Daily Market Outlook, July 6, 2022

Daily Market Outlook, July 6, 2022 Overnight Headlines UK PM Scrambles To Save Himself, Reshuffles Top Cabinet New Chancellor Zahawi Inherits Faltering Economy, Inflation Tory Rebels Plan Rule 1922 Change To Expel UK's Johnson Biden Prepares Action To Reshape Trump's Tariffs On China US Pushes ASML To Stop Selling Chipmaking Gear To China Blinken Plans A ‘Candid Exchange’ With China Over Ukraine US Call For Russia Pressure To Open Grain Delivery Lanes Shanghai Mass Testing Fuel Fear Another Lockdown Looms ECB Policymakers Unwavering In Support For Tighter Policy BoE's Tenreyro: Gilt Sales Unlikely To Have Economic Affect Goldman Say Oil Has Overshot As Global Deficit Unresolved Europe Gas At Near 4-Month High, Focus On Tight SuppliesThe Day Ahead Global recession fears continued to dominate the mood in financial markets, despite reports suggesting that US-China talks may lead to lower trade tariffs. European equities closed lower yesterday after a constructive start to the week, while their US counterparts ended in the red after the return from a public holiday. Asian stock markets followed through with widespread sell-offs. Brent crude oil dropped to a low of $101.10 yesterday but is slightly higher overnight. US 10-year Treasury yields has declined to 2.80%. The release of the minutes of the US Federal Reserve’s June policy meeting will be closely parsed as markets assess how policymakers respond to the trade-off between a weakening economic outlook and still uncomfortably high inflation. The Fed upped the ante and hiked rates by 75bp last month, with Chair Powell indicating that a similar rise is in play later this month. Powell indicated that evidence of rising longer-term inflation expectations among consumers partly justified the bigger hike. However, that measure of inflation expectations has since been revised lower. Nevertheless, given the Fed’s imperative to meet its inflation objective, the tone of the minutes is still likely to be ‘hawkish’ with the likelihood of further aggressive tightening flagged. In the UK, political uncertainty has increased after the resignations of the Chancellor and the Health Secretary yesterday. PM Johnson has indicated he is determined to stay on, while reports suggest his party’s MPs may seek to amend the rules over leadership changes. PMQs take place today. Meanwhile, Bank of England Chief Economist Pill is scheduled to give a keynote address entitled ‘The role of Central Banks in a Transforming World’ at a Qatar conference. Earlier this morning, BoE Deputy Governor Cunliffe said UK growth will be ‘essentially flat’ over the coming year, but the Bank will act to bring down inflation. Data wise, the UK construction PMI for June will be released and is expected to show continued expansion in activity in the sector. Yesterday’s UK services PMI was revised up to 54.3. Financial markets, nevertheless, are focused on softening business expectations. This morning’s Eurozone retail sales figures are likely to attract limited attention. Broader concerns remain about the curtailment of energy supplies from Russia and the impact on the Eurozone economy. The US data focus will be the ISM services survey. Look for a fall to 54.5 in June from 55.9, which would be the weakest pace of expansion for two years.FX Options Expiring 10am New York Cut EUR/USD: 1.0230 (570M), 1.0250 (471M), 1.0300-10 (374M) 1.0400-10 (350M) USD/JPY: 133.97-00 (682M), 134.50-60 (710M) 135.00 (615M), 135.00 (615M), 136.00 (506M) GBP/USD: 1.2250 (204M) AUD/USD: 0.6675-85 (487M). NZD/USD: 0.6200 (392M) 0.6410 (1.18BLN). AUD/JPY: 89.30 (1.1BLN), 93.49 (773M) USD/CAD: 1.2830 (566M), 1.3000 (380M), 1.3050-60 (270M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.05 Consolidates after big losses on Tuesday’s increasing recession fears EUR/USD prints 20 year lows sub 1.0250 Huge 17% increase in European natural gas prices raise recession alarms Lack of co-ordination on ECB support to indebted Eurozone states sours sentiment June Eurozone business growth adds further pressure to Euro Fed June meeting minutes released later as market eyes potential 75bps hike in July Bears eyeing a parity test; offers seen at 1.0340/60 20 Day VWAP is bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.2150 GBP pressured by political developments and weakening economy GBP/USD sitting at you year lows after losing 1.25% yesterday Fin Min & Health Sec quit Johnson Government decrying poor leadership New Fin Min Zahawi left to manage weak econ & cost of living crisis Energy price inflation and recession fears weigh on GBP Bears breach YTD lows en-route to a test of 1.18 Offers seen at 1.2130/60 Bids 1.1770 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 134 JPY demand rises on recession fears USD/JPY off another leg, 135.90 to 135.13 EBS Japanese importer bids seen at 135 Traders betting on 134/137 range trade US10Y 2.84 trading firmer by just under 1% seen as supportive for USD/JPY Initial offers seen at 136.55/65 stops above to see retest of 137 Option barriers KO’s quoted at 137 remain intact 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .7050 Recovers .68 handle as LDN opens up Commodity crush continues to weigh on AUD Oil and Index futures in the US recover lost ground supporting nascent AUD bid Offers seen towards .6900 AUD likely to take its lead from commodity trade ahead of FOMC minutes later Support seen at the 50% retracement of the 0.5510/0.8007 move at 0.6758 20 Day VWAP remains untested confirming downside 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 22k BTC continues to rotate around 20K weighing by recession fears Testing the 20 day VWAP which remains bearish 20 VWAP band contracting ready for next directional drive Trend remains down as within broader bearish channel beckons Support seen at 19k then 18300 the base of the daily VWAP bands failure here opens a retest of lows 20 Day VWAP remains bearishly oriented and untested Additional pressure seen from BTC miners liquidating positions on declining profitability 20 Day VWAP is bearish, 5 Day bearish

