Inter Market Analysis 22nd July

Equity

Risk On

Risk Off

  • Italy retail sales -0.1 vs 0.0
  • Overnight thin trading post earning had US equities slumbering lower
  • Asian shares lower Greek parliament continues vote on bailout
  • Joblessness clouds Spanish economic rebound
  • Poor Apple after hours result alongside Yahoo and Microsoft

Outlook: As per yesterday outlook, equities such as Apple’s earnings was affected by China recent and potential slowdown

Biased: Risk Off as market try to digest the implication of hard landing in China after the “blip” on the 2nd largest economy stock market  

Currencies

  • Retracement on the dollar after turn around Tuesday
  • Dollar found support and the rally could consider further regardless
  • Euro caught some bids and Sterling open strong on MPC minutes
  • More easing expected from export economy as commodity prices are hard hit

Outlook: Hawkish Yellen and Carney – dovish BOC / RBA / RBNZ / BOJ

Biased: With Greece resolved is there any more need for safe haven currency? No is the answer on Yen while dollar and sterling could still go higher

Bonds

  • With the dollar on the back foot = euro could attempt higher prices = bunds lower

Outlook: We continue to envisage higher bunds in the short term and pullback remains buying opportunity

Biased: Set to test higher as long as support at 20 and 50 ma holds

Commodities

  • A retest of the new low on several commodities in the next few days is possible
  • Talk of lower commodity prices to further hurt export economies (AUS / NZD / BOC) further easing expected?

Outlook: No reversal as of yet and expect further bout of weakness but look out for bargain hunters

Biased: After the sell off – consolidation and retest of the new low? Let the dust settle first  

Watch list

USD index

Price action is converging tighter while resistance of April swing low still there. Only a break above will clear the air for more upside potential. The selloff looks like an opportunity for dollar bull to build their position. There is no damage on the uptrend channel and instead, we could see a bounce here. Support comes at 20 ma as well and the 100 ma.

German Bund

The lower timeframes on the Bund suggest short term weakness ahead of resistance. Can it break above previous high of 154.22? Possible yes and break higher to 50% fib and 200 ma coming in as confluence where we look to setup a short.

Copper

The selling is not over yet as previously mentioned, copper tanked lower so a retest of previous low is possible. With China stock market struggling, rate hike in US imminent – demand for copper could be in taper tantrum. Bounce is selling opportunity.

German Dax

1 out of 3 gaps filled and we are in the process of possibly filling the next gap by end of the week. The above daily chart shows Dax hit resistance and after US equities took a knock, Dax gapped lower and looks at 20 ma as a potential magnet for support and previous channel. Gaps below remain unfilled and we will not rule out at least 2 out 3 gaps should be filled but on this weekly chart a potential retracement to 319 and a rebound is possible.

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