What are we looking at

  • USD paring gains, but for how long: USD has been on a tear in recent days. However, there is a slight unwinding to this move that is emerging this morning. With momentum becoming stretched on major markets, there could be space for a technical retracement. 
  • GBP one to watch on political developments: For now, there does not seem to be much impact on GBP to the political crisis for the UK Government. However, the longer that the situation continues, there may be a drag on GBP.
  • Indices rebound: European markets tick higher with a decent risk rally early today. US futures have also held up well recently. However, there is always caution to backing rallies as, throughout 2022, the selling pressure has never been far away.
  • Data trading: ADP Employment change will be the main focus for data traders. A pick-up is expected from last month. In recent weeks we have frequently seen a reaction of flow into safe-haven assets (and subsequently positive USD moves) to negative data surprises. The Weekly Jobless Claims are expected to be similar to last week.  


After a huge USD bull run, there is a hint of retracement this morning. It was interesting to see that despite a hawkish lean in the FOMC minutes, the USD has stalled since. Even though the minutes talked about being “more restrictive” to tackle inflation, they did not explicitly talk about recession risks. There is also a feeling that markets have moved on since the June meeting (FOMC was three weeks ago) with markets showing increasing signs of pricing for recession risks. This appears to have just stalled the advance of the USD this morning.

The USD is subsequently paring gains across all major currency pairs and there seems to be a minor risk recovery that has formed. The AUD and NZD which have been significant underperformers in recent weeks are leading the rebound. We are also seeing silver leading gold higher, whilst the German DAX is outperforming the FTSE 100. These are all risk positive signals. The caveat is that these rebounds could simply be near-term technical rallies from an oversold position, and the caution is that they do not last too long before the next bout of selling pressure. 

It is all about US jobs on the economic calendar today. The ADP Employment change is often seen as a precursor to Friday’s payrolls report. The ADP change is expected to improve to 200,000 (up from 128,000 last month). Weekly Jobless Claims are expected to be similar to last week at 230,000.  

Today's news

Market sentiment improves: USD is weaker across major forex, whilst commodities are rallying and indices are building higher.

Treasury yields ticked higher after the Fed minutes: Yields closed higher on the day with the 10yr yield +10bps. Yields are edging slightly higher again this morning, with broad markets responding well to a more settled look to Treasuries. The curve remains inverted between 2s and 10s with the spread at -4bps (-0.04%).

FOMC minutes remain hawkish: The minutes for the June FOMC meeting pointed to a firm commitment to getting inflation under control as inflation has increased to 8.6%. The 75bps hike was a move to tackle the risk that the public may question the resolve of the Fed thus entrenching elevated inflation. An increase of 50bps or 75bps will likely be appropriate in July, with an even more restrictive stance in policy potentially required. 

UK PM hangs on, for now: Despite over 50 resignations from his Government (there are 170 ministers, junior ministers, permanent private secretaries and trade envoys in total) and being urged to quit from all sides, UK Prime Minister Johnson clings on to his position. Likely, it will only be a matter of time before he is forced out as his Conservative Party MPs look sure to change the rules to oust him.

Cryptocurrencies are steady to slightly positive: There has been a more settled feel to crypto in recent sessions. Bitcoin has steadied above $20,000 and is trading around the flat line this morning.

Economic Data:

  • US ADP Employment change (1315BST) An improvement is expected in June to +200,000 (from +128,000 in May)
  • US Weekly Jobless Claims (1330BST) Claims are expected to reduce very slightly to 230,000 (against 231,000 in the previous week)

Major markets outlook

Broad outlook: Sentiment is trying to recover after a significant risk sell-off recently.

Forex: The USD is a slight underperformer across major currencies, giving back some of its significant gains. AUD and NZD are the main outperformers.

  • EUR/USD has fallen sharply in recent days and is trading at levels not seen since 2002 the next big level of note is parity. However, the market has found some support since the Fed minutes and is up from the 1.0160 low from yesterday. The RSI is around 30, which although has been lower in April/May, is still historically stretched. This opens the possibility of a near-term technical rally. The resistance of overhead supply starts at 1.0350.
  • GBP/USD has broken to its lowest since March 2020 but has found a rebound from 1.900. There is a hint of positive divergence on the RSI with the recent lows in the price, opening the potential for a near-term technical rally. Momentum could start to build if 1.1990 initial resistance can be decisively overcome. There could be scope for a rebound towards 1.2100/1.2160 overhead supply. The concern is that there is no support below 1.1900 until 1.1410.

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  • AUD/USD remains negatively configured in a one-month downtrend and has broken below 0.6830 support. However, it is also frequently finding support around 0.6760 in recent sessions and has ticked higher this morning. Reaction to the overhead supply between 0.6830/0.6870 will be the key as a bull failure would put pressure back on the lows and potential for further downside towards the 0.6650 area in due course. 

Commodities: Precious metals and oil looking to rebound after a sharp sell-off.

  • Gold has accelerated lower in recent sessions, breaching a whole number of supports. A rebound from $1732 this morning has kept $1720 intact for now, with $1676 the crucial 2021 support. With the RSI extremely oversold in the mid-20s, there is scope for a near-term technical rally. Overhead resistance of note comes in at $1752 and then $1784/$1786. We would still look to sell into strength.
  • Silver has been falling hard over the past couple of weeks, but started to find support yesterday at $18.91, rebounding into the close and is higher again today. Given the RSI is picking up from around 25, there is scope for a near-term technical rally. This would help to unwind oversold momentum. Initial resistance around $19.38 is now being tested but a move above here opens the way towards the more considerable resistance between $20.20/$20.45.
  • Brent Crude oil has fallen sharply over the past couple of sessions and has pulled back to the key medium-term range support band around $98/$102. The hourly chart shows a small base pattern formation that could see an initial rebound into the resistance band of $105.30/$108.25. At that point, there will be more consideration as to how far a rebound can go. The range support of $98/$102 appears to be solid for now.

Indices: Wall Street has shown signs of recovery in recent days whilst even European markets are rebounding 

  • S&P 500 futures have built well in recent days from the support firming around 3741 and the market is starting to edge higher. The move back into the resistance between 3876/3948 will be important on a near to medium-term basis. The RSI momentum has again recovered towards 50. However, with rallies within the three-and-a-half-month downtrend all faltering around 50/55 on the RSI this is an important phase. We favour selling a faltering rally. 
  • German DAX has ticked higher in the past two sessions to now breaching the sharp four-week downtrend. This opened a rebound to test the resistance of the band 12,820/12,955. This will be a key test to see whether near-term rallies are still a chance to sell. Support at 12,375/12,436 is growing.
  • FTSE 100 continues with its volatile swings on a near-term basis. The sharp move lower on Tuesday has swung around again with a rebound yesterday and into this morning. This still makes for difficult positioning, however, there is a choppy range in the past month, trading between support around 6970/7015 and up towards resistance of 7300/7370. The RSI is consistently below 50 and suggests that rallies are a struggle.

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