Inter Market Analysis – 1st July

Equity

World markets

Shanghai 4,053.70 -223.52 (-5.23%)
S&P 500 2,063.11 +5.47 (0.27%)
Nikkei 225 20,329.32 +93.59 (0.46%)
Hang Seng Index 26,250.03 +283.05 (1.09%)
TSEC 9,375.23 +52.21 (0.56%)
EURO STOXX 50 3,505.10 +80.80 (2.36%)
CAC 40 4,906.21 +116.01 (2.42%)
S&P TSX 14,553.33 +63.18 (0.44%)
S&P/ASX 200 5,515.70 +56.70 (1.04%)
BSE Sensex 28,020.87 +240.04 (0.86%)
TA25 1,668.68 +19.88 (1.21%)
SMI 8,890.35 +109.44 (1.25%)
ATX 2,458.70 +46.93 (1.95%)
IBOVESPA 53,080.88 +66.67 (0.13%)
SET 1,504.55 -6.64 (-0.44%)
BIST100 82,678.04 +428.51 (0.52%)
IBEX 10,940.90 +171.40 (1.59%)
WIG 53,647.50 +318.52 (0.60%)
TASI 9,105.71 +18.82 (0.21%)
MERVAL 10,185.37 +333.98 (3.39%)

Risk On

  • Asian equities are stabilising (2nd day)
  • Malaysia cut interest rate
  • Japanese economic data is positive and Chinese PMI came in as expected
  • Huge jump in Australia building approvals
  • Ongoing talks between Greece and EZ and market sensing a deal is close (priced in)
  • A weaker EURO should help propel EZ equities higher
  • Brand new month = new funds

Risk Off

  • Greece referendum vote with 46% NO while there are talk of EU pro rally
  • IS threatens to topple Hamas in GAZA

Outlook: GAP above needs filling and with a more positive tone out of Greece and EZ we will not rule out a rather buoyant market place to break higher

Biased: risk ON biased outweighs risk OFF simply because Greece Referendum should be priced in while the new Chinese Stimulus has yet to work its magic. However, we may see new low on EZ equities before a decent bounce.

Currencies

  • commodity currencies are under pressure again with a stronger dollar
  • Safe haven still at play with long yen and dollar (check VIX)
  • NFP week that may drive traders sentiment post Greece

Outlook: Dollar strength and resilience brought to question here-still trading within a big symmetrical triangle. Post NFP then we will see trader position the dollar accordingly but highly in favour of a stronger dollar for now.

Biased: USDJPY buyer’s build strong resistance at 121.90 and since then has retraced higher. With the EURUSD under pressure, dollar strength is in play today.   

Bonds

  • A bullish engulfing candle and today price action is trading within it
  • Price broke out of the downtrend channel but lower time frame suggest a pullback to retest the 20 DMA
  • Potentially, this could be a reversal play or another Bear Flag but the optimum trade is currently within the channel

Outlook: We will not rule out the retest on that breakout level at 151.10 which confluence as the 61.8% and also above the 20 DMA.

Biased: Biased for a retest lower but look to long Bunds at 151 levels to 150.80

Commodities

  • remain subdued and a stronger dollar as we head to NFP will add significant pressure for another round of dump and possibly pump
  • lack of market interest or demand after the stimulus from China is a real concern for commodities

Outlook: Copper 1 hour chart found support (possible double bottom) but is the IHS in jeopardy?

Biased: Pre NFP commodities are under pressure from strong dollar but stance is to wait and buy dip as the possible strategy.  

Watch list

USD index

Price action could continue within this symmetrical triangle. Price found support and IHS remain in play for now.

German Bund

Playing the channel line and watching how this will transpire. Possible game changer should a deal be secured.

Copper

The pullback hit 2586 levels and today price action can determine if there is any follow up selling. If not, we are likely to head higher.

German Dax

Prices did retest lower and found support with a higher low. A short term base is in and price has reconnected with 20 DMA as suggested yesterday. We maintain a RISK on view on DAX.

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