Risky assets were better bid yesterday after Friday’s sell off. For now, the S&P seems to have some good support around 3000. Overnight Asian equities continued the Wall Street move and traded higher supported by the better print seen in Chinese manufacturing PMI 50.9 vs 50.4 expected. Month end/ Quarter end flows appear to be USD buying as well as equity buying which negates the correlation we have seen between stocks and the USD at least if only for today.

A close above 3080 today would be positive for the S&P on a daily basis. We are still seeing elevated cases of covid19 and some states have reintroduced lockdowns whilst others have introduced mask mandates, and these may be seen as a substitute for further lockdowns. Yesterday we had better US pending home sales however, Fed’s Mary Daly said she has pencilled in a slow and gradual recovery whilst Powell said the path ahead remains uncertain and really depends in large part on containing the virus.

USDJPY – traded to a high of 107.85 yesterday on the back of strong month end USD demand however, failed to break above 108.00. Today as we write we are trading around the Fibonacci level of 107.72 and today we are expecting pretty much of the same demand for the greenback as we approach the last day trading day of the month and quarter. Resistance now sits at 108.05/10 and we will need to watch a close above 107.90 as technically this would be quite bullish and would open way for a move towards 108.50. On the downside we need to get back through the 107.55 which is mid daily bollinger band support to get back towards 107.00.

EURUSD – we traded almost to the pip of our 1.1280 resistance zone as we saw EURxxx’s demand during the early part of the European session however, this soon changed when NY came in and the USD demand picked up particularly into the London fix. Overnight we traded up to 1.1250 but could not break above it and as we write we are trading around the lows of the session at 1.1205. The German-France summit has not really produced much however, Merkel is very hopeful that he EU aid package deal will get done at the EU summit July17/19 albeit obstacles from the Frugal 4. So July will be a very important month for the common currency. With this in mind we still believe the pair has a good chance of trading towards 1.1600/1.1800 but we need the fiscal unity and if this does not happen then EURUSD can really fall off a cliff here. Our levels on the downside remain the same 1.1160/80 and we would really like this to hold otherwise our view will turn to neutral. The main risk is today’s month end flows and depending how big it is could really test the resolve of this level.

GBPUSD – Cable was one of the weakest currencies yesterday as we saw both EURGBP demand as well as USD demand as this was really the main driver for the move lower. We did try overnight to get back above the 1.2307 important level but could not sustain it and subsequently came off again and are now trading at 1.2260. Should the USD buying be strong today we really feel we can see a break of 1.2235 and then onto 1.2180. Yesterday we had our first local lockdown in the UK with Leicester closing again and this for sure will not help GBP.

GOLD – ended yesterday’s session little changed as it traded sideways, holding above our support level at 1767 as investors weighed the rise in Coronavirus infections vs. an uptick in economic activity with than Chinese manufacturing PMI and US pending home sales coming in better than expected. Volatile trading day ahead with all eyes on Powell / Mnuchin testifying to House Financial Services Committee on Coronavirus response. As long as the yellow metal prints above our support level at 1767, further bullish momentum is favorable with the RSI momentum indicator above the 50 level.

USOIL – WTI crude oil ended yesterday’s session up 3.8% lifted by better than expected US housing data though failing to print above the $40 pbl level, as investors weighed the likelihood of a continued recovery in global oil demand against worries over a Covid-19 resurgence in the US. Volatile day ahead for crude with lots of economic data expected as investors keep an eye on the API weekly crude oil stock which stands at 1.749 Mb. Prints below our support at 39.27 will favor further downside with 38.70 and 38 as the closest support targets.

DOWJONES – the blue-chip Dow gained more than 2% in its biggest one-day increase in more than three weeks, lifted by a surge in Boeing shares on the back of a risk on sentiment as investors hoped for a stimulus-backed economic rebound. An hourly close below our support level at 25560 will favor further downside with 25227 as the closest support target. But ultimately, if the sequence of lower highs and lower lows is broken, then we can assume the downtrend has ended. US Consumer confidence (June) is due today and is expected to rise to 90.1.

DAX – ended yesterday’s session in the green, following US indices higher, on optimism over stronger than expected economic data and hopes for more central bank stimulus with Merkel backing up a 750B euro of joint debt stimulus plan. Eurozone inflation data in focus today, with the 12200 support level, key in directing today’s trading session.

FTSE – tracked its peers higher as investors shook off fears of new virus outbreaks despite a continued increase in the number of confirmed cases, while a pickup in China factory activities boosted sentiment. With the index supported by the 200 period SMA and our support level at 6223, failure for the latest bearish reversal bar to push prices below our support will favor a retest to 6270 resistance level as investors await BOE’s chief economist Haldane.

 

Rony Nehme
Chief Market Analyst at SquaredFinancial

Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.

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