Inter Market Analysis – 3rd July

Equity

World markets

Shanghai 3,686.92 -225.85 (-5.77%)
S&P 500 2,076.78 -0.64 (-0.03%)
Nikkei 225 20,539.79 +17.29 (0.08%)
Hang Seng Index 26,064.11 -218.21 (-0.83%)
TSEC 9,358.23 -21.01 (-0.22%)
EURO STOXX 50 3,451.37 -11.88 (-0.34%)
CAC 40 4,818.44 -17.12 (-0.35%

Risk On

  • UK service PMI beat expectation
  • EU final service PMI came in as expected although German PMI is worse than expected
  • Near a possible deal before the referendum?
  • Yes camp taking slim lead in referendum poll

Risk Off

  • Chinese stock market in free fall
  • China HSBC services PMI came worse than expected
  • Overhanging Greece Referendum create uncertainty
  • Has the market priced in a Greek default?
  • Euro PPMI m/m did not come in line
  • Saudi led strikes (priced in) Syrian army bombards rebels

Outlook: GAP remains unfilled and all is down to the wire on a vote of yes or no. Trading the market is like gambling and best to stay flat.

Biased: We will remain neutral going into the weekend of turmoil.

Currencies

  • USD/JPY GAP filled retracing lower for now but dollar index holding well
  • NFP was a disappointment but probably due to illiquid market or Greece uncertainty so Dollar safe haven still at play
  • Commodity currencies remain weak but we may be at the verge of reversal

Outlook: Dollar is strong for now but post Greece, will the Euro rally hard and the dollar dumping begin? September rate hike is still in place but with the last NFP being off the track, we have to question holding a strong dollar.

Biased: Biased for a stronger dollar going into the weekend but might change after next week.

Bonds

  • on a Yes vote, then expect a selloff in Bunds as Euro rally
  • on a No vote, look for a spike but will wait for the dust to settle down before selling the bund

Outlook: Heading into the weekend of turmoil and no crystal ball on this

Biased: Neutral and waiting for a confirm signal to take a trade

Commodities

  • Saudi led air strike – oil prices priced in
  • Commodity prices hit support (gold and silver) while Copper is trying to break out higher
  • With dollar going strong as safe haven, then commodity advance remain in check
  • a yes vote, means no need for safe haven commodities

Outlook: Yes and a deal should see a boost to industrial commodities and include oil to rise

Biased: A weaker NFP means no rate hike, a yes vote to keep Greece going means commodities can get out this slumber   

Watch list

USD index

Post NFP dip was a buying opportunity as price action indicate that it wants to test the top of the triangle pattern. Safe haven buying continues on the dollar but we may get a good risk reward opportunity to try a short and if that fails we play the breakout higher.

German Bund

Bund found support at 150.40 and current price action is trading within an ascending triangle. As long as prices trade within this structure, we can capitalise the range until a breakout. At the moment, no action but will monitor price action closely.

Copper

No change in our view here as price continue to trade within this pattern. We counted that there are 9 rejections of 2646 levels. 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

Price retested the lower end of the flag and given the risk off scenario, selling the Dax was the play of the day. We are conscious that price is still trading within a descending triangle pattern and with that in mind we will be cautious and stay flat going into the weekend. Otherwise, 5 min chart allow a great flexibility to play the ups and downs.

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