expansion: The unofficial manufacturing PMI improves back into expansion territory (above 50) up to 51.7 also beating expectations. This is the highest level in over a year.

Eurozone final Manufacturing PMI marginal upward revision: The final reading has had a slight upward revision to 52.1 (from 52.0)

Cryptocurrencies move higher: Crypto is an asset class that is bucking the trend today, trading higher despite risk aversion. Bitcoin is over +4% higher this morning, however, having lost almost -8% yesterday this could just be an unwind. It remains under $20,000.

Economic Data:

  • Eurozone inflation (1000BST) Headline HICP is expected to increase to 8.4% in June (from 8.1%), with core HICP expected to increase slightly to 3.9% (from 3.8%).
  • US ISM Manufacturing PMI (1500BST) The survey is forecast to drop to 54.9 in June (from 56.1 in May).

Major markets outlook

Broad outlook: Sentiment is decisively risk-negative this morning. Safe havens are outperforming, whilst higher-risk assets are suffering.

Forex: USD and especially JPY are outperforming today. The biggest underperformers are AUD and CHF. 

  • EUR/USD moved higher yesterday but there is now a basis of initial overhead supply around 1.0470/1.0480 which has seen the market tailing off again today. The technical outlook looks corrective to sell near-term rallies. We favour short positions for a test of 1.0350/1.0380 support. Resistance at 1.0600/1.0640 is increasingly important.
  • GBP/USD broke below support at 1.2160 on Wednesday and this is now becoming a basis of resistance. There is an overhead supply now between 1.2160/1.2210 as Cable has fallen away this morning. A break back under the 1.2090 initial support re-opens the mid-June lows again. There is minor support at 1.2030/1.2040 but a retest of 1.1930 is still favoured. Resistance at 1.2330 is growing.
  • AUD/USD has fallen sharply to break below the big support at 0.6830/0.6870 taking the Aussie to a 2-year low. A closing breakdown would confirm a significant bearish development, with the RSI showing downside potential. The next basis of support is not until 0.6680. We look to sell near-term rallies with the old support band 0.6830/0.6870 now a basis of resistance. 

Commodities: Precious metals are accelerating lower, with oil also turning lower.

  • Gold is accelerating lower and has broken below the support of the $1805 mid-June low. This has opened a test of $1786 (the May low) however, looking at the longer-term charts a 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 $1805/$1825 as an initial “sell-zone”.
  • Silver has broken decisively below the key support of a trading range at $20.45 and is showing no signs of stopping. Aggressive negative candles have taken the market to its lowest level in 2 years. There is minor support around $19.65, but the main support does not come in until the $18.95 area. Momentum is very negatively configured now and any rallies back towards $20.45 is now a chance to sell.

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  • Brent Crude oil has had a choppy week and has fallen sharply in the past couple of sessions. Any positive implications of a break above the mid-range pivot area of $112/$116 have been neutralised. Trading under faltering moving averages, the outlook is neutral within the $98/$127 range once more. Initial support at $110.50 is holding and protects the $107.65 June low. Resistance at $119.65 is growing, with $115/$116.50 now a growing initial barrier.

Indices: Indices continue to track lower. 

  • S&P 500 futures have fallen for a fourth consecutive session and are under downside pressure once more this morning. The next support is 3735 with 3693 being the higher low protecting the 3641 June low. However, intraday rallies are being sold into and the market looks set for further downside. Initial resistance is at 3822/3840.
  • German DAX has closed decisively below the support between 12,820/12,930 and looks to be increasingly correctively configured for what is still a likely test of the 12,436 key March low. There is now a growing overhead supply between 12,820/12,930 which is becoming a near-term sell zone. 
  • FTSE 100 fell sharply yesterday and is lower again this morning in what looks to be another decisive swing lower. With the RSI faltering at 50, there is a growing negative configuration and the lows around 6970/6995 potentially come back into view. Initial resistance is at 7227 with the importance of the 7370 reaction high strengthening.

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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.