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Market Update – July 6 – Dollar Dominates on Global Recession Fears

USD moves to 20-year highs (USDIndex 106.34), US Stocks fell 2% on open but closed positively (NASDAQ +1.75%). Global PMI data overall in line. European markets fell 2%+ & Asian markets are negative (Hang Seng -2.38%, Nikkei -1.2%).  Yields closed down -2.77%. Oil tanked -8.2% trading under $100, Gold closed under $1765 & BTC rotates at $20k. EUR fell to new 20-year lows with parity in sight. Heavy fighting in Donetsk adds to the sombre mood. UK PM lost two cabinet ministers adding to woes for Johnson and Sterling.

• USDIndex tested 106.55 and remains on Bid at 106.25 now. 
• Equities – USA500 closed +6.0 (3831), after a weak day, US500FUTS at 3818 now.
• Yields 10-year yield lower, closed at 2.808% , trades at 2.802% now.   
• Oil & Gold had weak sessions – USOil tanked under $100.00 to $97.30 lows, back at $100 now. Gold fell to 1762 earlier, 1768 now. 
• Bitcoin continues to trade around $20K, testing $20.1K today.
• FX Markets – EURUSD remains pressured at 1.0260,  USDJPY rallied from under 135.00 to 135.80 now. Cable trades at 1.1932 now.

Overnight – German Factory Orders better at 0.1% from -1.8%.

Today – EZ Retail Sales, US ISM Services PMI, FOMC Minutes, Speeches from Fed’s Williams & BoE’s Pill.

Biggest FX Mover @ (06:30 GMT) CADJPY (-0.42%). CAD JPY weaker today. Fell from allied from under 106.00 Tuesday to 103.50 today before recovering.  MAs aligning lower, MACD histogram positive & rising, RSI 63.00 & rising, H1 ATR 0.216, Daily ATR 1.402.

Click here to access our Economic Calendar

Stuart Cowell

Head 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.

 

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Is inflation about to drop as recession takes hold?

Central banks are raising interest rates in an attempt to curb soaring inflation. But will that push the economy into recession? John Stepek looks at how we got here and where things might go next.

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Market Spotlight: AUD Falls Following Further .5% RBA Rate Hike

RBA Hikes A Further .5%It’s been a volatile day for AUD traders. On The back of yet another RBA rate hike overnight, the Aussie was initially leading the G10 currency pack today. However, resurgence in the US Dollar and the subsequent drop in risk sentiment has weighed sharply on the Aussie, sending the currency lower as we move through the European morning.The RBA delivered on expectations for a .5% hike overnight, taking rates back up to 1.35% there. Additionally, the RBA noted that it will now adopt a data-dependent approach to further rate hikes meaning that, should inflation continue to run above target, further rate hikes will be appropriate. Similarly, if CPI is seen cooling, the RBA has the optionality to pause hikes as it sees fit.Commenting on the current state of the Aussie economy, the RBA chief Phillip Lowe said: “The recent spending data have been positive, although household budgets are under pressure from higher prices and higher interest rates. The Board will be paying close attention to these various influences on household spending as it assesses the appropriate setting of monetary policy.”Technical ViewsAUDCHFThe sell-off in AUDCHF has seen the pair breaking down through the rising trend line off YTD lows and the .6677 support level. Though price is currently holding at deeper support, while the market holds below the broken trend line, focus is on a further breakdown towards .6419, in line with bearish RSI and MACD readings.

