FTSE +12 points at 7442
DAX +53 points at 12505
CAC +19 points at 5235
Euro Stoxx +9 points at 3509
As expected, the Bank of Japan (BoJ) kept its policy rate unchanged and extended the time needed for reaching its 2% inflation target to 2019 in another attempt to halt the rise in JGB yields and the yen. The USD/JPY was better in Tokyo, after having retraced to 50% of the June – July rise (111.65) on Wednesday. Gains could prolong toward 112.85 (200-day moving average).
The euro consolidates gains above the 1.15 level versus the US dollar before the European Central Bank (ECB) meeting and President Mario Draghi’s press conference due today. The ECB is expected to maintain the status quo at today’s meeting. Yet investors are craving details regarding the ECB’s plans concerning its Quantitative Easing (QE) program, due to end in September.
The recent rally in the Eurozone sovereign yields and the euro appreciation has been an interesting opportunity to observe the market’s take on an eventual QE taper. Both the euro and the yields have a decent upside potential waiting to be triggered with the slightest hint on the QE tapering. Therefore, Mario Draghi will likely remain cautious on his comments to contain the ECB-hawks’ enthusiasm at today’s press conference, given that a rapid euro appreciation would weigh on the inflation and push the ECB farther away from its 2% target.
Less hawkish than expected speech could cause a downside correction to 1.1425 (major 38.2% retracement on June 26 to July 17 rise). Below this level, the pair would step in the bearish consolidation zone and could extend losses to 1.1380/1.1329 (50% and 61.8% retracement).
The Australian economy added net 14,000 jobs in June, slightly lower than the consensus (15K) at first sight, yet encouraging when considering 62,000 new full-time jobs versus 48’000 part-time job losses. The AUD/USD edged lower posterior to data, after trading at a new two-year high of 0.7989.
Trend and momentum indicators remain comfortably positive, yet the overbought market conditions suggests that a downside correction could help gathering a stronger momentum to fight back the solid resistance at 0.8000/0.8015 (200-week moving average). Support is eyed at 0.7900/0.7875. Put options could weigh below 0.7875 at today’s expiry.
The lack of USD appetite doesn’t seem to bother the stock traders. The S&P 500 traded at a fresh all-time high of $2,473.83 on encouraging earnings yesterday. The US dollar pared losses in Asia, yet the fact that President Trump has not been as good as his fiscal promises gradually invite the Federal Reserve (Fed) doves to puff up their short USD positions.
Gold is down for the second consecutive session. Yet, the downside pressure on the US yields remains supportive of a further development of the July positive trend. Support is eyed at $1,230/1,229 (200-dma / major 38.2% retrace).
The softness in the US dollar helps keeping cable above the $1.30 level. Today, the UK will release the June retail sales data. Analysts expect 0.5% month-on-month expansion in retail sales excluding auto fuel, versus 1.6% contraction printed a month earlier. The unexpected slowdown in June inflation hints that there could be a negative surprise at today’s release. Softer-than-expected data should place the $1.30 support at risk. The next technical support is eyed at 1.2884/1.2865 (minor 23.6% retracement on March – July rise / 50-day moving average).
The FTSE 100 challenged offers near the 50-day moving average (7446p) on Wednesday. Further depreciation in the pound could help clearing resistance and bring the 7500p level back on radar.