Market Brief
After a sell-off that dragged EUR/USD down to 1.0955, the euro rallied in late European and Asian session and almost returned to its pre-weekend levels. The pressures on European peripheral bonds have also eased, as markets are having a hard time pricing in the outcome of a Grexit. German 5-year sovereign bond yields moved back above the 0.10% threshold, their UK equivalents are back around 1.55%, while Spanish and Italian 5-year bond yields stabilised around 1.15% and 1.28%, respectively. Nevertheless, investors remained reluctant to buy Greek 10-year sovereign bonds for now, pushing yields higher to 15.09%. We expect the pressure to be maintained on Greek bonds ahead of Saturday’s referendum in Greece.
On the equity front, yesterday’s sell-off spread to the US stock markets. The S&P 500 lost 2.09% to 2,057, the Nasdaq dropped 2.40% to 4,958, while the Dow Jones was down -1.95%. EUR/USD moved as high as 1.1278, but quickly returned below the resistance, lying at 1.1201 (Fib 38.2% on May-June rally).
Yesterday, AUD/USD tested again the strong support at 0.76 and failed to break it to the downside. However, RBA’s Governor Stevens will give a speech in London (GMT 8:40am) and we expect his comments to be dovish as usual. So be prepared to see some downward moves in AUD/USD as Stevens reiterates its view of an overvalued Aussie. The Aussie is currently trading at 0.7690 against the greenback, right in the middle of its 1-month range. We anticipate the Aussie to return quickly to the 0.76 support. However, more than a few dovish comments will be needed to validate a break of the strong 0.7560-33 support area.
In New Zealand, the economy is losing momentum as business confidence printed in negative territory for the first time since March 2011. ANZ released its business confidence index at -2.3 for June, as the kiwi economy is facing economic challenges such as falling dairy prices, low commodity prices and soft inflation pressure. NZD/USD broke the 0.6948 support and is now heading toward the next one standing at 0.6795. We remain bearish on the kiwi as we anticipate Governor Wheeler to cut rate further.
In the Asian session, regional equity markets rebounded from yesterday’s sell-off. The Nikkei added 0.63%, the Hang Seng 1.41%, the Shanghai Composite +4.19%, the Shenzhen Composite +3.76%, while Australian shares are up 0.67%. However, European investors are still reluctant to reload long equity positions, as European equity futures are sinking deeper into negative territory. The footsie is down -0.76%, DAX -0.63%, CAC -0.65% and SMI -0.62%.
In the UK this morning, GBP/USD is down 0.23% to 1.57 ahead of Q1 GDP third and final revision. The growth indicator is expected to be revised higher to 0.4%q/q from 0.3% or 2.5%y/y versus 2.4% consensus. EUR/GBP failed at breaking the strong support lying at 0.70 (psychological threshold) and has been proven unable at breaking the 0.7178 resistance (Fib 38.2% on May-June debasement).
In Switzerland, June KOF leading indicator printed way below expectations at 89.7 versus 93.7 expected and 92.7 prior read. EUR/CHF reacted positively to the released and moved slightly higher. USD/CHF is back above the 0.9308 threshold (Fib 50% on May rally) and is heading toward 0.9364 ahead of US consumer confidence index due this afternoon and the speech of Fed’s Bullard.
