Inter Market Analysis 16th July

Equity

Risk On

  • Asian shares all rose higher on the back of Greece vote Yes
  • Strong US earnings
  • Yellen professed rate hike is imminent sent the dollar higher
  • Bank of Canada cut rates

Risk Off

  • Schauble undermine Greece deal and see timeout as appropriate

Outlook: Market Euphoria but is this sustainable at all?

Biased: Equities broke above key resistance and pullback is a buy while GAPs below remain unfilled – RISK ON but with a cautious view that we have not seen any retracement   

Currencies

  • Dollar broke above key resistance with Fed Yellen promises of imminent rate hike
  • Commodity currencies continue to suffer
  • Euro broke below 1.09 and relationship with the BUNDS is breaking
  • Weakness in YEN continues to unravel post Greece parliamentary vote of NAI

Outlook: Yellen stick to her hawkish interpretation of the economy

Biased: As mentioned previously, holding long dollar remains the game in town  

Bonds

  • Bunds continue to trade with any headline news
  • Additional funding from Draghi today?

Outlook: Post Greece parliamentary vote, Bunds did sell off despite Euro weakness ahead of Draghi press conference.

Biased: Headline dependant move + Draghi press conference

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

Pullback did not materialise and the dollar index strengthens post Yellen testimony. Broke above key resistance line mark an important turn but is the pullback remains a buy?

German Bund

Resistance at 152.34 and the 50 ma did not stop price to test higher but then sellers appear nevertheless. Current price action found support at 20 ma and the structure look to form a potential head and shoulder – current pa forming a right shoulder? Break and close below 20 ma then more weakness expected.

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. Current price action is trading within a symmetrical triangle.

German Dax

Price broke above the 100 ma that has been a magnet and post parliamentary NAI vote; prices continue to head higher with no retracement whatsoever. Such bullish stance coincides with end of the week OPEX and the technical price action has broken out of the downward channel line. We will not rule out a rejection at 12000 (red trend line) and any pullback is a buy.

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