FOREX: Greenback Consolidating Tuesday Advance, GBP Contained Post CPI
- G10 currency ranges have been very contained early Wednesday, allowing the US dollar to consolidate the prior day’s broad-based advance following the release of US inflation figures. The recent USD index recovery has now extended to around 2.3% from cycle lows printed on July 01. The rally marks the cleanest evidence yet of a material break of the downtrend posted off the February high, bolstered by a clean break above the 20-day EMA.
- USDJPY moderately extended its significant upswing overnight, printing at the highest level since April 03 at 149.18. Bullish momentum was underpinned by the rising US yields and breaks above the June and May highs likely exacerbated the move. The May high around 148.65 has provided support this morning, keeping a short-term bullish theme prominent.
- the next focus will be on 149.38, the 50.0% retracement of the Jan 10 - Apr 22 bear leg, and 150.49, the Apr 2 high.
- Despite headline and core CPI in the UK surprising to the upside, we think the BOE will largely describe inflation in the August MPR as broadly in line with their forecast. This explains the very limited reaction for GBP this morning, as markets assess the upcoming labour market data on Thursday and bearish technical developments for the pound.
- GBPUSD breached important trendline support below 1.3430 yesterday, drawn from the Jan 13 low. A clear break of the trendline strengthens a bearish threat and exposes 1.3335, the May 20 low.
- The data focus later today will be on US PPI, industrial production and the Fed’s beige book. There are also various FOMC speakers expected.
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COMMODITIES: Continuation Higher for WTI Futures Would Expose $80 Handle
WTI futures traded sharply higher last week and Friday’s early rally marked an acceleration of the current bull phase. Price action is likely to remain volatile and from a technical standpoint, the trend is currently in an extreme overbought position. A continuation higher would expose the $80.00 handle. A firm support is noted $68.49, the Jun 13 low. A breach of this level would signal scope for a deeper retracement. A bullish theme in Gold remains intact and this week’s gains reinforce current conditions. Medium-term trend signals are bullish too - moving average studies are in a bull-mode position, highlighting a dominant uptrend. Resistance at $3435.6, the May 7 high, has been pierced. A clear break of this level would strengthen the uptrend and open $3500.1, the Apr 22 all-time high. Initial key support to monitor is $3262.2, the 50-day EMA.
- WTI Crude down $0.22 or -0.3% at $72.92
- Natural Gas up $0.11 or +2.99% at $3.687
- Gold spot down $16.91 or -0.49% at $3415.42
- Copper up $1.45 or +0.3% at $488.45
- Silver up $0.12 or +0.32% at $36.4139
- Platinum up $17.77 or +1.45% at $1245.79
EQUITIES: E-Mini S&P Back Above 20-Day EMA, Pullback Considered Corrective
The latest pullback in the Eurostoxx 50 futures contract has resulted in a breach of the 50-day EMA at 5297.58. Price has also pierced 5255.00, the May 23 low. A clear break of both support points would highlight a short-term top and signal scope for a deeper retracement. This would open 5178.00, the May 6 low and 5081.16, a Fibonacci retracement. Initial resistance to watch is 5365.98, the 20-day EMA. The trend condition in S&P E-Minis remains bullish and the contract traded to a fresh cycle high last Wednesday, reinforcing current bullish conditions. For now, the most recent pullback is considered corrective. The contract has pierced support at 5990.75, the 20-day EMA. A clear breach of this average would expose the 50-day EMA, at 5882.88. Key short-term resistance has been defined at 6128.75, the Jun 11 high.
- Japan's NIKKEI closed higher by 477.08 pts or +1.26% at 38311.33 and the TOPIX ended 20.66 pts higher or +0.75% at 2777.13.
- Elsewhere, in China the SHANGHAI closed higher by 11.733 pts or +0.35% at 3388.729 and the HANG SENG ended 168.43 pts higher or +0.7% at 24060.99.
- Across Europe, Germany's DAX trades higher by 83.31 pts or +0.35% at 23599.84, FTSE 100 higher by 28.18 pts or +0.32% at 8878.8, CAC 40 up 51.83 pts or +0.67% at 7736.8 and Euro Stoxx 50 up 24.5 pts or +0.46% at 5315.14.
- Dow Jones mini up 197 pts or +0.47% at 42408, S&P 500 mini up 33.75 pts or +0.56% at 6013, NASDAQ mini up 141 pts or +0.65% at 21785.25.
FOREX: EUR/JPY Makes Light Work of Key Resistance as Geopol Spillover Limited
- The USD has been unable to benefit from the more fraught geopolitical backdrop, slipping against all others in G10 in contrast with the initial market reaction to the first exchanges of missiles between Iran and Israel on Friday.
- The underperformance for the USD today may be tied to the more benign energy market early Monday. WTI and Brent crude futures are holding last week's rally but have stopped well short of another impulsive leg higher - a possible signal that markets see the ramifications for energy supply as limited at this stage, despite evidence of attack on some Iranian oilfields.
- In a similar fashion, JPY is underperforming. The uptrend in EUR/JPY persists, and the cross has shown to a new high today to comfortably clear horizontal resistance at ~166.69, opening 167.40.
- The quiet data schedule Monday should keep focus on the option expiry pipeline today: sizeable strikes at 145.00 ($4.9bln) in USD/JPY and E4.6bln at 1.1700 in EUR/USD could keep spot vol contained into the Monday cut.
