Market Spotlight: Swissy Approaching Target

Breakout Trade ContinuesThe rally in USD this week has seen the USDCHF breakout trade above the .9043 level continues. Following a brief pause around the .9189 level, the subsequent breakout in response to the June FOMC meeting has seen the pair continuing higher with the RSI and MACD both moving higher again now also. Price is now fast approaching the .9288 level targetWith the Fed having revised its dot plot forecasts higher, suggesting that a rate hike could now come as early as 2023, and with growth and inflation forecasts lifted, the market is now fully expecting tapering this year. Furthermore, with the SNB reaffirming its commitment to maintaining easing, the monetary policy divergence between the Fed and the SNB looks set to keep the pair geared towards higher prices.Key Data to WatchThe big focus this week will be the US labour reports at the top of the week. So long as the data doesn’t de-rail the current USD rally, the pair should continue to target. Jobs reports have been fairly volatile this year though, given the broader reopening underway, the market forecast of 700k on the headline number, should at least be met.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-swissy-approaching-target"
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Global inflation pick up is transitory - Citi's King

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The US dollar is in a bull market. That’s bad news for most assets

The big story now, as far as I’m concerned, is that the US dollar is in a bull market. 

As a “sound money” advocate, I would prefer it were not so. Gold, miners, bitcoin – they all do better when the dollar is falling. Our anti-fiat-money biases are confirmed when the dollar is falling. 

“Look, the Fed is printing money”, we can say, “and look at the resulting loss in purchasing power.”

The Fed is printing money. And fiat money is losing its purchasing power, especially against debt-based financial instruments. Such as houses. 

But let us not gloss over the fact that the US dollar has made a clear bottom. To do so would be to delude ourselves. The US dollar is now rising. It is in something of a bull market. And there are investment implications to that.

The US dollar’s double bottom

Starting with the US dollar index, which is the dollar versus a basket of the currencies of its major trading partners (the euro, the pound, the yen, Canadian dollar and so on), here is the offending chart – as textbook a “W bottom” as you will ever see.

Those forex traders who trade by patterns will be all over this, and those who follow trends will be starting to join them. The implication is that it goes higher – probably to the high 90s (this is an 18-month chart, by the way).

Note that the May low for the US dollar was slightly higher than the January low – the right hand side of the W (the double bottom) – is slightly higher than the left. The pattern guys will be loving that.

We have been warning for some time on these pages about the 89 area on the US dollar index. If it doesn’t hold, then the dollar probably goes to the low 80s, maybe lower. Gold goes to $2,500 an ounce or more, bitcoin to $100,000, oil goes to $150 a barrel, and metals go to the planets – the moon, Jupiter, Mars et al – whence they came.

However, if that 89 area holds, then the inflationary trend of the last year or so that we’ve seen in commodities comes to an abrupt halt. That 89 area has held. 

And meanwhile, the bull market in commodities has – oil aside – come to a juddering halt. Precious metals, base metals, softs and grains – they are all now in intermediate downtrends.

The yen, the euro, the pound and the Canadian dollar have all turned down too.

The trend is your friend. Don’t ignore it.

Oil is laughing in the face of the stronger dollar

One inflationary asset is not having it, however: oil. Rising US dollar or not, oil is grinding higher. It is in a bull market. Be long oil.

Oil demand is rising. We keep banging the drum about it on these pages. The green energy revolution needs a lot of oil to make it happen. Meanwhile, government policy dramatically disincentivises investment in oil exploration and development. What’s the result? Higher oil prices. Everybody pays. The poor are hit hardest.

Let’s spell it out in case there’s any doubt: the green energy revolution is driving the oil price higher. Government policy is driving the oil price higher. We are in the realm of unintended consequences, where government policy reigns supreme.

When oil goes above $100 – next year, probably – “greedy oil companies” will get the blame. The fault lies with deluded policy.

But back to the focus of today’s Money Morning – Uncle Sam’s currency. Now we zoom out and consider a longer term chart. This is the US dollar index over the last ten years. And we note, in the blue shaded area, that support zone at 88-89 was also visited in 2018. And that a much longer-term W could be forming (as drawn in red).

Is this something to be concerned about?

