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Markets were mixed as inflation worries took centre stage. Wall Street bets on a 100bps rate hike by the Fed while other investors are pricing in a 75bps as the Fed policy meeting begins today. UK real wages dropped to a 21-year low as the labour market shrinks. German’s May inflation data soars to 0.9% against the 0.00% surveyed. Fear grabs the markets as the stock market closes in bear territory.
USDCAD soared by +0.22% for the fifth day ahead of the US PPI data. The US PPI is expected to surge to 0.8% from the previous 0.5% reading boosting dollar strength. The pair broke above a 4-week resistance at 1.2900 and bulls are capped by the 1.2980 and 1.3070 barriers in the near term. Traders should watch out for the CAD Manufacturing Sales (April).
NZDJPY plunged by -0.45% as investors shifted their focus to New Zealand’s Current Account Data. The Current Account YoY is expected to drop to -22.50B against the -20.23B previous reading. Upside gains are capped by the 84.80 resistance and support at 82.80 if it manages to break below the 83.50 level.
EURGBP extended gains by +0.44% as UK real wages dropped to a 21-year low. Average Earnings Index dropped to 6.8% from 7.6% surveyed while Claimant Count Change for May dropped to -19.7K from a forecast of -49.4K. The pair rallied to 0.8620 high, a 20-months resistance. The next possible target is 0.8700 if the near-term high is breached. Investors should watch out for the ECB speakers.
European stocks continued with a sell-off as inflation jitters heightens. FTSE100 dropped by -0.40% as bears break below the 7200 psychological level. The next critical support is the 7156, a 12-week low and a break below that may cause selling pressure towards the 7000 level.
DAX extended its plunge by -0.43% and is sitting at a 13370 support and a break below that level could cause bears to target the 13000 psychological level. CAC40 slumped by -1.03% breaching the 6000 level although bears are challenged by the 5875 and 5800 support.
US stock futures took a breather after a massive slump as the dollar recedes ahead of the US PPI data. S&P 500 futures struggle to hold +0.36% gains as it broke into a bearish territory on Monday. Upside gains are capped by the 3800 resistance and the next target is the 3500 and 3200 levels.
Nasdaq 100 futures rebounded by +0.36% although gains are capped by the 11500-level coinciding with a 19-months low and bears may target 10800. DJIA index trimmed gains to +0.14% after closing below 31000, a 15-months low. The next critical support to watch is the 30000 and 29500 levels.
Gold ticked up by +0.12% as aggressive fed rate hikes cap gains. The yellow metal is supported by the 1800 level and a break below this near-term support could open the possibility of the 1760 level. Gains are capped by 1840and 1880 resistances.
US10-year treasury yields trimmed Monday gains by -2% after a strong rally to 3.44%, making a fresh 11-year high. Investors are already pricing a Fed hike between the 75bps to 100bps on Wednesday’s meeting.
