MARKET INSIGHT: Price Signal Summary - USD Bulls Remain Firmly In The Driver’s Seat
Jul-12 09:54
- In the equity space, S&P E-Minis continue to trade above recent lows. Trend conditions remain bearish though and a deeper pullback would open 3735.00, the Jun 23 low. A break of this level would expose key support at 3639.00, the Jun 17 low and bear trigger. Clearance of 3950.00, Jun 28 high, is required to suggest scope for a stronger recovery. EUROSTOXX 50 futures remain above last week’s 3343.00 low on Jul 5. Gains are considered corrective and the trend outlook is bearish. Last week’s breach of support at 3384.00, Jun 16 low, reinforces bearish conditions and confirms a resumption of the broader downtrend. The focus is on 3321.30, 50.0% of the major 2020 - 2021 upleg. Key short-term resistance is 3584.00, the Jun 27 high.
- In FX, EURUSD attention is on parity, the base of a channel drawn from the Feb 10 high and a key psychological level. A break would strengthen bearish conditions and open 0.9944, 1.618 projection of the Jun 9 - 15 - 27 price swing. Firm resistance is at 1.0378, the 20-day EMA. GBPUSD remains vulnerable and has resumed its downtrend today as the pair trades to a fresh trend low. The focus is on 1.1795, 0.764 projection of the Mar 23 - May 13 - 27 price swing. USDJPY started the week on a firm note, trading above 137.00 resistance on Monday and resuming the primary uptrend. The focus is on the 138.00 handle next.
- On the commodity front, Gold remains vulnerable following last week’s move lower that resulted in a breach of the bear trigger at $1787.00, May 16 low. The break confirmed a resumption of the broader downtrend and has opened $1706.3 next, 1.618 projection of the Mar 8 - 29 - Apr 18 price swing. Today’s fresh trend low also reinforces current conditions. In the Oil space, WTI futures remain vulnerable following last week’s move lower and break of support at $101.53, the Jun 22 low. Potential is for weakness towards $93.45 next. Recent short-term gains are considered corrective.
- In the FI space, a short-term bull cycle in Bund futures remains in play and today’s climb has confirmed a resumption of the current short-term uptrend. The focus is on 154.65 next, the May 27 high. Gilts trend conditions remain bullish and scope is seen for a climb towards 117.48, 1.236 projection of the Jun 16 - 24 - 29 price swing.
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US: Def Sec Austin Delivering Remarks On Indo-Pacific Strategy
Jun-11 00:30
20:30 ET 01:30 BST: US Defence Secretary Lloyd Austin is continuing his ten-day tour of Asia with a speech at the IISS Shangri-La Dialogue in Singapore outlining "Next Steps for the United States' Indo-Pacific Strategy."
- The Secretary's speech will be livestreamed on the Pentagon website: https://www.defense.gov/News/Live-Events/
- Today, Austin met with Chinese counterpart Wei Fenghe to discuss "the need to responsibly manage competition and maintain open lines of communication."
USDCAD TECHS: Cements Short-Term Reversal
Jun-10 20:00
- RES 4: 1.3077 High May 16 and the bull trigger
- RES 3: 1.2982 High May 16
- RES 2: 1.2896 High May 18 and a key resistance
- RES 1: 1.2813 High Jun 10
- PRICE: 1.2792 @ 16:01 BST Jun 10
- SUP 1: 1.2518 Low Jun 8
- SUP 2: 1.2459 Low Apr 21
- SUP 3: 1.2403/02 Low Apr 5 and key support / 2.0% 10-dma env
- SUP 4: 1.2387 Low Nov 10. 2021
A sharp rally in USDCAD continued Friday, cementing the short-term reversal. Key near-term support has been defined at 1.2518, the Jun 8 low. An extension higher would signal potential for a climb towards resistance at 1.2896, the May 19 high. For bears, a resumption of weakness and a breach of 1.2518 would again expose 1.2459, Apr 21 low and 1.2403 further out, the Apr 5 low and a key support.
US TSYS: Hot CPI, 2Y Yld Over 3% First Time Since 2008
Jun-10 19:51
Rates extend lows after May CPI came out higher than est at 1.0% vs. 0.7% est, unrounded 0.974%, core 0.631%. Heavy short end selling on inflation surge has market expecting Fed to hike US into a recession.
- Notably, 2Y yield surged to 3.0611% - the highest level since 2008, while curves bull flattened after some initial volatility in the long end: 2s10s at 9.858 (-12.786) vs. 9.421 low, 5s10s inverted, flattening -7.273 at -9.761 vs. -10.722 low, while 5s30s slipped to inverted low of -6.661.
- Reaction spurred several dealers to up their rate hikes estimates with Barclays now sees a 75bp Fed hike next week. They have also raised their forecast for the terminal rate by 25bp to 3.00-3.25% in early 2023, implying 150bp of hikes after June's meeting. That's the most aggressive June FOMC hiking call that we are aware of, but markets are pricing in a modest chance of such a surprise (15-20% probability per futures).
- GS upped they're hike forecast to 50bp in June, July and September (from 50bp in Jun/Jul and 25bp in Sep).
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