FOREX: USD Index Consolidates Break Above Downtrendline
- Tariffs and trade remain the primary drivers of near-term sentiment, and the President surprised markets again late yesterday in announcing a 50% tariff on copper imports – triggering a near 20% rally in US-listed futures and reminding markets that the White House is not concerned with triggering intraday market vol.
- As such, trade deals and tariffs remain the focus for markets, particularly as even countries that were seen to have sealed agreements with the US – namely the UK – are still subject to tariff risk on August 1st.
- The USD Index is consolidating after the break back above downtrendline resistance drawn off the early February highs earlier in the week. CAD is the poorest performer on the day, while GBP is marginally stronger – but both currencies remain contained inside the recent range.
- The rip higher for EUR/JPY continued apace in APAC trade, with the cross rallying again to touch Y175.43 and the highest level since mid-July last year. This tips the 14-day RSI further into overbought territory, hitting 75 and signalling a further pick-up in upside momentum could be harder to come by without fresh external catalysts in the very near-term.
- Prices are fading somewhat into the NY crossover, however, tipping EUR/JPY off the overnight high and into minor negative territory.
- Final US wholesale inventories and trade sales data for May are the primary data releases Wednesday, however it’s the FOMC meeting minutes due at 1900BST/1400ET that should draw more focus – particularly concerning any discussion among the committee about a possible July rate cut.
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COMMODITIES: Recovery Since Early-May for WTI Futures Could Still Be Corrective
WTI futures traded higher last week, resulting in a clear break of resistance around the 50-day EMA. The climb signals scope for an extension towards $65.82, the Apr 4 high. It is still possible that the recovery since early May is a correction. Moving average studies are in a bear-mode position, highlighting a dominant medium-term downtrend. Support to watch lies at $59.74, the May 30 low. A break would highlight a potential bearish reversal. A bullish theme in Gold remains intact and the latest pullback is considered corrective. Medium-term trend signals are bullish - moving average studies remain in a bull-mode position, highlighting a dominant uptrend. A resumption of gains would refocus attention on $3435.6 next, the May 7 high. A break of this hurdle would strengthen bullish conditions. On the downside, the next support to monitor is $3240.0, the 50-day EMA.
- WTI Crude down $0.03 or -0.05% at $64.54
- Natural Gas down $0.08 or -2.11% at $3.705
- Gold spot up $11.18 or +0.34% at $3321.12
- Copper up $1.05 or +0.22% at $486
- Silver up $0.33 or +0.92% at $36.299
- Platinum up $41.05 or +3.51% at $1209.23
EQUITIES: E-Mini S&P Trend Remains Bullish, Contract Close to Cycle Highs
The trend cycle in Eurostoxx 50 futures remains bullish and the contract is trading closer to its recent highs. Moving average studies are in a bull-mode position, highlighting a clear dominant uptrend. Sights are on 5516.00, the Mar 3 high and the key bull trigger. Clearance of this level would strengthen a bull theme. Key support to watch lies at 5280.33, the 50-day EMA. A clear break of this average would signal a possible reversal. The trend condition in S&P E-Minis is unchanged, it remains bullish and the contract traded to a fresh cycle high last week. The recent break of 5993.50, the May 20 high and a bull trigger, highlights a resumption of the uptrend and maintains a price sequence of higher highs and higher lows. A continuation would open 6057.00 next, the Mar 3 high. Key support lies at 5789.75, the 50-day EMA.
- Japan's NIKKEI closed higher by 346.96 pts or +0.92% at 38088.57 and the TOPIX ended 16.08 pts higher or +0.58% at 2785.41.
- Elsewhere, in China the SHANGHAI closed higher by 14.413 pts or +0.43% at 3399.771 and the HANG SENG ended 388.89 pts higher or +1.63% at 24181.43.
- Across Europe, Germany's DAX trades lower by 80.35 pts or -0.33% at 24223.6, FTSE 100 lower by 3.83 pts or -0.04% at 8834.14, CAC 40 down 0.8 pts or -0.01% at 7804.07 and Euro Stoxx 50 down 8.75 pts or -0.16% at 5421.42.
- Dow Jones mini up 31 pts or +0.07% at 42838, S&P 500 mini up 4.75 pts or +0.08% at 6011, NASDAQ mini down 4.5 pts or -0.02% at 21783.75.
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.
