Inter Market Analysis – 9th July

Equity

Risk On

  • Greece to present a new proposal by midnight today – imminent deal
  • EZ equities may have bottomed?
  • Asian equities found support and rebounding after government intervention
  • A dovish FOMC minutes
  • Global leaders are pushing Greece to do the right thing
  • Overnight Australia and China economic data fare better than expected

Risk Off

  • Potential Grexit (not priced in)

Outlook: Any pullback in EZ equities could be a swing long opportunity to fil GAPs above.

Biased: Waiting for pullback to add on swing long opportunity as RISK ON is back.  

Currencies

  • Safe haven trade is at its peak thus a strong dollar index but we reiterate that once a deal is clinch then expect a selloff in the dollar
  • A dovish FOMC statement despite the ongoing view of a rate hike but with market expectation having priced in such scenario, it will be harder to justify a stronger dollar.
  • An imminent Greece deal should unwind a safe haven dollar index trade
  • Technically, daily chart has an inside day formation at the upper Bollinger band which send a strong signal that a reversal and pullback is very much overdue.
  • Conservative trade is to wait and sell at a break of 938 with stops at 12000 and target of 871 and 830.

Outlook: Eurozone headlines will determine how the dollar index reacts in the next few days to next week-we see a weaker

Biased: Dollar rally may unwind soon but need a blow off peak first to create island reversal. Post Greece deal, holding the dollar is still the way forward

Bonds

  • Found resistance at the top of the rising channel as well as the 50% fib with a high of 154.22
  • Pullback to retest the 20 DMA for support

Outlook: A weaker BUND will suggest a stronger Euro in the short term

Biased: With a potential deal imminent, a RISK on should see BUNDS being sold off?

Commodities

  • An overdue recovery in the commodities sector but is this dead cat bounce?
  • Chinese stimulus is at work and a dovish FOMC statement certainly help to lift commodities higher

Outlook: A change of wind but wary of a dead cat bounce. However, certain commodity markets are heavily oversold and this could be a relief rally.

Biased: Bargain hunters and QE induced China came to the rescue but is this temporary?     

Watch list

USD index

Despite a dovish remark from the latest Fed statement, the dollar index pulled back with no technical damage. The rising channel is still intact and very much on course higher as long as it does not break below 11796.

German Bund

The breakout was confirmed and price almost hit the target of 154.45 but current outlook favour a pullback to retest support at 20 DMA. Although, we do not recommend taking any position as we go into the weekend of turmoil again.

Copper

Copper did pierce below the support zone that we highlighted at 2420 and one could argue that a double bottom is in. However, price is still trading within a downward channel and only a close above the 20 DMA will warrant a buy.

German Dax

The 200 DMA worked as strong support and our opportunity to swing long present itself. Despite that, we are aware at how erratic the market has been. This is the 4th GAP albeit an up one – which could potentially indicate that the market is ready to reverse higher on an imminent deal for Greece and close the rest of the GAP. Any pullback may present itself as another swing long opportunity.

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