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Markets had a mixed reaction on Wednesday as investors digested key inflation figures. UK, Canada and South Africa have key inflation data today along with US Existing Home Sales. Crude oil futures plunged ahead of US stockpile data. European investors are also pricing in a return of key oil pipelines at lower rates. Tesla will release the Q2 earnings report later in the New York session.
AUDCAD rallied by +0.10% early Wednesday morning ahead of Canadian inflation data. The plunge in crude oil prices amidst weakening demand will underpin Canadian dollar strength. Upside gains are capped by the 0.8900 psychological level, a break above that barrier could extend targets towards the 0.8980 level. However, a break below 0.8850 could invalidate the outlook and bears could target the 0.8800 level.
EURUSD was up +0.10% as bulls sustained a 4-day rally from parity. Investors are pricing in a 25bps hike by the ECB at its Thursday policy meeting, the first hike since 2011. The Euro inflation data released on Tuesday reinforced prospects of an aggressive rate hike by the ECB. Bulls broke above the 1.0200 psychological level and the next target is at 1.0350, a previous support-turned-resistance. Traders will closely watch US Existing Home sales data in the New York session.
GBPJPY soared by +0.10% early European session boosted by UK inflation data. UK inflation rose to 9.4% from a previous reading of 9.1% in June indicating further tightening by the BoE. The BoJ is expected to maintain its ultra-loose policy at its Thursday policy meeting. The pair is currently trading at a critical level at 166.00 and a failure to break above that high, the GBPJPY could trade lower towards the 165.00 level ahead of the BoJ policy meeting. Upside targets are at 167.00 and 169.00 levels.
European stocks were mixed as several factors played into investor sentiment. FTSE100 dropped by -0.20% trimming yesterday’s gains as UK inflation data signals further tightening in the near term. Bullish momentum halted at 7330, near-term resistance and a break above that high could cause bulls to extend targets towards the 7400 psychological level.
DAX index rallied by +0.44% after breaking above the 13200 near-term resistance. Critical levels to watch out for are the 13400 resistance and 13200 previous resistance turned support. CAC40 shaded gains by -0.24% although bulls could target the 6400 level if the 6250.00 immediate resistance is breached.
US stock futures were flat early Wednesday as investors paid close attention to the Tech earnings season. DJIA index was up by +0.11% and gains are capped by the 32000 psychological barrier. If bulls manage to defend gains above the 31500 support, an extended rally towards the 32800 could be possible.
Nasdaq 100 bulls managed to break above the 12200, a 6-week resistance as earning season improves sentiment. Bulls may target the 12800, an 11-week high if they retain gains above the 12200 level.
S&P 500 futures index bulls are flirting with the 3950 level, a 6-week resistance and a break above that could reinforce bullish appetite towards the 4200 high.
Gold edged higher by +0.10% as US 10-year yield plunged by -1.35% early European session. A weaker dollar boosted sentiment on the gold buyers, although gains are capped by the 1725 level. A failure to hold above 1700 could cause selling pressure towards the 1680 level.