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The IndeX Files 05-07-2022

Equities Slide Back Down on Fresh USD StrengthBenchmark global equities indices have been broadly lower across the European open on Tuesday. Resurgent strength in the US Dollar has quelled an earlier lift in risk assets which came on the back of reports yesterday that President Biden is looking at some of Trump’s trade-tariffs against China. Biden is said to be considering lifting tariffs on a basket of around $300 billion worth of Chinese goods. On the back of the lengthy trade war between the US and China and the disruption caused by the pandemic, such move would be welcomed by businesses in both countries.Better-than-expected China data overnight also helped set a positive risk tone initially today. The China Caixin services PMI was seen rebounding firmly last month, helping offset fears of a slow-down in China. While the country appears to be bouncing back firmly from recent lockdowns, there are fears that further restrictions might return given the resurgent COVID outbreak the country is experiencing currently.Despite the better start for risk assets today, equities have ultimately rolled over as USD enjoys a fresh wave of buying. US traders will return today following the holiday there yesterday and with hawkish expectations ahead of tomorrow’s FOMC minutes, USD looks set to rally further, creating additional pressure for risk assets.Technical ViewsDAXThe index continues to trade lower, travelling within the bear channel once again following an earlier attempt at a topside break. Price is now very close to testing the YTD lows around the 12462.59 mark. Given the bearish MACD and RSI signals, a break of these lows will put the focus on a move down to 11590.13 next. Bulls will need to see a break above the 13067.45 level to alleviate near-term bearishness.S&P 500Price recently failed at the latest retest of the 3910 level, with the market turning lower. Price is now sitting on support at the 3814.25 level creating plenty of two-way risk. Unless bulls can quickly get back above the current, local highs, focus is on a further push lower and an eventual downside break of the 3613.50 level.FTSEThe rebound off the 6990.4 lows in the FTSE has seen the market trading back up to retest the underside of the broken bull channel. With the area holding as resistance for now, price has since turned lower and, while below the 7362.6 level, focus is on a rotation back towards current lows. Should we break above said level, however, 7558.7 is the next level to watch.NIKKEIFor now, the index continues to trade around the mid-point of the large, falling wedge pattern which has framed price action over the year so far. To the downside, 25595.3 is the main support to note, a break of which is need to encourage fresh bearish momentum. To the topside, 27422.9 is the level bulls need to break to gather topside drive.

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Investment Bank Outlook 05-07-2022

BoFAFed leads the way, USD to follow The key message from last week’s ECB central bank forum in Sintra has been the belief that the global economy is entering into a new paradigm of higher inflation which requires a further policy response. For now, taming inflation remains the number one policy objective for all central banks despite further evidence this week of a slowing global economy. Whilst German inflation data was slightly weaker than expectations, the trend throughout the region remains one of rising inflationary pressures. This will, in all probability, elicit a policy response next month but in a world where 50bps rate hikes is the new norm, the ECB (and BoE to a lesser extent) are failing to read the room. This week has seen the Riksbank hike rates by 50bps; we expect the RBA to hike by a similar quantum on 5th July and both the Bank of Canada and RBNZ are also likely to deliver 50bps in tightening. The ECB is being left behind.ECB President Lagarde’s once again reiterated the ECB’s preference for a 25bps rate hike on 21st July and since hitting the highs through mid-June, German 10yr yields are now 40bps lower. Of more relevance to EUR is the fact that European front-end yields are sharply lower versus G10 counterparts (weighted terms). As the market continues to pair back its expectations for the scale of ECB rate hikes this year, we think EUR is increasingly being left behind in the global rate hiking cycle. Much will obviously depend on the forthcoming Eurozone inflation print but we think that the path of least resistance remains for a weaker EUR through the summer.Higher USD/JPY remains the ultimate manifestation of the policy divergence trade and this week the pair hit its highest levels since 1998. Shusuke Yamada argues that worst may not be over for JPY as an intransient Bank of Japan remains steadfast in its commitment to Yield Curve Control. He argues that JPY is likely to succumb to further tactical pressure through summer as well as medium-term secular weakness. For now, it seems that Japanese authorities seem content with verbal interventions rather actual. Whilst central banks remain resolute in their desire to rein in inflation, the past week has seen further deterioration in the global macro outlook.A host of US lead indicators continue to point to a further slowdown in US growth and notwithstanding a beat in China non-manufacturing PMI, global macro data surprises are in negative territory for the first time since last 2021. The Sintra comments suggest that central banks remain on course for further policy tightening through much of this year, but the decline in commodity prices is perhaps a precursor to a more intense debate within central bank circles on the trade-off between combatting inflation and slowing growth. That still seems some ways off which compels us to retain a constructive view towards USD versus much of G10.

