FTSE -15 points at 7510 DAX -42 points at 12780 CAC -20 points at 5287 Euro Stoxx -17 points at 3562
Oil fell to the cheapest level since May 9th on speculation that the anxiety around the Qatar-crisis may have a limited influence on the global supply. As the Qatar’s isolation occupies the headlines, oil traders are slowly walking away from the market. The negative bias in WTI crude is supportive of the continuation of the weakening toward the $45 a barrel. Intermediate support is eyed at $45.81 (minor 76.40% retracement on May rise).
The US dollar traded lower against the majority of the G10 currencies. The USD/JPY broke below the 110.00 mark as money flew into the safe haven assets. The pair is expected to consolidate losses below the Ichimoku cloud cover 111.30 on the global lack of appetite. Nikkei (-0.60%) and Topix (-0.48%) traded lower in Tokyo.
Australia’s ASX (-1.27%) fell sharply, led by decent losses in the energy and mining stocks. The Reserve Bank of Australia (RBA) held its cash rate steady at 1.50% as widely expected. The AUD/USD reversed a part of the earlier losses on mixed RBA concerns. Jobs market is stronger, yet soft growth in salaries continue weighing on consumption. The RBA expects the inflation to pick up gradually as the economy strengthens.
Yet, Aussie’s gains are expected to meet resistance given that the RBA still believes that the economic growth would soften. The debasement in commodity prices since March continue taking its toll although the mining investment transition is nearly complete and is supposed to limit the Aussie’s sensitivity to the global commodity prices. The first line of resistance in AUD/USD is eyed at 0.7516 (200-day moving average), before 0.7538 (50% level on March – May decline).
The FTSE futures came under pressure into the European open, the rolling index slipped below the 200-day moving average (7525p) on stronger pound and cheaper oil, commodities, hinting at a softer open in London.
The GBP/USD remains well bid ahead of the UK’s snap election due on Thursday, although most of the pound’s strength is certainly due to the broad based weakness in the US dollar. According to the latest polls, the Conservatives’ lead on Labour fell to nearly 1% (41.5% versus 40.4%), from about 20% at the time of the election announcement. We remind that the poll was conducted before the latest terrorist attack in London Bridge, and could be readjusted in favour of Tories. Nonetheless, the rapid fall in Conservatives’ popularity hints at a potentially hectic pound market into and after the election.
Gold advanced to $1’284 on the back of Qatar isolation and softer US yields. Positive trend and momentum indicators suggest the possibility of a further rise toward $1’295/1’300 (April resistance / psychological resistance). Traders seek further dip buying opportunities on short-term price pullbacks, also on expectation that the June Fed meeting could not be consistently positive for the US dollar.
The US 10-year yields eased 0.72% to 2.1660%. The Federal Reserve (Fed) hawks continued stepping out on worse than expected nonfarm payrolls released on Friday. The FOMC meets next week and the consensus is 25 basis points hike in rates from 1.00% to 1.25%. However, expectations for more Fed action in the second half of 2017 are visibly waning.
Quick glance at technicals on LCG Trader:
EUR/GBP intraday: Short positions below 0.8745 (pivot) with targets at 0.8695 and 0.8665 in extension. Above 0.8745, upside potential to 0.8770 and 0.8790.
GBP/USD intraday: upside prevails. Long positions above 1.2875 (pivot) with targets at 1.2940 and 1.2965 in extension. Below 1.2875, downside potential to 1.2850 and 1.2830.
Dow Jones (CME) (M7) intraday: bullish above 21,145.00. Long positions above 21,145.00 (pivot) with targets at 21,220.00 and 21,265.00 in extension. Below 21,145.00, downside potential to 21,125.00 and 21,090.00.