MARKET INSIGHT: What to watch
- It will be a busy data day today. Bunds have already moved higher this morning after the NRW state CPI came in at 0.3%M/M - lower than the 0.4%M/M expectation for the national print that is due this afternoon. Throughout this morning we will have a number of other German states report CPI as well as Spanish CPI (due at 8:00BST / 9:00CET). These will all be viewed through the lens of markets pricing in 67bp for the September ECB meeting after the Reuters sources piece last week suggested a 75bp hike was under discussion, some hawkish comments from Schnabel at the weekend and Lane leaving the options for any policy action open in this speech yesterday.
- As well as the German and Spanish inflation data due today (and French, Italian and Eurozone tomorrow) markets will continue to pay attention to any updates on EU plans to cap or at deal with energy prices. An extraordinary summit is being held the day after the upcoming ECB policy announcement, which may hold the ECB off from a larger-than-75bp hike in the hope a deal can be agreed to stop inflation reaching even more extreme levels.
- Elsewhere today we also receive Swedish confidence data, Spanish retail sales, Italian industrial sales, UK money supply/credit data, European confidence data and US conference Board / JOLTS / housing data.
- In addition we will have comments from ECB's Vasle, Holzmann, Stournaras, Wunsch, the Fed's Barkin and Williams and the Riksbank's Ingves.
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USDCAD TECHS: Heading South
- RES 4: 1.3224 High Jul 14
- RES 3: 1.3188 3.0% Upper Bollinger Band
- RES 2: 1.3038 High Jul 18
- RES 1: 1.2904/47 20-day EMA / High Jul 25
- PRICE: 1.2805 @ 16:42 BST Jul 29
- SUP 1: 1.2788 61.8% retracement of the Jun 8 - Jul 14 upleg
- SUP 2: 1.2763 Low Jun 13
- SUP 3: 1.2685 76.4% retracement of the Jun 8 - Jul 14 upleg
- SUP 4: 1.2633 2.0% 10-dma envelope
USDCAD maintains a bearish theme and the pair is trading at its recent lows. 1.2819, the Jun 28 low, has been pierced. A clear break of this support would strengthen bearish conditions and extend the move below both the 20- and 50-day EMA values. This would open 1.2763, the Jun 13 low. On the upside, initial resistance to watch is currently at 1.2947, Jul 25 high. A break would ease the current bearish threat.
US TSYS: Rates Off Highs Into Month End
Tsys futures remain mixed by the bell, curves flatter with short end underperforming: 2s10s -4.966 at 24.198, 5s10s -2.275 at -4.803.
- Weaker data in-line w/ more moderate rate hikes later in the year: Little initial reaction after slight gain in June reading of Personal Income is +0.6% MoM vs. +0.5 est, PCE Deflator is +1.0% MoM vs. +0.9% est, and ECI +1.3% vs. +1.2% est. Rates and stocks moved higher after the Chicago Business BarometerTM, produced with MNI, slid further in July, extending June's decline. The indicator fell 3.9-points to 52.1, the lowest level since August 2020.
- Exogenous factors: Tsys had come under pressure in early London hours after higher than expected French, Italian and Spanish GDP economic data triggered selling in EGBs w/ brief pause after weaker than expected German GDP.
- Meanwhile, Fed speakers out of media blackout: Atlanta Fed Bostic broke the seal earlier, reiterating Chair Powell's talking point: we are not in a recession, but inflation needs to be addressed w/ "more work needs to be done on bringing demand and supply into balance".
- Next Monday data: S&P Global Mfg data (52.4 est), ISMs (mfg 52.0 est; prices paid 73.5 est), JOLTS job openings (10.994M).
- Current cross assets: spot Gold +5.35 at 1761.19, Crude firmer but off early highs WTI +2.18 at 98.60, stocks on high ESU2 +64.50 at 4138.00 -- highest level sine June 9..
- Currently, 2-Yr yield is up 4.1bps at 2.9027%, 5-Yr is up 1bps at 2.7079%, 10-Yr is down 1.1bps at 2.665%, and 30-Yr is down 1.7bps at 3.0057%.
AUDUSD TECHS: Holding On To Its Gains
- RES 4: 0.7202 High Jun 9
- RES 3: 0.7141 76.4% retracement of the Jun 3 - Jul 14 downleg
- RES 2: 0.7069 High Jun 16
- RES 1: 0.7053 61.8% retracement of the Jun 3 - Jul 14 downleg
- PRICE: 0.6971 @ 16:39 BST Jul 29
- SUP 1: 0.6903/0.6859 20-day EMA / Low Jul 21
- SUP 2: 0.6786/6682 Low Jul 18 / 14 and the bear trigger
- SUP 3: 0.6647 0.764 proj of the Apr 5 - May 12 - Jun 3 price swing
- SUP 4: 0.6588 Low May 28 2020
AUDUSD is holding on to its recent gains and the short-term outlook remains bullish. A continuation higher would open the Jun 16 high at 0.7069, and potentially 0.7141 further out, a Fibonacci retracement. A strong reversal lower would instead refocus attention on the 0.6682 bear trigger, Jul 14 low, where a break would confirm a resumption of the broader downtrend. Initial support to watch is at 0.6903, the 20-day EMA.
