Inter Market Analysis – 02nd July

Equity

World markets

Shanghai 3,912.77 -140.93 (-3.48%)
S&P 500 2,077.42 +14.31 (0.69%)
Nikkei 225 20,522.50 +193.18 (0.95%)
Hang Seng Index 26,282.32 +32.29 (0.12%)
TSEC 9,379.24 +4.01 (0.04%)
EURO STOXX 50 3,493.37 -2.91 (-0.08%)
CAC 40 4,879.44 -3.75 (-0.08%)
S&P TSX 14,553.33 +63.18 (0.44%)
S&P/ASX 200 5,599.80 +84.10 (1.52%)
BSE Sensex 27,918.87 -102.00 (-0.36%)
TA25 1,668.72 -4.97 (-0.30%)
SMI 8,966.60 +57.61 (0.65%)
ATX 2,464.69 +3.53 (0.14%)
IBOVESPA 52,757.54 -323.34 (-0.61%)
SET 1,492.00 -12.55 (-0.83%)
BIST100 81,188.11 -493.60 (-0.60%)
IBEX 10,903.30 -8.20 (-0.08%)
WIG 52,946.19 -47.22 (-0.09%)
TASI 9,148.08
MERVAL 10,306.20 +120.83 (1.19%)

Risk On

  • UK construction PMI better than expected

Risk Off

  • Euro PPMI m/m did not come in line
  • Iran Saudi Yemen War
  • Greece referendum still active
  • China equity market another red day despite stimulus
  • Bonds heading lower across the EZ periphery
  • Fear with BOE Deputy Governor saying Greek situation very dangerous

Outlook: The GAP remains unfilled and could remain since we have no deal in sight

Biased: Risk OFF due to Greece uncertainty – dollar coming to resistance which may help unwind Eur/Usd short. Take note also on a possible lack of liquidity as we approach a short week in the US.

Currencies

  • USD/JPY filling gap
  • Dollar rally ahead of NFP with outlook of better number for 15 out of 16 months
  • No deal in sight and uncertainty will play into safe haven currency as we unwind to the weekend

Outlook: Post NFP and with no deal, a stronger dollar is expected but watch as it come to resistance.

Biased: Biased for a stronger dollar going into the weekend.    

Bonds

  • Price action has broken below and testing the 20 dma for support while a failure to close above will mean lower prices
  • Potentially, this could be a reversal play or another Bear Flag

Outlook: We have hit the target set as per yesterday commentary and will not rule out a temporary bounce. Failure to do so then 150.40 and 149.90 is next.

Biased: Testing minor support here but a break below will open the case for 149.90

Commodities

  • Chinese stock market slides thus causing a selloff in commodities
  • A rising dollar has kept commodities in check and copper is coming to resistance
  • Post NFP could change the landscape here
  • lack of market interest or demand after the stimulus from China is a real concern for commodities

Outlook: Copper has 2 scenarios – either a breakout higher or a failed breakout and takes out the lower end of the flag.

Biased: Stay on the side line until we have a clear picture post NFP.   

Watch list

USD index

Resistance up ahead and only a clean break and close will target 12050 where we expect resistance again. NFP day will set the next direction.

German Bund

Line in the sand here for bund is 149.90 and a close below could instigate more sell off. No action here until we have a clear picture on Greferendum as there is too much at stake. Bund is coming to support with a bullish RSI divergence.

Copper

Ascending triangle pattern in the short term and there are 2 possible scenarios to play this out. Play the breakout which offer better RR or play within the triangle.

German Dax

A retest on the lower end of the flag is possible while we have a higher high and expecting a higher low. However, a break below will invalidate this and a retest on the rising green line is the final straw.

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