Possibly. The pattern recognition purists will say that a classic double bottom needs to come at the end of a downtrend. This multi-year double bottom came after an uptrend. That doesn’t rule out the scenario that this a multi-year W, but it is not as clear-cut as the shorter-term pattern with which we began this article. 

In fact, more clean-cut is the double top – the “M” top around 104 – which heralds lower prices. 

Ah, technical analysis is in the eye of the beholder.

A more likely scenario over the longer term perhaps is that we range trade. Perhaps we get runaway inflation and commodity prices in non-US-dollar currencies, while the US dollar sees an influx. 

Impossible to know. But in the shorter term – and by that I mean the next few months – it looks like the US dollar wants to go up.

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The Crude Chronicles - Episode 96

Oil Traders Increase LongsThe latest CFTC COT institutional positioning report shows that oil traders increased their net long positions last week by a further 2205 contracts. This latest increase takes the total position up to 526,161 contracts and comes amidst the ongoing improvement in the demand outlook for oil. With global reopening still the main focus, expectations of a continued lift in demand across the remainder of the year are helping oil prices continue higher.EIA Reports Further Deep DrawdownThe latest weekly update from the Energy Information Administration is helping further endorse these expectations. The EIA reported a fifth consecutive weekly drawdown in commercial crude stocks last. Inventories held by refiners fell by more than 6 million barrels, far deeper than the drawdown the market was looking for.Inventories have been falling steadily in the US as the vaccination and reopening programme underway there has helped demand recover firmly. Refiners noted a spike in activity over the week with crude runs jumping by almost 200k barrels per day, taking refinery utilisation rates back up to 92.9% of their total capacity. Despite the fall in headline crude stocks, gasoline inventories were seen rising again last week with inventories jumping 1.5 million barrels on the week, despite expectations for a 900k barrel drop.OPEC+ Meeting in FocusLooking ahead to the remainder of the week, the big focus for oil markets is the OPEC+ meeting later today. The group is meeting to discuss further easing of production restrictions in August in a bid to meet rising global demand. Currently the market is projecting an output increase of 550k barrels though, given the projected over demand of around 3 million barrels per day, such a decision would be unlikely to weigh on oil prices.For now, given the longer-term trend and the latest set of EIA results, the focus is on further upside in the near term. However, today’s OPEC meeting needs to be monitored given the risks of any downside materialising on a greater than expected easing of supply restrictions.Technical ViewsCrude OilCrude oil prices are once again testing the 74.46 level resistance with the RSI and MACD turning higher. With the market still moving within a broad bullish channel, the focus is on further upside . Should we see any correction lower, the next support to note is down at the 69.53 level.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/the-crude-chronicles-episode-96"
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NIKKEI with a descending trend, facing further bearish pressure

Nikkei is approaching key support at 38.2% Fibonacci retracement. With technical indicators showing room for further bearish momentum, a break below our Pivot will see price open a deeper drop towards 61.8% Fibonacci retracement and 1st support level.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/nikkei-with-a-descending-trend-facing-further-bearish-pressure"
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BTCUSD approaching support, potential for bounce

BTCUSD approaching horizontal pullback support in line with 50% Fibonacci retracement and 61.8% Fibonacci extension. Prices might push up towards horizontal swing high resistance in line with 50% Fibonacci extension. MACD is also showing bullish pressures. If prices continue to push down, prices might take support on horizontal overlap support in line with 61.8% Fibonacci retracement and 78.6% Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/btcusd-approaching-support-potential-for-bounce"
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DAX, H4 approaching pivot, potential for drop

DAX H4 approaching pivot where we may potentially see a drop towards 1st Support, in-line with 61.8% Fibonacci retracement , 78.6% Fibonacci extension and descending trendline resistance. If price bounce from the pivot, it may swing toward 1st Resistance, in-line with 78.6% Fibonacci retracement and 78.6% Fibonacci extension

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/dax-h4-approaching-pivot-potential-for-drop"
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Investment Bank Outlook 01-07-2021

