FTSE +24 points at 7448 DAX +37 points at 12770 CAC +19 points at 5285 Euro Stoxx +13 points at 3556
The US dollar kicked off the week with a tiny appetite after the June preliminary PMI figures disappointed on Friday. The US manufacturing PMI unexpectedly eased to 52.1 from 52.7, versus 53.0 expected. The flash services PMI softened to 53.0 from 53.6, versus 53.7 a month earlier.
The US has a busy economic calendar this week. The preliminary data for the US May durable orders is due today. Analysts' forecasts suggest that the US durable goods orders may have contracted for the second consecutive month, by -0.6% versus -0.8% a month earlier. As such, the soft data could further weigh on the US dollar. On the other hand, even a positive surprise could have a limited positive impact before Janet Yellen’s speech (Tue), the US 1Q final GDP data (Thu) and May personal income and spending figures (Fri).
FOMC Chair Janet Yellen is due to speak on Tuesday. The Federal Reserve (Fed) hawks retreated significantly after the Fed’s June rate hike, although the Fed preserved the possibility of another rate hike before the end of the year and hinted at an imminent balance sheet normalisation. We do not expect Janet Yellen to reveal any further insight regarding the Fed’s policy outlook. Soft US data could however reinforce the idea that the Fed is no longer in a rush to normalize the US monetary conditions. The reflation scenario is losing its popularity.
The U.S. 10-Year yield remains heavy below the 2.20%.
The FTSE and the US equity futures started the week better bid, as oil extended gains for the fourth consecutive session. The WTI crude recovered more than 1% in Asia, yet the prices remain relatively soft compared to last month’s levels. The WTI erased $10 from May 24th to June 20th on the back of rising concerns about the global supply glut. Trend and momentum indicators remain comfortably negative. Resistance to the one-month negative trend stands at $44.42 (minor 23.6% retracement on May-June decline) and $45.88 (major 38.2% retrace).
Gold find buyers above $1,254 (minor 23.6% retrace on June decline). Soft US yields are supportive of a further rise to $1,262 (major 38.2% retrace), which will distinguish between the June negative trend and a short-term bullish reversal. More support is eyed at 100-day moving average ($1,248).
The EUR/USD trades in a tight range near the 1.12 mark. The USD/JPY consolidates below 111.50 (50 and 100-day moving averages). The AUD/USD tests the 0.7580 offers on improved AU-US yield spread.
The pound has been the biggest G10 gainer against the US dollar in Asia. The focus is on the Bank of England (BoE) Financial Stability Report and Governor Mark Carney’s speech due on Tuesday. Mark Carney has a clear dovish view regarding the BoE’s monetary policy outlook and his speech will likely keep the GBP-bulls back from taking the reins of the market. The short-term resistance is eyed at 1.2824 (minor 23.6% retrace on March-June rise & June triple top).
In the medium-term, investors should keep in mind that three MPC members (versus five) voted to raise the BoE’s interest rates in the June policy meeting and the BoE-hawks are gaining more voice due to the UK's rising inflationary pressures. This situation, combined to a widely softer US dollar continue pointing at a likely advance toward the 1.30 level against the US dollar.
Quick glance at technicals on LCG Trader:
EUR/USD intraday: positive bias. Long positions above 1.1175 (pivot) with targets at 1.1210 & 1.1230 in extension. Below 1.1175, downside potential to 1.1160 & 1.1140.
GBP/USD intraday: upside prevails. Long positions above 1.2705 (pivot) with targets at 1.2785 & 1.2815 in extension. Below 1.2705, downside potential to 1.2680 & 1.2650.
Natural Gas (NYMEX) (N7) intraday: upside prevails. Long positions above 2.9400 (pivot) with targets at 3.0210 & 3.0590 in extension. Below 2.9400, downside potential to 2.9010 & 2.8780.