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Daily Market Outlook, July 5, 2022

Daily Market Outlook, July 5, 2022 Overnight Headlines China's Liu Discusses Tariffs With Yellen As US Look To Ease Chinese Services Activity Expands At Fastest In Almost Year BoJ Likely To Raise Price Forecast, Ex-Chief Economist Warn Japan Service Sector Activity At Fastest Rate In Over 8 Years RBA Hikes Rates A Third Time, Fastest Tightening On Record Canadian Inflation Outlooks Bolster Case For Supersize Hike Lagarde’s Task Toughens As Nagel Fires Salvo On Crisis Tool PM Johnson Call On Saudi Arabia To Increase Oil Production Germany Drafts Law Taking Struggling Gas Importers Stakes Norway Oil, Gas Workers To Strike On Tuesday, Cuts Output Chip Giants Threaten To Delay US Expansion Without Grant Germany's Uniper In Talks Over Bailout To Fill $9.4Bln HoleThe Day Ahead Asian equity markets are mostly up this morning, but Chinese indices are down despite a rise in the Caixin services index to 54.5 in June from 41.4 in May. Reports suggest that US President Biden may scrap some import tariffs on Chinese consumer goods this week in an attempt to combat inflation. In Australia, the central bank as expected raised interest rates by 50 basis points, its third consecutive rate hike. Today’s economic data calendar is dominated by PMI services reports for June. However, most of these are second readings that are not expected to be revised from their initial estimates. In the UK, that first reading showed the headline index for June unchanged from May at 53.4, still some way above the 50 expansion/contraction level but the lowest since February 2021. While services activity is holding up a little better than manufacturing, it nevertheless seems to be slowing as the post-Omicron rebound fades. Meanwhile, inflationary pressures remain elevated but may have peaked. In the Eurozone, the first reading for the headline index fell to its lowest since January confirming a marked loss in momentum in the sector over the past two months. The equivalent service sector measures for the US have been delayed until tomorrow because of yesterday’s holiday. In the meantime, factory goods orders for May will be watched for further signs that manufacturing activity is decelerating. However, already released data for durable goods orders showed a solid monthly rise of 0.7%. The Bank of England will produce its Financial Stability Report and hold a press conference today. At the time of the last report in March, the BoE failed to undertake its usual stress tests on banks citing uncertainties related to the Ukrainian situation, so an update on its intentions will be expected. There will also be interest in the BoE’s thoughts about the impact of higher interest rates and other economic uncertainties on the financial system. The BoE MPC’s Tenreyro is scheduled to speak today. She is considered to be one of the members of the Monetary Policy Committee that was least convinced of the need to raise interest rates. Indeed, she was the only one not to vote in favour of the first hike back in December. However, she has voted for all four subsequent increases. She will be speaking today as part of a conference on the interaction between monetary and fiscal policy.FX Options Expiring 10am New York Cut EUR/USD: 1.0450 (764M), 1.0500-05 (600M), 1.0520 (357M) 1.0570 (235M), 1.0600 (508M) USD/JPY: 134.95-00 (1.44BLN), 135.40-45 (338M), 136.05 (265M) 136.40 (235M), 136.75 (240M), 137.00 (1.68BLN) GBP/USD: 1.2280 (231M). EUR/GBP: 0.8670-80 (927M) AUD/USD: 0.6850 (204M), 0.6875 (390M), 0.7030 (316M) USD/CAD: 1.2900 (675M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0650 Bullish above Opens the LDN rotating around 1.04 Trading in a tight range reduced flows due to US holidays Asian trade has seen support for USD on firmer US yields EUR/USD will likely remain under pressure in the short-term Failure below the base opens a test of 1.0270’s next Initial offers are seen at 1.0530/50 Bids being eroded at 1.04 stops below to fuel a retest of cycle lows 20 Day VWAP is bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.24 Bullish above. GBPJPY provides some support for the GBP Headwinds continue to cloud cable outlook, high inflation, PM issues, dovish BoE Market feels heavy below 1.2230/60 resistance Note Friday has GBP810 mln in option expiries at 1.2000 strike Bears targeting a break of YTD lows en-route to a test of 1.18 Resistance remains sited at 1.2275 1.2150 failure opens a test of bids at 1.2050 ahead of 1.11950 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 132 Bearish below USD/JPY retinas a bid tone driven by firmer US yields Short covering driving the pop higher US10Y 2.94% adding support Initial offers seen at 136.55/65 stops above to see retest of 137 Option barriers KO’s quoted at 137 remain intact 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bullish above .7200 Bearish below AUD retreats after brief pop on RBA 50bps move RBA implied further hikes to come, will remain data dependant China tariff news not sufficient to give further support as LDN opens Resistance is sited at .6900/10 Support seen at the 50% retracement of the 0.5510/0.8007 move at 0.6758 20 Day VWAP remains untested confirming downside 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bullish above .22000 Bearish below BTC lifts over 4% on better risk sentiment overnight trading above 20k Tested the 20 day VWAP which remains bearish 20 VWAP band contracting ready for next directional drive Trend remains down as within broader bearish channel beckons Support seen at 19k then 18300 the base of the daily VWAP bands failure here opens a retest of lows 20 Day VWAP remains bearishly oriented and untested Additional pressure seen from BTC miners liquidating positions on declining profitability 20 Day VWAP is bearish, 5 Day bearish

