What we are looking for

  • USD starting to move lower again: Markets have been seemingly moving on the elevated geopolitical risk of Pelosi’s visit to Taiwan. As the dust begins to settle again, market participants are reverting to the trend of the past two weeks. The bias of a USD correction is resuming.
  • Indices looking to build support again: After yesterday’s slide lower, indices are consolidating today. S&P 500 futures holding above 4080 is a near-term gauge of support.
  • Can the recovery in gold be sustained?: Gold slipped yesterday but has found support today. A bull failure after this rebound would threaten a small top formation.
  • Data trading: It is all about the Services PMIs today, with the US ISM Services in key focus. UK data is a revision to the flash reading of a couple of weeks ago, so is unlikely to do too much for GBP (unless there is a significant revision). The US ISM Services is expected to fall decisively, so some sort of surprise is likely. A negative surprise is USD negative. Oil traders will be watching the OPEC+ meeting for any changes to production levels. Higher production will be negative for the oil price.


Risk appetite has been far more cautious over the past 24 hours. Geopolitical tensions have become elevated as US House Speaker Pelosi has visited Taiwan. The move has angered China which has promised a response. So far the response has been relatively muted (military drills being stepped up around the Taiwan coast and some restrictive exports/investments. However, nothing is overtly dangerous yet. As with the Russian moves in Ukraine, only time will tell. 

Markets have subsequently become relatively settled this morning. Yesterday’s bout of USD buying and flow into safety has eased. USD has also been supported by the hawkish commentary of FOMC members in the past 24 hours. However, USD gains have been limited this morning and equity markets are building support again.

It is a day of Services PMIs today on the economic calendar. The UK Services PMI (and Composite PMI) is a final reading and is expected to be unrevised from the flash. Into the US session, the US ISM Services will be key, with a drop of nearly 2 points expected. US Factory Orders for June are expected to show decent growth of 1.1%. Elsewhere the OPEC+ meeting could throw up some surprises after reports that Saudi Arabia was to push for production increases.

Today’s news

Market sentiment looking more settled: After yesterday’s USD positive/risk-negative bias amid cautious trading, we are seeing markets more settled today.

Treasury yields stable after yesterday’s jump higher: Yields jumped yesterday on the hawkish FOMC comments (see below) which also supported the USD. However, they are looking more stable today, hovering around yesterday’s close.

FOMC members talk rates up: Bullard (most hawkish on the FOMC) says the Fed needs to be more “restrictive”. Mester (again very hawkish) notes that inflation is not even levelling off yet and is not going to come down quickly. Evans (one of the more dovish members) says that 75bps is a possibility in September but prefers 50bps and then 25bps at each of the next four meetings after. The US interest rate futures curve has moved higher with all this.

China Caixin Composite PMI falls in July: The Caixin (unofficial) Services PMI slightly beat to the upside, but after Manufacturing missed earlier in the week, the China Caixin Composite PMI fell to 54.0 (from 55.3).

Eurozone final Composite PMI revised higher: With the Services PMI revised up to 51.2 (from the flash 50.6) this has pulled the final July Eurozone Composite PMI up to 49.9 up from the flash reading of 49.4 (final June 52.0).

Ukrainian grain exports reach Turkey: The container ship of grain that left Odesa earlier in the week has reached its first destination of Turkey.

Cryptocurrencies steady: Crypto was relatively stable yesterday despite the risk-negative bias. This stability has continued today and has steadied the selling pressure of late last week. Bitcoin is all but flat at around $23,000.

Economic Data:

  • UK Services PMI (08:30 GMT) – The final July Services PMI is expected to be unrevised at 53.3 (down from 54.3 final June). The final Composite PMI is also expected to be unrevised at 52.8 (53.7 final June). 
  • ISM Services (14:00 GMT) – Consensus is expecting the official services PMI to fall to 53.5 in July (from 55.3 in June) 
  • US Factory Orders (14:00 GMT) – MoM orders are forecast to grow by +1.1% in June (+1.6% in May).

Major markets outlook

Broad outlook: Yesterday’s cautious sentiment is looking more stable today as recent trends look to take hold once more.

Forex: USD is slightly weaker this morning across major forex. There is no real standout performer.

  • EUR/USD has posted a bull failure around the resistance at 1.0275. The market is not ready to break out quite yet. We will not be getting too carried away with a “bearish engulfing” candlestick as trading ranges can be choppy.  We need to wait and see this move as the buyers need to hold on to 1.0145 support. We remain cautious of backing a recovery as the RSI remains stuck under 50 and the multi-month downtrend is intact. The important higher low support is at 1.0095. Resistance is now at 1.0294.

Espresso Morning Call: Markets settle, USD weakens again

  • GBP/USD pulled back yesterday but the move has found support again this morning within the near three-week uptrend. The RSI holding above 50 will sustain the improving outlook. Initial support is now around 1.2135 but the important first higher low is at 1.2060. Initial resistance is 1.2240 below 1.2293. 
  • AUD/USD fell sharply on the RBA decision yesterday to break the 0.6910 support. A close below this support is yet to be seen so, the bulls have responded well initially. With the RSI unwinding back towards 50, we are looking for whether this is a chance to buy. A move below 0.6875 would suggest the recovery is turning sour. Above 0.6965 resistance would improve again and then the 0.7045/0.7070 resistance comes back in. 

Commodities: Gold is holding up well, but silver is starting to slip. Oil has once more turned into a frequent swing trade.

  • Gold has pulled back from $1788 which is in the $1785/$1805 resistance band. However, the recovery uptrend is holding as the market has ticked higher again today. This now becomes an important crossroads as two trendlines converge. Breakout support at $1745/$1752 has been held for now and if this continues the prospect of continued recovery grows. Breaking the five-month downtrend would also add to this, as would the daily RSI holding above 50.
  • Silver has seen a recovery stall around the overhead supply resistance at $20.45/$20.60. Yesterday’s negative candle needs a response from the bulls today, but for now, a drift lower again is not ideal. The market needs to find support, ideally above the $19.48 breakout to sustain the recovery momentum. The RSI holding above 50 would help. Initial support is at $19.75.
  • Brent Crude oil is struggling to get a recovery going again after the bull failure around the resistance band $107.65/$109.65. The RSI consistently failing around 50 (where recent rallies have faltered) suggests selling into strength. The market fell again yesterday and looks set to put pressure on $101.60/$102.35 support. Below opens $98/$100 once more.

Indices: Wall Street is losing recovery momentum but a near to medium-term positive outlook is still favoured.

  • S&P 500 futures have eased back from recent resistance at 4147 as the recovery momentum stalls. However, this still looks to be a move within the trend of higher lows and weakness has consistently been bought into over recent weeks. We would still be looking at near-term weakness being used as a chance to buy into this recovery. Initial support is now at 4080 and strengthening between 3994/4042. 
  • German DAX has eased back from 13567 but is holding in the support band 13330/13440 With RSI momentum holding above 50 and an uptrend formation, if 13330 can hold as support then the outlook will continue to improve. Above 13567 opens 13665/13735 resistance. 
  • FTSE 100 eased back from a high of 7474 with a bit of profit taking and is now into the breakout support band 7335/7370. With the RSI above 50, this looks to be a chance to buy. The run of higher lows is intact whilst 7309 support holds.

Espresso Morning Call: Markets settle, USD weakens again

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.