GBP: GBP/USD Set to Test Key Resistance
Aug-13 10:23
Latest stretch higher in GBP is putting GBP/USD on course for a test of the major resistance we've flagged at 1.3589: clearance here puts prices at the highest since mid-July fully reverses the fade into the early August lows.
- GBP has been the primary beneficiary of the USD-led weakness in recent weakness - with the contrast between BoE and Fed policy cemented on the hawkish BoE cut last week, limiting the pricing of UK rate cuts into year-end, and through to the Autumn Budget - the next major macro event in the medium-term (likely late October/early November).
- Growth numbers due tomorrow are expected to show a sharp slowing in quarterly growth to 0.1% from 0.7% in the prior quarter - but an upside surprise here would catalyse a move north of the current range and extend the spell of not-as-bad-as-feared UK economic data.
- The downtick in front-end implied GBP vols coincides with improving net risk reversals - likely implying a cheapening of put vol that covers both the Sept and Nov MPC, priced for a cumulative 11bps of cuts across both meetings.
- On GBP, Rabobank write that they see GBP's recent better tone running out of steam, with the BoE cutting in November - with this week's growth data possibly confirming stagflationary fears.
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US 10YR FUTURE TECHS: (U5) Support Holds For Now
Jul-14 10:17
- RES 4: 112-23 High May 1 and key resistance
- RES 3: 112-15 61.8% retracement of the Apr 7 - 11 sell-off
- RES 2: 112-12+ High Jul 1 and a bull trigger
- RES 1: 111-13+/111-28 High Jul 10 / High Jul 3
- PRICE: 110-24 @ 11:06 BST Jul 14
- SUP 1: 110-21+/17 Low Jul 8 / 61.8% of the May 22 - Jul 1 bull leg
- SUP 2: 110-10+ Low Jun 16
- SUP 3: 110-03 76.4% of the May 22 - Jul 1 bull leg
- SUP 4: 109-28 Low Jun 6 and 11
Treasury futures maintain a softer short-term tone and the contract is trading closer to its recent lows. Price has breached the 50-day EMA, at 110-31. This undermines a recent bull theme and exposes 110-17 next, a Fibonacci retracement point and a key support. Clearance of this price point would strengthen a bearish threat. Note that it also remains possible that the recent move down is a correction. Resistance to watch is at 111-13+, Jul 10 high.
FOREX: Euro Unfazed By Tariff Developments, EURJPY Trend Needle Points North
Jul-14 10:17
- Despite President Trump threatening to impose 30% tariffs on the EU, the Euro has taken the news in its stride as markets remain cautiously optimistic that a more lenient deal may be struck before the Aug 01 deadline. The single currency’s resilience, alongside the bounce off the lows for major US benchmarks, is helping EURUSD edge back towards session highs just below the 1.17 mark.
- The brief initial weakness did prompt a fresh pullback low at 1.1651 and notably, the 20-day EMA was pierced. However, the lack of follow through shows that these shallow dips remain corrective, keeping bullish sentiment firmly intact for now. The July 01 high of 1.1829 remains the bull trigger for the pair.
- This dynamic has also allowed EURJPY to consolidate its position back above the 172 handle this morning. The cross has advanced around 4.25% following the break above 165 in early June and gains last week maintain the price sequence of higher highs and higher lows. Moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend, with sights on 172.92 next, the Jul 16 ‘24 high.
OUTLOOK: Price Signal Summary - S&P E-Minis Bull Cycle Remains Intact
Jul-14 09:51
- In the equity space, the trend condition in {US} S&P E-Minis remains bullish and short-term weakness is considered corrective. Recent activity has resulted in a break of resistance at 6128.75, the Jun 11 high. The breach confirmed a resumption of the uptrend that started Apr 7. This was followed by a break of key resistance and a bull trigger at 6277.50, the Feb 21 high. Sights are on 6356.12, a 1.236 projection of the May 23 - Jun 11 - 23 price swing. Key support is at the 50-day EMA, at 6054.38. First support lies at 3201.21, the 20-day EMA.
- EUROSTOXX 50 futures traded higher last week as the contract extended the recovery that started Jun 23. This exposed key resistance and the bull trigger at 5486.00, the May 20 high. It has been pierced, a clear break of it would confirm a resumption of the medium-term bull cycle that began Apr 7 and open the 5500.00 handle. Price has pulled back from its recent highs - a correction. Support to watch lies at 5281.00, the low on Jul 1 and 4.
