T-Bonds sold off yesterday after finding some supply close to the May high. This pushed yields higher and also gave the dollar another push higher. Credit traders seem to be reasoning that much better than expected ISM numbers indicate that Friday’s employment numbers will be solid encouraging the Fed to keep on tightening. Also, the FOMC Minutes released yesterday signalled that the Fed is ready to tighten significantly even if it meant that the economy would weaken in the process. The base case scenario for many of the Fed bankers is reportedly a 75 bp hike at the end of this month and more hikes are expected in the following months. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
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GBPUSD – Over 40 UK ministers have now resigned as they feel they can’t support Boris Johnson anymore. While political drama continues in Westminster, Cable is trying to recover and take back some of the recent losses. Before significant rallies can happen though the bulls need to find the strength to push the market decisively above 1.1975. One attempt has failed but if there’s a sustained push above the 1.1975 – 1.1989 range the market might rally a bit. The expectation is that the conservative government will keep on spending even after the PM has resigned so a chance of a significant relief rally could be out of the question. Therefore, the 1.1975 – 1.1989 range has some significance and could provide us with a shorting opportunity. Look for a rally failure inside or near the range if your own analysis agrees with the idea. The nearest key support is yesterday’s low at 1.1875. If it’s taken out the market could move down to 1.1780 or so.
USOIL – There are worries that even though the US driving season is approaching the consumers just are too thinly spread in terms of their spending capacity. This translates to less willingness to shop or move about thus reducing demand for oil. However, USOIL is now oversold and an immediate significant downside might be limited. The nearest resistance levels (101.14 and 103.08) could therefore come into play sooner or later. To get there the market would, however, need to challenge the 97.50 – 99.60 area first. The nearest key support levels are at 87.28 and 92.62. So, even though the market is oversold there are no signs of this market turning strongly bullish yet. Let’s monitor oil for now and see how the market trades at resistance levels.
NZDCHF moved to my T1 (0.6011) quite quickly after I published the trade idea yesterday. I expected there could be some weakness first but the market was strong and rallied to the target straight away. Unfortunately, there was a typo in yesterday’s report and some of you might have missed the target as a result. The T1 level was 0.6011 (as can be seen in the chart I published yesterday) and not 0.6110 which would have been higher than the T2 level at 0.6046. My apologies. The two-hour chart has some weakness at the time of writing but the key support is at 0.5950. If the level can’t be taken out by the bears we should see a move to the T2 level (0.6046). If the market breaks below 0.5906 it’s likely to move to 0.5807.
CADCHF has been creating a bottoming formation for over two weeks now. The balance of power started to shift from the bears to the bulls after the market hit a highly significant weekly support level at 0.7360. This means the market could provide us with long trade opportunities. We need to see a decisive break above the 0.7487 resistance level in order to see a sustained rally. This could take the market all the way up to 0.7626. Let’s keep an eye on this market.
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The Next Main Risk Events
- EUR EU Economic Forecasts
- EUR ECB Monetary Policy Meeting Accounts
- USD Unemployment Claims
- CAD Ivey PMI
- USD FOMC Member Bullard Speaks
- EUR ECB President Lagarde Speaks
- CAD Employment Change
- CAD Unemployment Rate
- USD Average Hourly Earnings m/m
- USD Non-Farm Employment Change
- USD Unemployment Rate
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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