Today's Calendar Estimates Previous Country / GMT DE May Unemployment Rate Gross Rate 4.80% 4.80% DKK / 07:00 DE 1Q F GDP SA QoQ 0.40% 0.40% DKK / 07:00 SZ Jun KOF Leading Indicator 93.7 93.1 CHF / 07:00 TU May Trade Balance -6.60B -4.97B TRY / 07:00 DE 1Q F GDP SA YoY 1.70% 1.70% DKK / 07:00 SW Apr Wages Non-Manual Workers YoY - 1.80% SEK / 07:30 GE Jun Unemployment Change (000's) -5K -6K EUR / 07:55 GE Jun Unemployment Rate 6.40% 6.40% EUR / 07:55 NO May Credit Indicator Growth YoY 5.80% 5.70% NOK / 08:00 NO Jul Norges Bank Daily FX Purchases - -700M NOK / 08:00 SP Apr Current Account Balance - 0.9B EUR / 08:00 IT May P Unemployment Rate 12.30% 12.40% EUR / 08:00 UK 1Q Current Account Balance -24.0B -25.3B GBP / 08:30 UK 1Q F GDP QoQ 0.40% 0.30% GBP / 08:30 UK 1Q F GDP YoY 2.50% 2.40% GBP / 08:30 UK 1Q F Total Business Investment QoQ - 1.70% GBP / 08:30 UK 1Q F Total Business Investment YoY - 3.70% GBP / 08:30 UK Apr Index of Services MoM 0.30% 0.10% GBP / 08:30 UK Apr Index of Services 3M/3M 0.50% 0.40% GBP / 08:30 UK Jun Lloyds (LONDON:LLOY) Business Barometer - 55 GBP / 08:30 AU RBA's Stevens Gives Speech at OMFIF Function in London - - AUD / 08:40 EC May Unemployment Rate 11.10% 11.10% EUR / 09:00 EC Jun CPI Estimate YoY 0.20% - EUR / 09:00 IT Jun P CPI NIC incl. tobacco MoM 0.10% 0.20% EUR / 09:00 IT Jun P CPI NIC incl. tobacco YoY 0.10% 0.20% EUR / 09:00 EC Jun A CPI Core YoY 0.80% 0.90% EUR / 09:00 IT Jun P CPI EU Harmonized MoM 0.10% 0.20% EUR / 09:00 IT Jun P CPI EU Harmonized YoY 0.20% 0.20% EUR / 09:00 IT May PPI MoM - -0.30% EUR / 10:00 IT May PPI YoY - -3.10% EUR / 10:00 IN May Fiscal Deficit INR Crore - 127523 INR / 10:30 SA May Trade Balance Rand -3.2B -2.5B ZAR / 12:00 SA May South Africa Budget -21.75B -41.44B ZAR / 12:00 BZ May PPI Manufacturing MoM - 0.31% BRL / 12:00 BZ May PPI Manufacturing YoY - 5.63% BRL / 12:00 CA Apr GDP MoM 0.10% -0.20% CAD / 12:30 CA Apr GDP YoY 1.50% 1.50% CAD / 12:30 US Jun ISM Milwaukee - 47.7 USD / 13:00 US Apr S&P/CS 20 City MoM SA 0.80% 0.95% USD / 13:00 US Apr S&P/CS Composite-20 YoY 5.50% 5.04% USD / 13:00 US Apr S&P/CaseShiller 20-City Index NSA - 175.2 USD / 13:00 US Apr S&P/Case-Shiller US HPI MoM - 0.12% USD / 13:00 US Apr S&P/Case-Shiller US HPI YoY - 4.14% USD / 13:00 US Apr S&P/Case-Shiller US HPI NSA - 168.03 USD / 13:00 BZ May Primary Budget Balance -7.0B 13.4B BRL / 13:30 BZ May Nominal Budget Balance -55.3B 11.2B BRL / 13:30 BZ May Net Debt % GDP 33.80% 33.80% BRL / 13:30 US Jun Chicago Purchasing Manager 50 46.2 USD / 13:45 US Jun Consumer Confidence Index 97.4 95.4 USD / 14:00 IN May Eight Infrastructure Industries - -0.40% INR / 22:00
Currency Tech
EUR/USD
R 2: 1.1679
R 1: 1.1459
CURRENT: 1.1180
S 1: 1.0868
S 2: 1.0820
GBP/USD
R 2: 1.5930
R 1: 1.5755
CURRENT: 1.5714
S 1: 1.5647
S 2: 1.5473
USD/JPY
R 2: 125.86
R 1: 124.68
CURRENT: 122.14
S 1: 122.64
S 2: 118.33
USD/CHF
R 2: 0.9503
R 1: 0.9408
CURRENT: 0.9304
S 1: 0.9285
S 2: 0.9151