Asian markets were a mixed bag. USD/JPY failed to sustain above key resistance at 109.32 and is now trading around 108.65 marker. This lack of commitment to upside has filtered its way to European markets which all trade lower this morning.
The economic calendar is light and the pace of earnings reports slows throughout the remainder of the week so it will be interesting to see if US equities manage to build on yesterday’s significant gains. The S&P 500 put in its best 1 day gain in 2 months but overhead resistance levels loom large and with a plethora of put options outweighing calls, it would seem that not everyone is all that confident that this upside will last. Declining trading volumes when juxtaposed with the upside in price action would indicate that the rally may be losing some momentum.
All will likely come down to oil inventories due out later this afternoon. Oil prices have helped drag equities higher on reports of supply disruptions in both Libya and Nigeria and this coupled with the Alberta fires are creating a good base for oil. Both Brent and WTO are slightly lower this morning by 0.67% and 0.53% respectively as the dollar index consolidates around the 94.00 level following 6 consecutive days of gains.
Expected to rebound on a m/m basis, but recent PMI data has been weak so the miss on both should not have surprised anyone. As was expected, it has weighed on both the pound and sterling yields and will only serve to add to the fray that is the UK economy ahead of the EU referendum.
We also have Chancellor Osborne testifying on the Brexit impact report which will add to the chop. Some of the bookies have reduced their odds on Brexit; Ladbrokes (LON:LAD) have reduced from 12/5 to 5/2. We are long overdue a new telephone poll but the two camps appear to be neck and neck with some polls showing the Brexit camp inching ahead. For now the 1.4360 level should provide a base (100DMA) for cable and this may act as a magnet should we see a plunge below the $1.44 level on poor macro data.
The FTSE is slightly lower in early trade with TUI disappointing in its earnings but the miners are back on top – gains in precious metals are helping with gold adding 0.56% and silver gaining 1.06%. Despite some calling for a bottom in the dollar, there is a strong possibility we get another attempt on the $1303 recent gold price high should this momentum carry.
Copper is also on the rise and finding a base around $2.08/lb but one would question the veracity of this; the price has been under pressure since the beginning of May, having capped out at $2.20/lb and the bias remains to the downside in light of slowing global growth.