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Market Update – July 5 – USD Hold Gains, RBA Acts, Stocks Steady

USD holds at highs (USDIndex 104.85), Stocks closed higher in Europe and hold gains in Asia with US FUTS higher too.  Yields are flat but off recent lows. Asian markets buoyed by positive Yellen-Liu He meeting, prospect of Chinese & Australian Fin. Min. meeting this week and better PMI data from Japan & China, all despite action from the RBA. Covid concerns continue to weigh (Hang Seng +0.07%, Nikkei +1.04%) Oil ticks to $110, Gold holds over $1800 & BTC regains $20k. JPY underperforms in Asian. RBA raises rates in line with expectations by 50bp to 1.35%.

Week Ahead – Topped by NFP on Friday, FOMC Minutes on Wednesday and RBA rate decision tomorrow

• USDIndex tested 105.00 Monday before slipping back to 104.85 now. 
• Equities – USA500 closed +39 (3825), Friday  US500FUTS higher at 3854 now.
• Yields 10-year yield lower, closed down Friday at 2.889% , trades at 2.880% now.   
• Oil & Gold had mixed sessions – USOil has rallied to $110.40 earlier from $108.00 Monday. Gold holds between resistance at $1815 and support at $1800, trading at $1808 now. 
• Bitcoin continues to trade around $20K, testing $20.3K today.
• FX Markets – EURUSD remains pressured at 1.0430,  USDJPY rallied  to 136.30 earlier from under 135.00 Monday. Cable trades at 1.2110 now.

Overnight – China Services PMI’s better at 54.3 vs 47.3, Japanese Service PMI also improve at 54.0 vs 52 last time.  

Today – EZ/UK Services and Composite Final PMIs, Speech from BoE’s Tenreyro

Biggest FX Mover @ (06:30 GMT) EURJPY (+0.54%). JPY weaker today. Rallied from under 140.00 Thursday to 142.20 now, next resistance, 142.75 & 143.00. MAs aligning higher, MACD histogram positive & rising, RSI 66.00 & rising, H1 ATR 0.212, Daily ATR 1.402.

Click here to access our Economic Calendar

Stuart Cowell

Head 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.

 

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XAUUSD : Weekly Review 04 – 08 July 2022

The prospect of higher interest rates is still driving the US Dollar and Bond buying and has dampened the price of Gold. XAUUSD extended its decline last week for the third week in a row with a total weekly decline of -1.68%. XAUUSD hit a low of $1784.39 in trading on Friday, before closing at $1807.29. Gold is retreating and had its worst quarter in five on the strength of the Dollar and hawkish rhetoric from the central bank.

The increase in import duties in India played a role in the fall in the price of Gold. India, the world’s second-largest consumer of gold bullion, raised the basic import duty on gold to 12.5% from 7.5% in a bid to reduce the trade deficit that is weighing on demand.

Gold’s declining appeal has pushed the US Dollar index to near two-decade highs, posting its best quarter in more than five years, making Gold in dollar terms more expensive for overseas buyers.

