FTSE flat at 7517
DAX -27 points at 12594
CAC -10 points at 5327
Euro Stoxx -8 points at 3576
The WTI tanked more than 5%, as the OPEC extended the production cuts by nine months as expected and overly priced in. The lack of deeper cuts, or a longer duration sent the WTI below the $48.92 (major 38.2% retracement on May rise). Failure to regain this level would suggest a short-term bearish reversal on the pre-OPEC positive trend and pull the price of a barrel to $47.97 (50% retrace) and $47.01 (major 61.8% retrace). Recovery is expected to meet resistance at $49.90/$50.00 (200-day moving average). The USD/CAD rebounded from 1.3380, as traders took opportunity of buying the dip on the oil sell-off.
The US dollar firmed as the country’s retail inventories decreased by 0.3% in April. The data boosted confidence on the US recovery and gave reason to the Federal Reserve (Fed) officials, who projected that the 1Q weakness would to be temporary (Fed minutes). The S&P 500 (+0.44%) traded at uncharted territory in New York, despite 2.25% fall in energy stocks. The index rallied more than 2.5% over the past six sessions.
The US’ 1Q GDP data is due today and is expected to be revised higher to 0.9% quarter-on-quarter annualized from 0.7% printed previously. This being said, the enthusiasm posterior to a solid GDP read could be short-lived, given that the second quarter expectations have already taken a hit after the data showed the US’ trade deficit widened in April.
Investors in Asia did not carry on with the US enthusiasm. Australia’s ASX 200 erased 0.64% as mining and energy stocks led losses.
Nikkei (-0.56%) and TOPIX (-0.51%) traded down as well, as the yen (+0.20%) strengthened against the greenback. The Japanese inflation, excluding fresh food, rose from 0.2% to 0.3% year-on-year in April, versus 0.4% expected. The USD/JPY remained bid above the 200-day moving average (111.40) for an advance to 112.00 level. Call options trail above 111.25 at today’s expiry. There are no option barriers into the 112.00 level.
The pound (-0.46%) has been the biggest G10 loser against the US dollar as Theresa May's lead fell by 5 points according to the latest YouGov poll. Cable retreated to 1.2868 as the UK’s second GDP read showed that softer British pound failed to boost exports in the first quarter. The failure to clear the critical mid-term resistance at 1.3044 (major 38.2% retracement on post-Brexit sell-off) could encourage a deeper downside correction to 1.2824 (minor 23.6% retracement on March – May recovery) and 1.2688 (major 38.2% retrace).
Softer pound remained insufficient to revive appetite in the FTSE futures overnight. Cheaper oil and commodities could prevent the UK stocks from extending gains to record levels before the weekly closing bell.
The EUR/USD consolidates around the 1.1200 level. There is a minor support at 1.1102 (23.6% retracement on April – May rise) and a major support at 1.1000 (38.2% retrace). Resistance is eyed pre-1.1300, the Trump Election Day high.
Gold is rangebound between $1’264 and $1’245 (38.2% and 61.8% retrace on April – May slump). Traders are waiting for a positive or negative breakout to trade a fresh direction. A positive breakout could encourage a further rise to $1’275, while a negative breakout should extend toward $1’235/1’233 (100-day moving average / minor 23.6% retrace).
Quick glance at technicals on LCG Trader:
USD/CAD intraday: continuation of the rebound. Long positions above 1.3465 (pivot) with targets at 1.3500 and 1.3525 in extension. Below 1.3465, downside potential to 1.3430 and 1.3410.
EUR/GBP intraday: further advance. Long positions above 0.8670 (pivot) with targets at 0.8720 and 0.8740 in extension. Below 0.8670, downside potential to 0.8640 and 0.8620.
S&P 500 intraday: upside prevails. Long positions above 2406.00 (pivot) with targets at 2420.00 and 2425.00 in extension. Below 2406.00, downside potential to 2400.00 and 2394.00.