Market summary
- Fed Chair Powell signalled two more hikes at the ECB’s central bank forum, although warned that whilst a recession is not a likely scenario it is “certainly possible”
- BOE’s Bailey justified last week’s 50bp hike with a ‘resilient economy’ and suggested rates could be higher for longer
- Wall Street was mixed yet seemed unphased by hawkish CB comments, whilst major banks such as Goldman Sachs, JPMorgan, Morgan Stanley and co passed ‘stress tests’
- The US dollar was the strongest forex major, pushing EUR/USD back to Tuesday’s lows as it seemingly cares out a range between 1.09 – 1.10
- AUD/USD was the weakest major as Australia’s inflation data for June came in much softer than expected, pushing the Aussie to a 17-day low during its worst day in three month
- Weighted CPI falling to 5.6% y/y, seasonally adjusted was down to 5.8% y/y (6.1% forecast, 6.8% prior) and 0% m/m
- The ASX 200 rose to just shy 7200 on hopes that the RBA may pause in July
- Some economists still expect another 25bo hike, even though cash rate futures favour a 84% probability of a pause
- Australian retail sales warrants a look to see if consumer spending has dipped enough to further back up a pause in July
- WTI crude oil rallied from its range lows around $67 and looks set to retest $70 following as the draw on US stockpiles was much higher than expected, for a second week
- Gold fell to a 15-month low but we suspect prices could hold above 1900 (over the near-term at least) looking at futures volumes
Events in focus (AEDT):
- 09:30 – Japan’s retail sales, foreign investment
- 11:00 – Australian retail sales, New Zealand’s business confidence
- 18:00 – German state CPI (which can provide a lead on eurozone CPI due later this week)
- 19:00 – Eurozone sentiment index, consumer price expectations, selling expectations
- 22:30 – US Q1 GDP (final read)
ASX 200 at a glance:
- 89% of ASX 200 stocks advanced yesterday
- All 11 sectors rallied, led by consumer discretionary and real estate
- Wall Street and SPI futures point to a flat open
- Intraday Resistance: 7215, 7250, 7287, 7300
- Intraday support: 7182, 7150, 7172
WTI crude oil 1-hour chart:
Price action remains choppy and erratic on the daily chart of WTI crude oil, yet a clear range is being carved out between $67 - $72-73 which could provide opportunities for intraday traders. The fact oil rallied yesterday despite the stronger US dollar is a further testament to oil’s strength, and today is about whether it can continue higher above $70 into the top half of that range.
Strong volumes formed as prices rallied from the cycle lows, suggesting strong support resides above $68. Low volatility pullbacks towards the $69, $68.50 and $68.22 areas could tempt bullish swing traders to the table with an initial target around $70. A break above which brings $70.84-$74.00 resistance zone and the $72 handle into focus.
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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