Daily Market Outlook, July 1, 2021
Overnight Headlines
- Investors still diving into US equities with valuations at record highs – FT • BOJ Tankan -Japan business mood improves in Q2 to 2-1/2-year high as COVID hit eases • JP Q2 Tankan Big Mfg DI +14, +15 f'cast, +5 prev; Big Non-Mfg +1, +3 f'cast, -1 prev • JP Q2 Tankan Big Mfg Sept DI eyed at +13, Non-Mfg DI +3, FY ‘21/22 CAPEX +9.6%, USD/JPY 106.71 • Japanese buy net Y22.7 bln foreign stocks, sell Y1.0265 trln foreign bonds, Y110.2 bln bills June 26 week • Foreign investors sell net Y147.1 bln Japan stocks, Y281.5 bln JGBs, Y120.3 bln bills June 26 week • Japan government to judge need for stimulus with eye on economy – top spokesperson • Japanese land prices post first annual fall in 6 years in 2020 – tax agency • Japan June factory activity sees slowest growth in 4 most but well above 50, Mfg PMI 52.4, 51.5 prev • China June factory growth slows on COVID-19, supply chain snags, Caixin PMI 51.3, 51.8 f'cast, 52.0 prev • Xi warns against foreign bullying as China marks party centenary • China advances in challenge to dollar hegemony – FT • Australia May Trade Balance A$9.681 bln, A$10 bln f'cast, A$8.028 bln prev • Australian job vacancies surge to record, firms struggle to find workers • Australia's NSW state says Delta outbreak grows despite lockdown • BoE’s Andy Haldane warns over inflation complacency in parting shot – FT
- Looking Ahead – Economic Data (GMT) • 07:55 DE Jun Mfg PMI 64.9 f'cast, 64.9 prev • 08:00 EZ Jun Mfg PMI 63.1 f'cast, 63.1 prev • 08:30 GB Jun Mfg PMI 64.2 f'cast, 64.2 prev • 09:00 EZ May Unemployment Rate, 8.0% f'cast, 8.0% prev
- Looking Ahead – Events, Auctions, Other Releases (GMT) • 07:00 ECB Lagarde, Enria parliamentary testimony • 07:30 Riksbank policy announcement, Monetary Policy Report • 08:00 BOE Bailey Mansion House speech • 09:00 Riksbank Ingves press conference • 09:30 ECB Elderson at Nordic Banking Associations seminar • 10:30 BOE Woods in Q&A on climate-related financial regulation • 12:00 Irish CB DepGov Donnery speaks at online event
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD 1.1850 (202M), 1.1900 (202M) 1.1940-50 (835M)
USD/JPY 110.45-50 (310M), 110.75 (395M), 111.00 (580M)
111.40 (350M). EUR/JPY 131.25 (1.23BLN)
EUR/GBP 0.8570 (330M). EUR/NOK 10.20 (202M)
AUD/USD 0.7500 (500M), 0.7605-20 (475M)
NZD/USD 0.6900 (552M), 0.7000 (352M), 0.7200 (315M)
USD/CAD 1.2475 (320M), 1.2745 (500M)
USD/CHF 0.9200 (302M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.21 Bullish above
Maintains heavy tone ahead of key support • EUR/USD opened 0.36% lower at 1.1855 after USD broadly firmed in US session • After trading 1.1860 it traded with a heavy tone through the morning • Heading into the afternoon it is at the session low at 1.1847 • Support is at 1.1845/50 where it has bottomed on three occasions • More support at the 76.4 0f the 1.1704/1.2266 move at 1.1836 • A break below 1.1835 targets the 2021 low at 1.1704 • Resistance is at the 10-day MA at 1.1905and break eases pressure • EUR/USD likely to remain offered ahead of Friday's US jobs data
GBPUSD Bias: Bearish below 1.4080 Bullish above.
Heavy with key support under pressure and USD firm • -0.1% towards the base of a 1.3812-1.3838 range with plenty of interest • UK's Sunak to sharpen City of London's competitive edge • Bank of England Governor Bailey speaks at Mansion house – text at 9am • Charts; daily momentum studies, 5, 10 & 21 daily moving averages fall • 21 day Bollinger bands slide – bearish setup suggests further losses • 10 DMA capped repeatedly, currently at 1.3879 and pivotal resistance • Downtrend targets a test of key 1.3756 support, 61.8% of the 2021 rise • Key sterling support vulnerable, as the USD climbs USD bulls run risk of U.S. jobs disappointment The U.S. dollar index's rally to a 2-1/2-month high on Wednesday, triggered in part by a better-than-expected ADP National Employment Report, could prove to be a bull trap yet again
USDJPY Bias: Bullish above 108 targeting 112
Consolidates above 111.00, JPY crosses better bid • USD/JPY consolidates gains to 111.12 overnight, Asia 111.03-16 EBS • Some bidding into Tokyo fix, eases back post-fix • Some chunky nearby option expiries help contain action • 111.00 strike $580 mln, 111.20-55 total $819 mln, larger tomorrow • Upside capped for now by Japanese exporters, option players • Bouncing US yields supportive, Tsy 10s @1.474%, Nikkei -0.5% @28,641 • Eyes on strong US NFP after strong ADP • Fed-BoJ policy divergence, US-Japan rate divergence back in play
AUDUSD Bias: Bearish below .7790 bullish above
Holds support after early dip – but remains heavy • AUD/USD opened -0.20% at 0.7499 after USD moved broadly higher • After trading at 0.7501 it slipped to 0.7485 where it ran into bids • Move lower in part due to some analysts saying RBA will push back against early hikes • Heading into the afternoon the AUD/USD is settled around 0.7490 • Support is at double-bottom formed at 0.7478 with buyers at 0.7480/85 • Break below 0.7475 targets the 61.8 of 0.6990/0.8007 at 0.7378 • Resistance is at the 10-day MA at 0.7540 and close above would ease pressure
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!