Inter Market Analysis 15th July

Equity

Risk On

  • China better than expected GDP numbers
  • China additional stimulus underway
  • Murmur of positive agreement amongst Greece parliament
  • BOJ Kuroda says economic recovery is spreading to Japan’s regions

Risk Off

  • Asian shares closed mixed with China languishing lower
  • China Small Caps suffered 7% drop despite an ironic 7% GDP growth
  • Diminishing return of extra stimulus and QE?
  • Greece backlash and may not reach any agreement to creditors terms
  • Dollar at key support

Outlook: All eyes on Greece parliament but with Asian shares languishing-the relief rally in EZ and US could be over.

Biased: Equities all at resistance or close to – RISK OFF  

Currencies

  • A turn around on sterling as BOE Carney said rate hike is imminent
  • Dollar dived lower after the above remark but already hit resistance now at minor support
  • Euro gave up all gains and need another positive headline
  • Yen continue to weaken with BOJ press conference underway

Outlook: Dollar at support and bulls are waiting for a hawkish yellen

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 at support too and further positive news from Greece could see a selloff in Bunds

Biased: Headline dependant move

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

As per our report yesterday, a pullback is in the process. Price action respect the upper resistance line and dollar index continues to trade within a symmetrical triangle. A possible head and shoulder pattern in the process and price needs to break below 11945 hard to push prices lower.

German Bund

Buyers entered with a defined risk reward as price bounced of the 50% fib move at 149.75 levels. With a higher low and a long wick candle, this shows that buyers are determined to put a line of defence there and should a higher high materialise then expect Bunds to continue higher. In the short term, Bunds face resistance at 152.34 and the 50 ma.

Copper

We could see a retest of previous low and will only be a confident buyer if price break and close above20 dma. Resistance at 20 ma so a well-defined risk reward short can be place to test the mettle of this relief rally. Failure to break above 20 ma could take price lower.

German Dax

11582 = 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. In addition, there are GAPs below left unfilled and market never forgets.

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