The Markets experienced a risk-on mood on Monday as dollar weakness dominated sentiment. The dollar continues its corrective move to the downside as investors eye the US Inflation report on Tuesday. The WASDE report and Treasury notes auction will be key data today. The UK trade balance showed improved economic sentiment in July despite weakening GDP MoM data. ECB’s Schnabel will be speaking later today.
GBPUSD surged by +0.69% ahead of the US inflation data on Tuesday. The pound took advantage of dollar weakness and gained despite disappointing economic data. UK’s GDP data came out less than anticipated at 0.2% though it was more than a previous reading of -0.6%. The Manufacturing Production along with the Industrial production showed a contraction in the month of July coming in at 0.1% and -0.3% respectively. The market has fully priced in a 75bps hike by the Fed although CPI data would determine a 50bps or 75bps decision by the Fed. The pair rose from 1.1600 and the nearest resistance at the 1.1700 level. Further barriers are at 1.17500 and 1.1800 levels to the upside. A correction to 1.1600 may be possible in the near term.
NZDJPY gained by +0.64% on Monday as the NZD profited from risk-on sentiment. The rate-sensitive Yen continues its broad weakness against its major rivals ahead of PPI data readings on Tuesday. The Japanese PPI YoY is expected to rise to 8.9% from 8.6%. The New Zealand GDP will be due later this week with expectations showing a rise for the second quarter. The pair established a fresh 7-year high at 87.80 and further moves may target 89.00 and 90.00.
EURAUD rose by +0.50% ahead of Tuesday’s Euro area Inflation data. The EUR got boosted by hawkish ECB members who emphasized the need to raise rates to 2% to fight inflation. The weakening Chinese economic data continues to underpin the Australian dollar’s weakness. Nevertheless, the Bulls struggle to hold gains above the 1.4670 support as the 1.4820 barrier holds. A break below that near-term support could trigger selling pressure towards the 1.4600 psychological figure. ECB’s Schnabel will be speaking later today, and traders should pay close attention.
European stocks rallied early Monday morning. FTSE100 rose by +0.88% adding a 3-day rally from 4200 support and upside gains are capped by 7450. A break above that immediate level could cause an extended rally towards the 7570 level. CAC40 surged higher by +0.85% breaking above the 6250 near-term resistance. Critical levels to watch are the 6300 resistance and 6250 resistance-turned-support. DAX soared by +1.62% after breaching a 10-day high at the 13100 level and the next key resistance levels are at 13400 and 13600.
US stock futures extended the rally as the dollar slid ahead of the US inflation print. S&P 500 futures gained by +0.73% and upside gains are capped by the 4100 near-term barrier. A break above that level could open the possibility of retesting the 4200 and 4300 resistance. Nasdaq100 futures sustained a 4-day rally from 12000 and upside gains are capped by the 12650 and 13000 levels. DJIA index futures rallied by +0.61% after closing above the 32000 psychological level on Friday. Upside gains are capped by 32500 and 33000 resistance levels.
Crude Oil futures advanced on supply concerns and the weakening dollar. USWTI crude oil futures advanced by +1.74% towards the 90.00/barrel level and a break above that level could extend retracement towards the 94.00 level. Brent surged by +1.92% and upside gains are capped by the 97.00 level.