FTSE -3 points at 7443
DAX -28 points at 12742
CAC -7 points at 5288
Euro Stoxx -6 points at 3555
A fat finger squeezed the gold prices on Monday, as the price of an ounce unexpectedly and aggressively plunged to $1,236 (200-day moving average). A huge spike in volumes was reported in the New York futures at 9am London time due to erroneous order. The fat-finger move should not impact the fundamental trend. With the US sovereign yields standing at new year-to-date lows, we could expect a recovery to $1,248/1,250 (100-day moving average) and $1,259 (38.2% retrace on June decline).
The equity markets made a positive start to the week. Shanghai's Composite jumped to two-month highs on Monday and consolidated gains above its 100-day moving average (3,180) on Tuesday. Nikkei (+0.30%) was bid above the 20’000 level, Topix advanced by 0.42% on softer yen. The FTSE traded at 7480p, as financials gained 0.74% on rescued Italian banks. The Stoxx 600 closed 0.40% higher on Monday.
European markets are set for a flat-to-negative open before the European Central Bank President Draghi and the Bank of England Governor Mark Carney's speeches.
The EUR/USD traded in a tight range near the 1.12 mark, the direction is unclear as investors become increasing impatient to hear more about the European Central Bank’s (ECB) plans to exit the Quantitative Easing (QE). President Draghi is due to speak in Portugal (9am GMT).
The USD/JPY cleared resistance at 111.50 (50 and 100-day moving averages) and 111.58 (50% retrace on May-June decline). Soft US yields is a major barrier for a further bullish development. Resistance is eyed at 112.24 (major 61.8% retrace) and 112.33 (200-day moving average).
The GBP/USD recovered to 1.2659 as PM Theresa May and the Northern Ireland’s Democratic Unionist Party (DUP) finally agreed on a deal. The Conservative – DUP pact gives Theresa May the support she needs to stay in office. From a political standpoint, the collaboration with such a sharp-edged party could be toxic for the Tories, who have already lost the majority support of voters at the latest general election.
Although the DUP deal means less political uncertainty for the pound traders, hence a stronger currency, today's macro agenda in the UK could dent the short-term appetite in the pound.
The Bank of England’s (BoE) Financial Stability Report and Governor Mark Carney’s speech will set the tone in London. Obviously, Mark Carney is dovish regarding the BoE’s policy outlook due to the Brexit uncertainties. Therefore, he could place the GBP/USD under pressure at today’s speech. On the flip side, the mid-term price dynamics take the hawkish BoE shift into account. The BoE hawks remain buyer on the dips. Support is eyed at 1.2672 (100-day moving average), 1.2577 (50% retrace on March-May rise) and 1.2555 (200-day moving average).
In New Zealand, the sharp deterioration in the trade balance sent the NZD/USD to 0.7274, yet the pair is determined to challenge the 0.7318 (June high) before a further attempt to 07375 (February high).
Grey clouds hang over the US dollar.
The US durable goods orders missed estimates at the May preliminary read, by a worse-than-expected 1.1% month-on-month contraction versus -0.6% expected. Last month’s figure has been revised down to -0.9% from -0.8%.
President Donald Trump obtained the Supreme Court’s win on the travel ban. The citizens of the countries subject to the travel ban could enter the US if they have a ‘credible claim of a bona fide relationship’.
The US dollar is holding its breath before the Federal Reserve (Fed) Chair Janet Yellen’s speech due later in the session. Investors are looking for more policy insight, yet Yellen is unlikely to let out any meaningful information on top of what has been said at the FOMC’s June policy meeting.
At its latest policy meeting, the FOMC hinted at the possibility of one more rate hike before the end of the year, three rate hikes during the course of next year and warned about an upcoming balance sheet normalisation. As a result, the Fed’s portfolio tightening is increasingly in focus. New York Fed’s William Dudley said that the recent easing in the US financial conditions is another reason to tighten the policy. Yet the weakness in the economic data could spoil Janet Yellen’s efforts to become less data-dependent and further weigh on the US yields and the dollar.
Quick glance at technicals on LCG Trader:
NZD/USD intraday: turning up. Long positions above 0.7275 (pivot) with targets at 0.7310 & 0.7330 in extension. Below 0.7275, downside potential to 0.7260 & 0.7245.
AUD/USD intraday: further advance. Long positions above 0.7575 (pivot) with targets at 0.7620 & 0.7635 in extension. Below 0.7575, downside potential to 0.7560 & 0.7550.
EUR/GBP intraday: positive bias. Long positions above 0.8770 (pivot) with targets at 0.8805 & 0.8825 in extension. Below 0.8770, downside potential to 0.8745 & 0.8720.