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Technical Analysis

XAUUSD,H4 – The brief rebound on Friday after breaking $1800 still looks weak. Strong bears are adding to the bearish short-term outlook as prices continue to trend lower. The trades are zigzagging to the downside, checked only by 1 intraday short-term rally. A break of the $1800 level after several recent failures will add bearish signals from negative intraday technical studies and pave the way for further weakness.

XAUUSD,H4

However, in the short term, the psychological number of $1800 will be the general basis. A stronger downside move is forecast for FE61.8% at $1748 from $1998-$1786 and $1879 pullbacks. On the upside, the rally will be blocked by the 200-day EMA, before it can head for the $1879 resistance.

Overall, the bearish outlook remains strong, although it appears to be tempered by reports of rising inflation. If it turns out that the market is worried about growth slowing due to aggressive rate hikes, gold will likely still be an option going forward. However, the structural support of $1676 will be the reference point for the immediate gold price, either it will remain consolidated in the price range of $1676-$2069 or eventually this structural level will be penetrated to enter the correction era.

 

Click here to access our Economic Calendar

 

Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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.

 

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Investment Bank Outlook 04-07-2022

INGUSD: July has historically been considered a low-volatility month in global markets: this year, this notion may fall quite far from reality. Even if global equities have mostly embedded the new inflation-focused approach by the Fed and other major central banks, the depth of the upcoming global slowdown remains highly uncertain, leaving risk assets in a rather fragile state for now. Stock and bond market volatility is set to continue generating material volatility in the FX market, in our view.It is therefore quite hard to forecast a marked change of direction in the dollar for now, even though recent CFTC data continues to show speculative dollar positions have remained around two-year highs, in theory leaving the greenback at risk of a long-squeeze. The week ahead sees two major releases in the US.The June FOMC minutes (Wednesday) may tilt the balance towards markets fully pricing in a 75bp rate hike at the end of this month, should there be some indication of a growing consensus at the June meeting.All high-beta currencies may remain on the back foot, although we continue to see the Canadian dollar as the least vulnerable of that segment given the still positive commodity story and some jobs data (also on Friday) which may do little to challenge the Bank of Canada’s aggressive tightening plans. Today, markets will keep an eye on the BoC business outlook survey for 2Q, normally an important piece of information for the Bank’s policy decision, while in the US the calendar is very light and markets are closed for the Independence Day holiday.EUR: Last week’s CPI jump in the eurozone had a contained impact on EUR/USD, highlighting the recent lack of sensitivity of the common currency to the inflation numbers as: a) markets are already pricing in 140bp of ECB tightening by year-end; b) global assets seem to be trading more in tandem with recession fears given that aggressive monetary tightening has been largely factored in.Recession fears now appear to be mostly linked to further developments in Russia-EU relations pertaining to gas flows, as fears of Russia halting or further reducing exports to Europe remain quite elevated. The data calendar is rather quiet this week in the eurozone and several ECB speakers - Joachim Nagel and Luis de Guindos today, Christine Lagarde, Philip Lane and others later this week – may still fail to generate any material jitters in EUR/USD.AUD: The Reserve Bank of Australia announces monetary policy before the European open tomorrow (0530 BST), and the main question is whether policymakers will hike by 25bp or by another 50bp. As discussed in our RBA meeting preview, we think another half-point increase is more likely. A larger, 75bp hike, cannot be fully ruled out, but we think it is improbable given that it was not mentioned as a possibility by Governor Lowe at a recent speech and may be an unwarranted move given that the RBA sets its policy monthly and therefore has greater flexibility than others in adjusting its policy path.

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AUDUSD, H4 | Potential For Bearish Continuation

Type: Bearish ReversalKey Levels:Resistance: 0.69616Pivot: 0.68658Support: 0.67208Preferred Case:On the H4, with price moving in a descending trend channel and below the ichimoku cloud, we have a bearish bias that price will drop from the pivot at 0.68658 at the pullback resistance in line with the 100% fibonacci projection and 50% fibonacci retracement to the 1st support at 0.67208 in line with the 78.6% fibonacci projection and 161.8% fibonacci extension.Alternative Scenario:Alternatively, price may reverse off the pivot and rise to the 1st resistance at 0.69616 at the swing high in line with the 50% fibonacci retracement.