CitiJuly starts with a bang, with plenty of catalysts to take us into the end of the week. USD has emerged triumphant after month/quarter end, though we suspect much of this move is positioning/flow driven. Our conviction is further strengthened if key levels hold in the likes of EURUSD. Given the importance of NFP, CitiFX Strategy think there will be outsized currency volatility around the June print, especially in the event of a major surprise. The setup going into the number suggests two-way risks for the USD.For today, ISM manufacturing will be the highlight in terms of data. EUR data sensitivity remains limited, though we saw slightly disappointing data for AUD trade and JPY BoJ Tankan survey. The Riksbank will not change rates but the market will be looking for potential changes to rate path with a projected hike. Otherwise KRW underperformance overnight was a function of USD short covering ahead of top tier USD events.RBC Capital MarketsUSD has consolidated yesterday’s gains in quiet markets overnight, with all of the majors close to the NY closing levels. On the crosses, JPY is outperforming and commodity currencies continuing to underperform, though ranges have been very tight, as is typical in the days ahead of the US payrolls release. China’s Caixin PMI was close to expectations (51.3), mirroring the official index. Our commodity strategists think today’s OPEC+ meeting will answer the call to put more barrels on the market, potentially increasing supply by between 500 kb/d and 1 mb/d starting in August. Day ahead: The Riksbank rate announcement is the main G10 event today (see SEK). In the US, the ISM manufacturing headline index is expected to be little changed at a still very robust level. There are a number of central bank speakers (see table), including BoE Governor Bailey at the annual Mansion House speech (GBP). Canada is closed for Canada Day today

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-01-07-2021"
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Market Update – July 01 – Dollar and Gold up ahead of NFP

Sentiment across Asia remained muted as manufacturing PMI readings out of China and Japan brought downward revisions and added to concerns that virus developments will at the very least slow the recovery. Japan’s Tankan survey improved, but slightly less than hoped, while Australia export numbers were still encouraging. Still with the spread of the Delta variant curbs may actually be extended and/or brought back again.

The 10-year Treasury yield is little changed at 1.47% after paring overnight gains, while bonds across the Asia/Pacific region are narrowly mixed. JPN225 is down -0.4%. The ASX lost -0.6%, while Hang Seng and CSI 300 are down -0.6% and up 0.2%. In Europe, stock market sentiment seems to be stabilising, however, and GER30 and UK100 futures are up 0.3%, US futures also slightly higher.

Concern about the rapid spread of the Delta variant still weighed on risk appetite and investor sentiment overnight, but in countries with higher vaccination rates evidence so far suggests this wave may slow, but won’t halt re-openings and the recovery. 

Forex Market:USDIndex edged up to April’s high, USDJPY is at 111.13 (15-month high), while the USOIL future is at $73.57 per barrel ahead of OPEC+. The Australian and NZ Dollars are under pressure extending weeks and 2 months losses, while the EUR at 1.1836. The Pound retests again 1.3800 floor. Gold gains on Delta variant worries ahead of key US jobs data.

Today’s Calendar – Today’s final round of manufacturing PMIs for the Eurozone and the UK should confirm that demand remains strong and the sector expanding at a swift pace. Wage growth in the UK in particular is the one to watch as the economy fully re-opens as the impact of Brexit is also felt on the labour market and could add to wage growth, especially in the hospitality sector. ECB president Lagarde and BoE Bailey due to speak at the top of the hour, while OPEC+ meeting takes center. In US session, ISM Manufacturing PMI and Jobless claims take place.

Significant FX Mover @ (06:30 GMT) AUDUSD

Click here to access our Economic Calendar

Andria Pichidi 

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /249173/
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Dollar Near Multi-Month Highs; Employment Data Key

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Dollar hits 15-month high vs yen as U.S. payrolls test looms

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U.S. dollar share of global reserves rises in Q1; euro share slips

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Daily Market Outlook, July 1, 2021

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 eventG10 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 ViewsEURUSD Bias: Bearish below 1.21 Bullish aboveMaintains 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 dataGBPUSD 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 againUSDJPY Bias: Bullish above 108 targeting 112Consolidates 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 playAUDUSD Bias: Bearish below .7790 bullish aboveHolds 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

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-july-1-2021"
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USDJPY reversing from swing high, potential pullback

USDJPY is reversing from swing high, where we could see a reversal at Pivot, in line with 38.2% Fibonacci retracement, 50% Fibonacci extension and horizontal pullback resistance. We could see a further drop towards 1st Support, in line with 100% Fibonacci extension and horizontal pullback support. RSI is also holding below descending trendline resistance.

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