FTSE +10 points at 7533 DAX +60 points at 12948 CAC +20 points at 5330 Euro Stoxx +16 points at 3595
The US dollar and the US yields improved on Federal Reserve (Fed) member Dudley’s optimistic view of the US economy. William Dudley, who is known as a dovish Fed member, said that the strength in the US labour market should translate into higher wages and prices, and that the financial conditions in the US remain loose despite the interest rate hikes. Three other Fed members, Fisher (hawkish), Rosengren (non-voting member) and Kaplan (balanced) are due to speak today.
The Dow Jones closed the Monday’s session at a fresh all-time high of $21,528.99, as Nasdaq 100 advanced by 90.74 points. The US stock futures extended their advance in Asia, hinting that the US stocks could resume gains through the uncharted territories later in the session.
Equity rally extended to Japanese stocks. Nikkei (+1.12%) and Topix (+1.01%) surged in Tokyo, as the USD/JPY cleared resistance at 111.60 (50 and 100-day moving averages). The next reasonable target stands at 112.15 (38.2% retrace on December-April decline & 200-dma).
German and French equity markets are set for a positive open, underpinned by the solid appetite for the global stock markets. The DAX could seek to renew record above €12’921.17, as the CAC could target an advance toward the June high levels (€5’372.97) at Tuesday’s session
Australia’s ASX (-0.56%) traded on the back foot amid Moody’s downgraded the long-term rating of four major Australian trading banks from Aa3 to Aa2. Financials slid by 0.83%. The AUD/USD softened as the Reserve Bank of Australia’s (RBA) meeting minutes concentrated on faster growing housing debt compared to households’ income and said that there are signs of easing inflation despite the improved unemployment rate. The RBA-doves could further weigh on the Aussie as the US yields attempt to improve. Intermediate support is seen at 0.7563 (23.6% retracement on May-June rise) and 0.7535 (100-day moving average). Key support stands at 0.7518 (major 38.2% retrace & 200-day moving average).
Chinese stocks are flat before the MSCI's decision to include Chinese stocks in its global indices, MSCI China and MSCI EM.
Oil and industrial metals were better bid in the US and consolidated gains in Asia.
Gold slipped below $1,245 on improved US yields and remained offered at the 100-day moving average ($1,246). Gold bears’ next major target stands at $1,238 (200-day moving average).
The FTSE futures remained flat on stagnation in oil and commodity prices in Asia. Soft pound remains supportive of the FTSE stocks, but the Brexit risks are looming.
The Brexit talks officially started yesterday. The UK has a blurry vision on the Brexit and therefore finds itself in a difficult position as the negotiations begin. The political environment inside the UK is tense following the June 8 election’s dramatic outcome for PM Theresa May and the Tories. From the very beginning of the negotiations, the UK government had to give in to the EU’s request to discuss the terms of the divorce before mentioning any possibilities on an eventual trade deal posterior to the UK’s separation from the union. Although the markets tend to price in a softer Brexit, the EU is currently showing teeth.
The GBP/USD trades under pressure, as the third test of 1.2824-resistance (minor 23.6% retrace on March-June rise and June triple top) has been unsuccessful. Support is eyed at 1.2658, (100-day moving average), if broken, should pave the way for a further slide to 1.2577 (50% retrace) and 1.2536 (200-day moving average).
The EUR/GBP sees support at 0.8735 (minor 23.6% retracement on April-June recovery). Trend and momentum indicators are supportive of a further positive development toward 0.8868 (June high), before 0.8897 (major 61.8% retrace on September-April decline). The key support to the monthly positive trend stands at 0.8655 (major 38.2% retrace).
The pound appreciation is expected to attract the Bank of England (BoE) hawks against the euro and the US dollar approaching 0.89 and 1.25 levels respectively, given the recent hawkish shift at the heart of the BoE’s MPC.
Quick glance at technicals on LCG Trader:
AUD/USD intraday: capped by negative trend line. Short positions below 0.7615 (pivot) with targets at 0.7580 & 0.7565 in extension. Above 0.7615, upside potential to 0.7630 & 0.7655.
EUR/JPY intraday: supported by a rising trend line. Long positions above 124.15 (pivot) with targets at 124.75 & 125.20 in extension. Below 124.15, downside potential to 123.75 & 123.45.
Dow Jones (CME) (U7): upside prevails. Long positions above 21420.00 (pivot) with targets at 12525.00 & 21550.00 in extension. Below 21420.00, downside potential to 21350.00 & 21310.00.