Daily Market Outlook, July 5, 2021
Overnight Headlines
- SF Fed Daly – Appropriate to consider tapering later this year, we’re on our way to pre-crisis employment levels • Celebrating nation's birth, Biden urges Americans to help end COVID-19 pandemic • ECB's Knot says "inflation is not dead" in Europe – NRC interview • ECB's Schnabel says euro zone can escape low-inflation era, near inflation goal • Kuroda stresses BOJ's readiness to ease more to beat pandemic pain • Japan's digital yen plan to become clearer late 2022, says ruling party official • Japan's service sector activity contracts for 17th month as pick-up stalls; PMI 48.0, 46.5 prev • Suga's LDP falls short in Tokyo election as he presses on with Olympics amid pandemic • Growth in China's June services activity falls to 14-month low; Caixin PMI 50.3, 55.1 prev • After Didi, China launches cybersecurity probe into more U.S.-listed firms • Australia's labour market stays strong in face of COVID lockdowns; job ads rise 3% in June • AU May Retail Sales MM Final, 0.4%, 0.1% f'cast, 0.1% prev; June Services PMI Final, 56.8, 56.0 prev • AU May Building Approvals, -7.1%, -5.0% f'cast, -8.6% prev, -5.7% rvsd • Sydney Airport gets $16.7 bln buyout bid as investors take longer-term view on travel
- Looking Ahead – Economic Data (GMT) • 08:00 EZ June Services PMI 58.0 f'cast, 58.0 prev; Composite 59.2 f'cast, 59.2 prev • 08:30 GB June Services PMI 61.7 f'cast, 61.7 prev; Composite 61.7 f'cast, 61.7 prev • 08:30 EZ July Sentix Index, 30.0 f'cast, 28.1 prev
- Looking Ahead – Events, Auctions, Other Releases (GMT) • 09:00 ECB Christine Lagarde in Madrid panel discussion • 12:45 BOE Place speaks at Investment Association event • 13:00 Bundesbank Buch speaks at Bundesbank event • 16:00 ECB Enria speaks at IESE-EY banking meeting • 17:00 ECB De Guindos speaks at IESE-EY banking meeting
- Week Ahead-Services PMIs, China inflation lead global data It will be a very quiet week for U.S. data – in part due to Monday being a public holiday, while June services PMIs and China inflation dominate the global economic calendar. U.S. ISM non-manufacturing will be released this week along with final Markit PMIs, consumer credit and weekly jobless claims. European data includes final Markit services and composite PMIs, retail sales, German industrial orders and the ZEW investor sentiment survey. UK data includes services PMI, May GDP, manufacturing output and the trade balance. Japan's calendar features services PMI, household spending, current account and the trade balance. In China, the Caixin services PMI, FX reserves, CPI and PPI data are due. Australian data includes final retail sales and building approvals, but the focus will be on the RBA meeting. New Zealand has no top-tier data due, while Canada has the Ivey PMI and June jobs data.
- Week Ahead-Central banks in focus with RBA meeting, Fed minutes Tuesday's highly-anticipated Reserve Bank of Australia rate meeting takes the spotlight this week, followed by the release of the FOMC minutes on Wednesday, in the wake of better-than-expected U.S. non-farm payrolls data. RBA Governor Philip Lowe will hold a rare post-meeting press conference, stoking expectations for a tweak to the bond-buying programme which targets the three-year bond yield at 0.10%. The central bank may attempt to push back against a growing number of economists who predict it will start raising the cash rate well before the RBA's own forecast for 2024. The minutes of the June Federal Reserve meeting will be scrutinized for hints as to when quantitative easing might be tapered and for sentiment on U.S. economic strength and inflation. Wall Street is sensitive to any hints of a hawkish shift in the Fed's tone, so the minutes may cause some volatility in an otherwise quiet week in the U.S. with Independence Day on Monday.
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD 1.1840-50 (2.1BLN), 1.1900 (1.15BLN), 1.1920-30 (705M), 1.2000 (390M), 1.2050 (400M)
USD/JPY 110.25-28 (540M), 110.50 (340M), 111.00 (854M), 111.45 (280M), 112.00 (409M)
USD/CHF 0.9000 (360M), 0.9180 (200M)
AUD/USD 0.7500-05 (720M), 0.7515 (300M)
NZD/USD 0.7045 (376M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.20 Bullish above
Trades with soft tone in quiet Asian session • EUR/USD opened 1.1868 after moving higher following US jobs data • The USD firmed slightly in Asian and the EUR/USD dipped to 1.1852 • Heading into the afternoon its trading around 1.1855 • Resistance is at the 10-day MA at 1.1898 and break would lengthen correction • Support is at Friday's 1.1807 low with buying tipped at 1.1840/50 • EUR/USD still trending lower and selling rallies is the favoured strategy
GBPUSD Bias: Bearish below 1.4080 Bullish above.
Downtrend remains in play into lockdown easing plan • -0.1% in a 1.3815-1.3833 range – plenty of interest, once Asia fully opened • Bank of America tells UK staff to have vaccine before they return- Telegraph • Johnson to set out plan for final lockdown easing on Monday • Charts; despite Friday's bounce, 5, 10 & 21 DMAs, 21 day Bolli bands slide • Strong bearish trending setup targets 1.3669 double bottom in March, April • 1.3756, 61.8% 2021 rise proved resilient on the close – still major support • 10 DMA capped repeatedly, and is pivotal resistance, currently at 1.3867 • Close above 1.3867 would suggest choppy consolidation this week
USDJPY Bias: Bullish above 108 targeting 112
Back on 111 after dip to 110.96 Fri, 110.98 early • Asia sees USD/JPY up from 110.98 early to 111.19 before steadying on 111 • Profit-taking following US NFP/jobs report Friday over for now • Fed more hawkish going forward? SF Fed Daly • US yields remain soggy however, Treasury 10s @1.429% at Friday close • USD/JPY in 111.04-47 hourly Ichi cloud, tech support from @111.02 100-HMA • Daily chart shows USD/JPY likely still in uptrend from 107.48 on April 23 • Pull from massive 111.00 option expiries – today $854 mln, tom 1.75 bln • Nikkei -0.6% @28,611, E-minis -0.1% @4336 but AXJ bourses mostly up
AUDUSD Bias: Bearish below .7790 bullish above
Recovers from early dip in quiet Asian session • AUD/USD opened 0.7526 after completing a bullish outside day on Friday • USD struck a firm tone early and the AUD/USD dipped to 0.7509 at one stage • Buyers ahead of 0.7500 were noted and the AUD/USD drifted back to 0.7520/25 • There was no reaction to Aus data today as market awaits RBA decision • AUD/USD resistance is at the 10-day MA at 0.7539 and 200-day MA at 0.7570 • Buyers are tipped ahead of 0.7500 and 0.7475 with support at 0.7445 • US holiday today and RBA decision tomorrow should limit price action
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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!