Inter Market Analysis 14th July

Equity

Risk On

  • Iran reach nuclear deal – brings stability but more oil supply
  • BRC report UK retail sales growth strengthens
  • China credit expansion in June – Extra stimulus

Risk Off

  • Greece backlash and may not reach any agreement to creditors terms
  • Asian shares lower with uncertainty of Greece parliament agreeing to terms
  • Dollar strengthen while safe haven YEN gave in
  • Japan Inflation is rising faster than wage rise

Outlook: Remain unchanged since there are GAPs remain to be filled but with the agreement priced in – expect volatile price movement. Tight trading range but with well-defined risk reward to head higher or break lower to fill gap.

Biased: Respect the current channel – uncertainty of Greece Parliament accepting the terms will be headline risk (risk off)

Currencies

  • Dollar strengthen during Asia trading but gave back gains
  • Yen continue to weaken as safe haven trade unravel
  • Sterling and Euro weakness followed with commodity currencies weakening *Yellen Testifies tomorrow

Outlook: A stronger dollar as Chinese investors look to diversify?

Biased: Dollar to remain strong but Miss Yellen testimony could shed some light

Bonds

  • Range trading but with Tsipras possible backlash from Greece parliament, expect price volatility.
  • Expecting that Greek parliament will accept the deal

Outlook: Euro gave up most of its gains and Bunds managed to claw back after the heavy selling.

Biased: Should the Euro continue to weaken then expect Bunds to continue higher?

Commodities

  • Expect a retest of previous low for support before any meaningful counter rally?
  • Commodities remain weak as Asian stocks did not recover fully

Outlook: Remain cautious of a dead cat bounce and a final bout of selling could be in the card before any real recovery

Biased: Risk of further sell off before we see any meaningful reversal

Watch list

USD index

Dollar spiked higher in Asian trading hours and over the past few weeks, the rally has been kept strong on the back of the uncertainty in Greece deal. The question remains, if a strong dollar is sustainable and is it due for a pullback?

German Bund

Bargain hunters bought Bunds and current price action indicates a symmetrical triangle. Expect short term range trading and the 50% Fib of recent move at 151.82 could be minor resistance followed by the 50 ma.

Copper

We could see a retest of previous low and will only be a confident buyer if price break and close above 20 dma. Otherwise, if price can find support at 2487 then we could look to swing long with a tight stop.

German Dax

11573 = 100 ma remains a magnet and we cannot rule out a final push to test the upper range before a run lower. Post Greek deal euphoria is priced in and the current price action is in favour of a swing short as we respect the technical setup.

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