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Daily Market Outlook, July 4, 2022

Daily Market Outlook, July 4, 2022 Overnight Headlines Recession Fears Dominate At The Start Of A Holiday Shortened Week China Covid Outbreaks Widen As Mass Testing Finds More Cases UK Tory Rebels Preparing Another Vote To Expel PM This Month Biden Administration Split On Whether To Remove China Tariffs Senate Democrat Urge Biden To Repeal Tariffs To Fight Inflation Biden Weighs Push To Trim Mortgage Costs As Home Prices Rise Russia Claim Full Control Of Luhansk As Ukrainian Forces Retreat ECB Plan To Block Banks From Billion Euro Windfall As Rates Rise Confidence Drains From UK Companies As Economic Woes Grow Germany Risks A Cascade Of Utility Failures, Economy Chief Says IEA Urges Saudi Arabia Pump More Oil In Energy Crisis Red Alert Iran Slashes The Cost Of Its Oil To Compete With Russia In China Tesla’s Deliveries Dropped In Quarter, Snapping Two-Year StreakThe Day Ahead Equities across the Far East are mixed, with gains across Japan and Australia offset by declines elsewhere. Notably, stock markets in China are trading lower on the day as rising Covid infections weigh on sentiment. Flare-ups in infections in provinces near Shanghai are causing some parts of the region to be locked down, although case levels remain well below those seen during April and May. In the UK, the release of the British Chambers of Commerce’s latest Quarterly Economic Survey showed that a record number of UK firms were expected to increase prices in the next three months. Over the past week, fears over a sharper than desired slowdown in global economic activity have been the overarching driver of market moves. Global stock markets slipped, contributing to a torrid first half for equities, while bond yields moderated further from their recent highs as markets increased their expectations that central banks may have to cut policy rates in the second half of next year (although not before raising them significantly to combat elevated inflationary pressures), as ongoing signs of a global economic slowdown continue to be evident. For now, however, the message from policymakers continues to be that they remain most concerned about higher-than-expected inflation. Consequently, they feel the need to tighten policy aggressively to ensure that the present high inflation does not become embedded in longer-term inflation expectations. That means significant further interest rate rises across a range of countries before year end are still expected. Over the coming days, the release of the minutes to the last Fed and ECB policy meetings in June, along with a plethora of central bank policymakers – including from the Bank of England – are likely to continue signalling support for a further tightening in monetary policy. However, any indication that recent signs of slowing economic activity are weighing on their minds will likely see a further shift in interest rate expectations. For today, the focus will be on comments from ECB members Nagel and de Guindos, while on the data front, the Eurozone Sentix investor confidence survey for July is expected to show another decline, reflecting further drops in equity markets. Meanwhile, early tomorrow morning the Australian central bank (RBA) will give its latest update, which is expected to result in a third successive rate rise, this time by 50 basis points.CFTC Data IMM: USD net spec long trimmed amid EUR, GBP bottom – fishing IMM net spec USD long cut in Jun 22-28 period; $IDX +0.16%... EUR$ -0.15% in period, specs +5,009 contracts into dip now -10,596 $JPY -0.37% in period specs +5,884 contracts short cut to 52,570 GBP$ -0.74%, short reduced by 10,129 contract to -53,118 AUD specs sell into dip now short 42,980; CAD specs +4,992 as $CAD -0.3% BTC dipped 2.8% in period, specs add 39 contracts long grows to 1,085(Source: Reuters)FX Options Expiring 10am New York Cut EUR/USD: 1.0440-50 (558M), 1.0470 (249M), 1.0530 (210M) 1.0565-70 (437M), 1.0585 (268M) USD/JPY: 135.00-05 (320M) GBP/USD: 1.2145-50 (378M) AUD/USD: 0.6905-15 (410M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0650 Bullish above Opens the LDN session trading in the middle of Fridays range Trading in a 25pip range driven by reduced flows due to US holidays Asian trade in general has had a risk off tone driven by ongoing recession fears EUR/USD will likely remain under pressure in the short-term Failure below the base opens a test of 1.0270’s next Initial offers are seen at 1.0530/50 Bids 1.04 stops below to fuel a retest of cycle lows 20 Day VWAP is bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.24 Bullish above. GBP stages a tepid recovery from lows Friday but bias remains lower GBP crosses follow cables lead and recover losses from Friday Headwinds continue to cloud cable outlook, high inflation, PM issues, dovish BoE Market feels heavy below 1.2230/60 resistance Note Friday has GBP810 mln in option expiries at 1.2000 strike Bears targeting a break of YTD lows en-route to a test of 1.18 Resistance sited at 1.2275 1.2150 failure opens a test of bids at 1.2050 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 132 Bearish below USD/JPY opens the week with a bid tone in thin holiday trade 60pips of range seen into the Tokyo fixing Desk note short covering in the Asian session Upside traction tricky with US yields continuing to decline US10Y 2.889% Initial offers at 135.55/65 stops above to see retest of cycle highs Option barriers KO’s quoted at 137 remain intact 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bullish above .7200 Bearish below Aussie lifts from early Asain lows trading middle of Friday’s range break candle Remains under pressure from reduced risk sentiment at the start of the week Iron ore on the back foot losing 5.5% as global growth concerns weigh Resistance is sited at .6900/10 Support seen at the 50% retracement of the 0.5510/0.8007 move at 0.6758 20 Day VWAP remains untested confirming downside 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bullish above .22000 Bearish below BTC opens the week down 1.32% weighed by souring risk sentiment Three Arrows Capital bankruptcy pressures amid concerns about further liquidations Trend remains down as within broader bearish channel beckons Support seen at 19k then 18300 the base of the daily VWAP bands failure here opens a retest of lows 20 Day VWAP remains bearishly oriented and untested Additional pressure seen from BTC miners liquidating positions on declining profitability 20 Day VWAP is bearish, 5 Day bearish

