What we are looking for

  • USD hints of resuming strength this morning: A near-term corrective move on the USD has stalled. With the USD outperforming major forex today, there are hints that strength could be renewing.
  • Indices look more mixed today: Tech stocks have been leading Wall Street higher, but US futures show NASDAQ falling away. This would begin to weigh on the Wall Street rally. European indices are looking cautious in early moves.
  • Data trading: Flash PMIs will continue to dominate data trading. The disappointing PMIs from Australia and Japan are weighing on sentiment, whilst the Eurozone data has fallen into contraction and will weigh further on EUR. PMIs for the UK and US are also set to be announced, so GBP and USD will be reactive.


The European Central Bank has hiked rates more than expected in an attempt to frontload rate hikes. However, with Eurozone core/periphery yield spreads widening, the EUR has lost upside traction. Furthermore, this comes as major economies continue to see worrying signs of moves towards negative growth and even recession. Overnight flash PMIs for Australia and Japan have dropped towards stagnation, whilst the Eurozone flash Composite PMIO has fallen into contraction. Subsequently, we are seeing a bias towards USD (as a safe haven) once more in forex. These growth concerns are also weighing on equity markets as US futures begin to pull back and European indices look cautious in early moves.  . 

The flash PMIs for major economies will continue to dominate the economic calendar throughout the day. These growth indicators are expected to continue to deteriorate across the board. UK Composite flash PMI is forecast to decline more than a point, whilst US flash PMIs are expected to only fall slightly. 

Today’s news

Market sentiment is looking cautious again: A far more cautious mood has taken over markets approaching the end of the week. A USD positive bias is re-emerging whilst indices are tentative.

Treasury yields falling again: Yields fell sharply into the close last night (10yr yield -13bps) and are down again today (10yr yield down another -7bps). Market participants buying bonds (yields lower) are a reflection of a negative risk appetite.

Italian political risk grows: The parliament has been dissolved as PM Draghi has been unable to hold his government together. A general election is now scheduled for 25th September.

Australian flash PMIs fall more than expected: The flash Composite PMI has fallen to 50.6 in July (from 52.6 in June). The forecast was looking for only a slight decline and this means that the survey is only just in expansion now.

Japanese core inflation increases: Core inflation increased to 2.2% in June (from 2.1% in May). This was in line with forecasts.

Japanese flash PMIs drop more than expected: The flash Composite PMI has fallen to 50.6 in July (from 53.0 in June). This was a big miss of the 51.8 forecasts and is only just in expansion now.

UK Retail Sales fall sharply in June: MoM adjusted sales (ex-fuel) fell by -0.7% in June (after growth of +0.4% in May). This was a larger than expected decline than the -0.4% forecast. YoY sales are falling by -5.9% now (from -5.5% in May).

Eurozone flash PMIs fall into contraction: The flash Composite PMI has fallen to 49.4 in July (from 52.0 in June). Readings below 50 suggest contraction. This missed estimates of 51.0. 

Cryptocurrencies in consolidation: Bitcoin has been choppy in consolidation in the past few sessions, but is holding above $23,000. The caution is that if risk appetite is turning decisively negative, crypto will struggle to hold on to these recovery gains.

Economic Data:

  • UK Flash PMIs (0930BST) – The composite flash PMI is expected to deteriorate in July to 52.5 (from 53.7 in June).
  • US Flash PMIs (1445BST) – The composite is expected to fall slightly to 52.1 in July (from a final 52.3 in June).

Major markets outlook

Broad outlook: With USD strength taking hold this morning and US Treasury yields falling again, there is a risk-negative bias taking hold. 

Forex: USD is outperforming all majors with EUR especially weak. 

  • EUR/USD has been hitting up against resistance at 1.0275 in recent sessions and failed once more there in the wake of the ECB. Subsequent selling pressure is taking hold today as USD strength resumes. A close back under 1.0150 support would suggest a move back lower (and imply -120 pips of initial downside target). Below support at 1.0120 would confirm the renewed selling pressure and re-open the prospect of parity again. Daily and 4-hour RSI faltering under 50 add to the corrective momentum that is growing.
  • GBP/USD been unable to overcome the resistance around 1.2055 in recent days and the rally is starting to fall over. Resistance around 1.2000 could now be a mini lower high and a move below 1.1890 would point towards growing corrective momentum again. This would then re-open a test of the 1.1760 low again. The importance of resistance at 1.2055 is growing. 
  • AUD/USD has held up well in the past 24 hours, even though there is a move lower this morning. This continues to be an important juncture for the pair as the resistance of the three-month downtrend and 55-day moving average lie overhead. Reaction to the old pivot band which is now supportive between 0.6830/0.6895 will be key. A move back under 0.6830 old support would suggest the sellers are back in control. The initial price resistance is now at 0.6935.

Commodities: Precious metals are trying to recover, but need to continue for confirmation. Oil .is tracking lower once more.

  • Gold has posted a remarkable turnaround since the ECB meeting yesterday. A bullish key one-day reversal (bullish engulfing candle) has left support at $1680 and closed back above $1715. If this is now confirmed with a positive session today it can be a powerful near-term reversal signal. The RSI above 30 is also encouraging for a recovery. However, a move above resistance at $1723 needs to also happen to be the first breach of a lower high. The moves have been cautious this morning.

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  • Silver has also recovered well in the past 24 hours. A sharp intraday rebound from $18.24 has formed a “bull hammer” (although not from the trend low) which suggests a shift in sentiment. This shift needs to continue with another positive move today, ideally with a move above initial resistance at $19.09. The initial move today is one of caution, so there is much that needs to happen before being encouraged into playing for a recovery.
  • Brent Crude oil has fallen over as the resistance band between $107.65/$109.65 has held firm. A sharp negative candle yesterday (although closing around the session mid-point) is taking a move corrective outlook again. An early bull failure today is also playing into this move. The initial support is yesterday’s low at $102.35 which is protecting a move back towards $98/$100 again. Initial resistance is around $106.50.

Indices: Wall Street recovery is still intact, but the reaction to breakout support will be watched. 

  • S&P 500 futures have posted positive closes in four of the past five sessions. Closing decisively clear above 3950 is also encouraging for continued recovery. However, there is a consolidation early today and the bulls will be looking to now build support above the 3950 breakout support. The past two sessions have found buyers into dips between 3920/3930, so a failure below here would indicate corrective momentum again. Initial resistance is the overnight high of 4004 before the next band of resistance 4070/4200. 
  • German DAX has been consolidating in recent sessions having found a barrier of resistance between 13,375/13,430. For now, the recovery is still intact but the buyers need to continue to build on the support area around 13,000/13,080. Above 13,440 would open the way again towards 13,650.
  • FTSE 100 has pulled back from the resistance around 7335/7370. However, there is a more constructive positive configuration on RSI momentum now (holding above 50) and buyers are being attracted to weakness. This leaves a slight positive bias within a month-long trading range. There is support forming between 7205/7229. A move below 7180 would be disappointing now.

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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.