Market Overview
Safe haven plays have been performing well after weaker US data, more political woes for Trump and this morning’s disappointment in Chinese PMIs. With sluggish US growth in the first half of the year, lower US employment costs and a constant stream of concerning newsflow out of the White House, traders have moved back into US Treasuries. This has pulled yields lower again on Monday morning and any intraday rebounds on the US dollar are likely to be seen as another chance to sell. With Donald Trump’s Chief of Staff leaving his job being the latest stumbling block for a stumbling President, in addition to the news that Russia has expelled 755 US diplomats, the safe haven plays are benefiting.
Despite slight dips this morning, gold and the yen continue to strengthen whilst the negative trends on the Dollar Index remain in place. The move out of risk will not have been helped by the China Manufacturing PMI data overnight which missed estimates and dropped back slightly. Although both services and manufacturing were still above 50 (signalling expansion) the data is touch sluggish. This flip-side argument is that this could induce looser monetary policy from the PBoC.
Wall Street again closed mixed on Friday with the Dow higher, but the broader S&P 500 -0.1% at 2472. Asian markets have been mixed today with the Nikkei -0.2%, although European markets are mildly higher as earnings from banking giant HSBC (LON:HSBA) help to support the FTSE 100.
In forex, the dollar has looked to unwind some of Friday’s losses, however the yen is still outperforming. Gold is around flat, whilst the recovery in oil continues to make ground.
The big focus for today will be the Eurozone flash CPI at 10:00 BST. The expectation is that the headline will stay at +1.3% whilst the core CPI will stay at +1.1%. The euro and German Bunds will certainly be reactive to the data. US Pending Home Sales are at 15:00 BST and are expected to improve by 1.1%.
Chart of the Day – FTSE 100
A sharp bearish candle posted on Friday has broken an 8 month uptrend and puts the positive outlook in jeopardy. Will the market now drop away to test the key June/July lows around 7300? An intraday breach of the support at 7358 was a 12 day low which was confirmed on the RSI, but was also a 12 day closing low too. However the concern comes with the MACD lines roiling over at neutral and the Stochastics beginning to find downside traction.
Early on Monday the market has rebounded strongly (on the back of HSBC earnings) but the technicals are beginning to look more corrective. This means the reaction to the rebound will be key. another lower high and failure below 7447 would begin to put pressure back on the downside and rallies are being seen as a chance to sell. Exactly the medium to longer term implications of the waning technicals will be seen this week, with the 144 day moving average having previously been a key basis of support for the corrections since December, currently in at 7341. The hourly chart shows that the momentum has picked up again, but there is still more of a corrective slip to the market on an overall basis. Support is now in at Friday’s low of 7340 with 7300 being key.
The euro continues to climb higher as the dollar remains weak. The technical outlook remains strong with the RSI continuing to hover around 70, the MACD lines rising and Stochastics solidly above 80. Corrections are being bought into as old breakouts are becoming a basis of support. Breakouts at $1.1300 and $1.1490 have been used previously and now $1.1615. The strong bull candle on Friday was another move into multi-year closing highs and there is little reason to back against the rally for now. The hourly chart shows there is a near term “buy zone” $1.1650/$1.1710, with the important support coming in initially at $1.1615.
The bulls are in control of the now six week uptrend as the market continues to pull higher. Cable has found support in the past couple of sessions above $1.3050 and is pushing higher to test the recent multi-month high at $1.3157. Momentum is strong and the RSI is holding well above 60, with the Stochastics in strong configuration and MACD lines pulling higher. The support of the uptrend currently comes in at $1.3030 and any minor retreat back to it is a chance to buy. The hourly chart shows rising moving averages and positively configured momentum that shows a market continuing to buy into weakness. There is resistance around $1.3150 from the past few sessions but a decisive breakout once more opens the upside. The next resistance is $1.3280 and then $1.3345.
Once more a consolidation candle has been followed by a strong bear candle that has encouraged a downside break in the early moves this morning. This breach of 110.60 simply continues the corrective move which should pull the market below 110.00 and towards the 50% Fibonacci retracement of 100.07/118.65 at 109.35. Intraday rallies remain a chance to sell with bullish candles incredibly rare still and negative momentum indicators configured to sell into strength. The hourly chart shows that the rally from Wednesday last week was a one off and the sellers quickly resumed control. There is now a band of overhead resistance 110.60/111.70, with the hourly RSI failing between 50/60 and hourly MACD lines failing below neutral. The June lows around 109.00 are increasingly likely to be tested.
After a degree of consolidation around $1260, the gold bulls have broken free once more and the move has re-opened the upper limits of the medium term range once more at $1295. The momentum indicators show strength but also upside potential, with the RSI in the mid-50s (tends to push to 70) and the MACD lines only just now rising above neutral, whilst the Stochastics are solidly above 80. The $1260 pivot now turns into a basis of support for intraday corrections, whilst the hourly chart shows a near term band of support $1260/$1265 for any unwinding moves. The early dip back this morning should give another chance to buy and the daily hart shows that there is room to correct within the uptrend. The next resistance above the session high of $1271is at $1280 and then the key high at $1296.
WTI Oil
And yet again the rally continues. Momentum is strong and the bulls have pushed the market above the 76.4% Fib retracement of $52.00/$42.05 at $49.65, a level which has been a historic pivot. The continued breakout is also above $50 and the reaction around this price will be key. The momentum in the rally is strong with the RSI in the mid-60s and the MACD lines accelerating into strong positive territory. The run of higher daily lows continues and this means that support to watch on a correction is in at $48.85 now. Corrections remain a chance to buy and if the market starts to pull clear of $49.65 this has openned the way for a full rally back to $52.00 which is the May high.
The bulls remain on track as the Dow continues to push into new all-time high ground. The breakout above 21,681 opened a 210 tick upside target to 21,890 and this is now well within touching distance of today’s session with the average true range at 113 ticks today. Momentum is strong with the RSI pushing towards 70 and Stochastics positively configured. Old breakouts remain supportive (the latest at 21,681) and today the bulls will look for building support above 21,756 which was Friday’s low
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