FTSE -27 points at 7350 DAX -52 points at 12423 CAC -28 points at 5167 Euro Stoxx -21 points at 3470
The sentiment in the US dollar turns mixed before the Wednesday’s FOMC minutes. The U.S. 10-Year yields advanced further to 2.35%, the highest level since mid-May. Improved yields pulled the euro lower versus the US dollar, although the rise in the US yields have been triggered by the European Central Bank (ECB) hawks last week.
US markets are closed for Independence Day.
The GBP/USD retreated to 1.2933. The UK’s June construction PMI will be released in London today. The construction sector may have expanded at a cooler pace in the month of June. The consensus is 55.0 versus 56.0 printed a month earlier. A negative surprise could dampen the mood following the weak manufacturing PMI figure released on Monday. A further pullback in cable should meet support at 1.2860 (50-day moving average) before 1.2824 (June resistance turn support at minor 23.6% retracement on March-May rise).
The FTSE rolling index advanced to 7373p (100-day moving average) on a softer pound. Yet gains remained short-lived. The FTSE stocks are expected softer at the open.
Energy stocks in Australia gained 1.68%, hinting that the slight pullback in oil prices may not suddenly deter the appetite as London steps in. However, it is worth noting that news play against the oil-bulls today. According to Bloomberg, OPEC production rose by 260,000 barrels per day in June. Libya and Nigeria stood for the half of the increase; Saudi Arabia, the UAE and Angola extracted more as well. WTI crude (-0.55%) saw resistance at the 50-day moving average ($47.12). More offers are eyed pre-$48.05 (50% level on April-June decline).
Gold nosedived to $1,218.50 on the back of the US yield rally. The yellow metal aggressively took out the 200-day moving average ($1,234) and is consolidating losses by the $1,120/1,225 area. The next critical support is eyed at $1,200. Gold could gain some colour moving into the Federal Reserve’s (Fed) June meeting minutes and thereafter, given that there is certainly little margin for a hawkish surprise.
Meanwhile, the Eurozone’s yield rally is expected to cool down in the absence of a tangible macroeconomic basis. If this is the case, the downside correction in the EUR/USD could deepen to 1.1340 (major 38.2% retracement on one-week rally). Light offers are eyed at 1.1370 (minor 23.6% retracement) and 1.1395 (100-hour moving average).
The USD/JPY rallied to 113.46 on the back of improved US, European yields and speculation that the disappointing outcome in Tokyo elections would encourage PM Shinzo Abe to reshuffle his cabinet and boost fiscal stimulus. The USD/JPY is expected to gather enough momentum to test the May double top (114.36) before taking a chance toward the 115.00 mark. Option calls at 113.00/112.55 to give support to the bulls.
In the meantime, the Bank of Japan (BoJ) gives no signs of policy normalisation. The widening divergence between the BoJ and the ECB policy outlooks fuel the JPY-bears against the single currency. The EUR/JPY traded at 128.97 for the first time since February 2016. It is just a matter of time before the 130.00 is conquered.
The Reserve Bank of Australia (RBA) kept its official rate unchanged at 1.50% as expected. The AUD/USD was better bid prior to the RBA announcement, as data showed that retail sales grew by 0.6% on month to May, down from 1.0% printed a month earlier, yet better than 0.2% expected by analysts. The pair reversed the morning session’s gains as the RBA’s accompanying statement emphasized that the low wages growth would continue for a while and that the consumption growth remains subdued.
From a technical point of view, the 50-day moving average is preparing to cross over the 200-day moving average. The golden cross formation on daily chart could encourage the dip-buyers. Key support to May-June rise is eyed at 0.7565 (major 38.2% retracement on May-July rise).