EQUITIES: E-Mini S&P Holding Onto Bulk of Recent Gains
Recent gains in Eurostoxx 50 futures from the Jun 23 low still appear to be a potential bull reversal and the contract is holding on to its most recent gains. Price has traded through both the 20- and 50-day EMAs. The clear break of both averages strengthens a reversal theme. This opens 5486.00, the May 20 high and a bull trigger. On the downside, a break of 5194.00, the Jun 23 low, would reinstate a bearish theme. The trend condition in S&P E-Minis remains bullish and the contract is holding on to the bulk of its recent gains. Resistance at 6128.75, the Jun 11 high, has recently been breached. The break confirmed a resumption of the uptrend that started Apr 7. This was followed by a breach of key resistance and a bull trigger at 6277.50, the Feb 21 high. Sights are on 6356.12, a Fibonacci projection. Key support is at the 50-day EMA, at 6021.70.
- Japan's NIKKEI closed higher by 132.47 pts or +0.33% at 39821.28 and the TOPIX ended 11.62 pts higher or +0.41% at 2828.16.
- Elsewhere, in China the SHANGHAI closed lower by 4.425 pts or -0.13% at 3493.05 and the HANG SENG ended 255.75 pts lower or -1.06% at 23892.32.
- Across Europe, Germany's DAX trades higher by 180.39 pts or +0.75% at 24385.78, FTSE 100 higher by 7.29 pts or +0.08% at 8861.28, CAC 40 up 60.48 pts or +0.78% at 7827.19 and Euro Stoxx 50 up 38.44 pts or +0.72% at 5410.39.
- Dow Jones mini up 30 pts or +0.07% at 44544, S&P 500 mini up 0.5 pts or +0.01% at 6272.5, NASDAQ mini down 7.25 pts or -0.03% at 22890.
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FOREX: AUD and NZD Outperforming Amid Dollar Slide
- Alongside the noted dollar slippage on Monday, buoyant equity benchmarks are prompting AUD and NZD to outperform as cautious optimism surrounding the US/China talks provide tailwinds to the higher beta ccys.
- Kiwi leads the charge in G10, and NZDUSD has broken back above an important zone of resistance between 0.6025/40. Spot continues to threaten a daily close above the US election related highs, signalling scope for a more protracted recovery towards 0.6168, the 76.4% retracement of the Sep ’24 – Apr ’25 selloff. Initial resistance is seen at 0.6080, last week’s high print.
- For AUDUSD, last Thursday’s close above 0.6500 was the highest in 6 months, and Monday’s resumption of strength keeps trend signals bullish. The pair’s recent clearance of 0.6515 (May 7 high) confirmed a resumption of the uptrend and signals scope for an initial climb to 0.6550, a Fibonacci retracement and the Nov 25 high. It is worth noting that US election related highs remain the medium-term target at 0.6688.
- In Australia this week, consumer and business confidence data is due, as well as consumer inflation expectations. New Zealand BusinessNZ Manufacturing PMI figures will be released.
FOREX: FX OPTION EXPIRY
Of note:
EURUSD 3bn at 1.1400/1.1425 (could act as magnet).
EURUSD 2.05bn at 1.1400 (wed).
EURUSD 5.13bn at 1.1400/1.1450 (thu).
EURUSD 1.37bn at 1.1400 (fri).
USDJPY 1.19bn at 144.00 (fri).
- EURUSD: 1.1350 (1.52bn), 1.1375 (722mln), 1.1400 (1.04bn), 1.1425 (2bn), 1.1500 (776mln).
- EURGBP: 0.8440 (275mln), 0.8450 (391mln).
- USDJPY: 144.00 (660mln).
- AUDUSD: 0.6500 (628mln).
FOREX: EURUSD Above NFP Highs, Goldman Sachs Raise Forecasts
- The brief spell of dollar strength following the US employment data on Friday has dissipated, with the dollar index now lower compared to pre-NFP levels. This morning’s 0.25% advance for EURUSD is seeing the pair test above the post-NFP highs around the 1.1430 mark.
- Price action underpins the underlying bullish trend, and immediate topside levels of note are 1.1457 and 1.1495, last Friday’s high and the ECB peak respectively. Further out, the cycle high of 1.1573 remains the key bull trigger. Initial support is at 1.1334, the 20-day EMA.
- Goldman Sachs believe the most recent dollar consolidation is more the “end of the beginning” rather than the “beginning of the end” of the Dollar’s shift lower. Given the confirmation of a slowdown in US activity and a shift in global investor appetite, GS are rolling their EURUSD forecasts to 1.17, 1.20 and 1.25 in 3, 6 and 12 months (from 1.12, 1.15 and 1.20).
- Following the hawkish reaction to the ECB's June decision and the stronger-than-forecast Q1 compensation per employee reading, staff's forward looking wage tracker on Wednesday will be watched for confirmation that the downward trajectory of pay pressures is intact. US CPI provides the highlight on the US calendar.
