- Dollar recovery has been driven by strong employment data (especially Non-farm Payrolls).
- Equity markets have corrected early this week after weak German and UK industrial and trade data
- Switch back into safe haven sovereign debt (rally in US Treasuries, Gilts and Bunds), with yields falling in an apparent retrenchment in risk appetite
- Gold is struggling to gain traction despite a slight shift to safe havens, because the US dollar has rallied
- Eyes on the Fed meeting minutes on Wednesday, but also the Chinese trade data which could drive an improvement in risk on Thursday
- Earnings season begins for the US this week with Alcoa (on Tuesday after hours) and the first of the banks Wells Fargo (on Friday).
- Geopolitical risk (ie. Ukraine, Iraq) has receded for the time being, but always has the ability to flare up again
EUR/USD – sell into strength, or on a break of $1.3574
- After NFPs, the pressure has been cranked up on the euro once more.
- Testing the near term support band $1.3574/$1.3585.
- A breach opens weakness towards $1.3500 and $1.3475 near to medium term.
- Resistance $1.3640/$1.3670
GBP/USD – look to buy into weakness towards $1.7060
- Despite a brief breach of support at $1.7100 which implies a near term target of $1.7030 it would be a brave trader that goes short.
- It would be safer to buy into the support band at $1.7060 for further gains in due course into multi-year highs.
USD/JPY – can only realistically play the range
- Up a few days, down a few days, trading Dollar/Yen is very frustrating
- The last 3 months have seen a trading band form between support around 101.30 and resistance up around 102.80.
- Momentum is on the bearish side of neutral.
- There is little reason to believe that the range will now continue for now.
Indices – Prefer S&P 500
Equity markets back in near term correction mode again. Expect S&P 500 to continue to outperform, European indices hit by weak data
- S&P 500 bearish key one day reversal is being threatened as the bulls appear to be resilient
- DAX retreating back towards support around 9810 the old breakout high. Key support near term at 9750. Testing a 4 month uptrend around 9850.
- FTSE falling sharply back towards the primary uptrend support at 6725 (which held the June correction almost to the point).
Gold – Stand aside for now
- Gold has formed a near term band of consolidation between $1306/$1332.
- Dollar strength and calming geopolitical tensions have curbed the rally.
- The primary downtrend dating back to October 2012 remains under serious pressure
- But technical indicators beginning to deteriorate again.
- Key near term support is now at $1306
WATCH OUT FOR
Wednesday 9th July
- China – CPI
- US – FOMC meeting minutes
Thursday 10th July
- China – Trade Balance
- UK – Bank of England monetary policy
Tuesday 15th July
- Australia – RBA meeting minutes
- Japan – BoJ monetary policy and press conference
- UK – CPI
- Eurozone – German ZEW Economic Sentiment
- US – Retail Sales
- New Zealand – CPI
Wednesday 16th July
- China – GDP
- UK – Unemployment
- Canada – BoC monetary policy
Thursday 17th July
- Eurozone – CPI (final June)
- US – Building Permits
Friday 18th July
- Canada – CPI
- US – University of Michigan consumer sentiment