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-july-4-2022"
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Occidental Petroleum Topped the S&P500

Last Thursday, the S&P500 closed out its worst first-half since 1970, with losses more than -20%. On Friday ahead of the long US holiday weekend, the index managed to gain its support and closed above +2% at 3827. On the other hand, recession fears and disappointing economic data have lifted demand for the treasuries, with 10-year treasury yield fell to lowest level since May.

Fig. 1: Best S&P 500 Stocks in First-Half of 2022. Source: Bankrate.

Despite the macroeconomic factors, there are some stocks continued to deliver outstanding results. According to Bankrate, an independent, advertising-supported publisher and comparison service, Occidental Petroleum topped the S&P 500 stocks, with YTD performance over 100%.

Occidental Petroleum is an American oil and gas conglomerate founded since 1920 which operates through three segments: Oil and Gas, Chemical, Midstream and Marketing. Benefited by higher oil prices and the company’s solid fundamentals, Occidental Petroleum in general delivering satisfying results in 2021, with reported sales hit 26.0B, exceeded consensus estimates at 25.4B. Also, Earnings per share (EPS) rose to $2.55, the highest since 2018 ($5.01) [Source: CNN Business].

“For the full year, Wall Street expects Occidental to post US$37 billion in revenue, up 42% from the US$26 billion reported in 2021”. – Matt Miczulski

 

Fig. 2: Institutions and their % Shares Held in Occidental Petroleum. Source: The Wall Street Journal.

Another reason for Occidental Petroleum to outperform its competitors is that the company has always been the “Oracle of Omaha” – Warren Buffet’s favourite. Latest news reported that Buffett’s company, Berkshire Hathaway continued to buy 9.9 million more Occidental shares, now totaled 163.4 millions shares worth about $9.9B. As a result, Berkshire Hathaway now holds 17.4% stake in the oil company. Its aggressive move has sparked speculation that Berkshire might eventually buy Occidental, once the latter’s credit turns to an investment-grade.

Technical Analysis: 

The Daily chart displayed #OccidentalPetr remains supported above the lows seen in 2018 ($56.74). The company’s stock price closed bearish in June following market over-reaction and uncertainties. In general, it remains above 100-day SMA but far below the median estimate of analysts at $75. Nearest resistance lies at $62.70. A successful breakout may indicate possibility for the bulls to extend its gains towards $68.20, $74 and $76.80. On the other hand, the lows seen in 2018 ($56.74, lies near to 100-day SMA) serves as the nearest support. A close below the level may indicate more technical correction into testing support zone $54.30-$55.70, followed by the psychological level at $50.

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Larince Zhang

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 /489902/
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XAUUSD, H4 | Potential Bearish Drop

Type: Bearish BreakoutKey Levels:Resistance: 1830.3Pivot: 1805.8Support: 1783.3Preferred Case:On the H4, with prices moving below the ichimoku indicator and along a descending trendline, we have a bearish bias that prices will drop to our pivot at 1805.8 where the horizontal overlap support is. Once we have downside confirmation, we would expect bearish momentum to carry price to 1st support at 1783.3 in line with swing low support and 127.2% fibonacci extension.Alternative Scenario:Alternatively, price could rise to our 1st resistance at 1830.3 in line with overlap resistance, 61.8% fibonacci retracement and 78.6% fibonacci projection.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/xauusd-h4-or-potential-bearish-drop"
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