Financial market research and analysis

The FTSE 100 opened downbeat. The majority of sectors started the session in the red despite the softening pound.

Technology stocks gained past 2%, as Worldpay Group surged by 7% on news that the company has been approached for a takeover. World’s tech giants as Apple Inc and Paypal could be the potential bidders, as they have also approached the Scandinavian Nets recently.

Energy stocks erased 0.54% at the open, as news play against the oil-bulls today. According to Bloomberg, OPEC production rose by 260’000 barrels per day in June. Libya and Nigeria stood for the half of the increase; Saudi Arabia, the UAE and Angola extracted more as well. WTI crude (-0.55%) saw resistance at the 50-day moving average ($47.12). More offers are eyed pre-$48.05 (50% level on April – June decline).

The GBPUSD retreated to 1.2923. The softer-than-expected expansion in the UK’s manufacturing activity dampen the mood on Monday. Services PMI, due on Wednesday, could hint at a slower activity in the UK’s services sector as well, which represents 80% of the country’s economy. Although the current figures stand at the levels prior to the Brexit referendum, the deterioration in numbers increase anxiety due to the extraordinary Brexit conditions that the UK businesses are facing.

On the other hand, the Bank of England (BoE) hawks have taken the reins of the market last week. Therefore, a further pullback in Cable should meet support at 1.2860 (50-day moving average) before 1.2824 (June resistance turn support at minor 23.6% retracement on March – May rise).

The reaction from the doves' camp remain subdued for the moment. BoE's Gertjan Vlieghe said that a premature hike would be a 'bigger mistake than a late one', yet his words gained little-to-no momentum.


EUR-bears on alert before ECB officials’ speeches; Fed, ECB meeting minutes

The sentiment in the US dollar turns mixed before the Wednesday’s FOMC minutes. The US 10-year yields advanced further to 2.35%, the highest level since mid-May. Improved yields pulled the euro lower versus the US dollar, although the rise in the US yields have been triggered by the European Central Bank (ECB) hawks last week.

The EURUSD eased to 1.1336 before the ECB’s chief economist Praet, the executive board member Yves Mersch and the head of Nowotny’s speeches due today. The ECB will release the latest monetary meeting accounts on Thursday. The ECB officials are expected to talk down the rising speculations on the Quantitative Easing (QE) tapering, using the low inflation as an excuse.

The ECB’s silence regarding its plans about the future of its QE program, which is due to end in September, indulges the ECB-hawks’ imagination. In its July meeting, the ECB could hint at a readjustment regarding the size of its monthly purchases, but the duration will certainly remain flexible to prevent any undesired spike in the Eurozone’s bond yields.

The Eurozone’s yield rally is expected to cool down in the absence of a tangible macroeconmic basis. If this is the case, the downside correction in the EURUSD could deepen beyond the 1.1340 (major 38.2% retracement on one-week rally) and extend to 1.1307 and 1.1275 (50% and major 61.8% retracement). Light offers are eyed at 1.1370 (minor 23.6% retracement) and 1.1395 (100-hour moving average).


Gold binding up its wounds

Gold nosedived to $1’218.50 on the back of the US yield rally. The yellow metal aggressively took out the 200-day moving average ($1’234) and is consolidating losses at $1’220/1’225 level.

Gold could gain some colour moving into the Federal Reserve’s (Fed) June meeting minutes and thereafter, given that there is certainly little margin for a hawkish surprise in the release.

US markets are closed for Independence Day.


Yen loses field versus EUR, USD

The USDJPY rallied to 113.46 on the back of improved US, European yields and speculation that the disappointing outcome in Tokyo elections would encourage PM Shinzo Abe to reshuffle his cabinet and boost fiscal stimulus.

The USDJPY is expected to gather enough momentum to test the May double top (114.36) before taking a chance toward the 115.00 mark. Option calls at 113.00/112.55 to give support to the bulls.

In the meantime, the Bank of Japan (BoJ) gives no signs of policy normalisation. The widening divergence between the BoJ and the ECB policy outlooks fuel the JPY-bears against the single currency. The EURJPY traded at 128.97 for the first time since February 2016. It is just a matter of time before the 130.00 is conquered.


AUDUSD tests 0.7600 post-RBA decision

The Reserve Bank of Australia (RBA) kept its official rate unchanged at 1.50% as expected. The AUDUSD was better bid prior to the RBA announcement, as data showed that retail sales grew by 0.6% on month to May, down from 1.0% printed a month earlier, yet better than 0.2% expected by analysts. The pair reversed the morning session’s gains as the RBA’s accompanying statement emphasized that the low wages growth would continue for a while and that the consumption growth remains subdued.

From a technical point of view, the 50-day moving average is preparing to cross over the 200-day moving average. The golden cross formation on daily chart could encourage the dip-buyers. Key support to the May-June rise is eyed at 0.7565 (major 38.2% retracement on May – July rise).