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The markets took a breather on Wednesday as investors shift their focus to the US inflation report. Gains could be capped with recession fears as the Fed pins down a 75bps hike in July. The RBNZ delivered a 50bps hike while markets are pricing in 75bps from the BoC today. The UK trade deficit rose for the 4th month a slow-down in exports.
GBPUSD rallied by +0.26% in the early European session aided by the positive UK GDP data. The GDP YoY jumped to 3.5% from the 2.7% surveyed. Manufacturing Production MoM (May) was at 1.4% against a consensus of 0.1%. The pair recovered losses after a major dip towards the 1.1800 level on Tuesday. Upside gains are capped by the 19500 mid-figure and near-term support at 1.1870. The US inflation data will be a critical event to watch out for later in the New York session.
NZDJPY soared by +0.47% post RBNZ rate hike early Wednesday. The RBNZ increased its rate hike by 50bps to 2.50% boosting the New Zealand dollar sentiment. The ultra-loose monetary policy of the BoJ favours the NZDJPY bids. Bulls are capped by the 84.70 resistance and a break above that could reinforce the outlook towards the 85.00, a 10-day resistance. Near-term support is at the 83500 level.
EURCAD was little unchanged trading at +0.03% ahead of the BoC monetary policy release. Investors are very cautious ahead of the policy meeting, as the rate is forecasted to rise by 75bps to 2.25%. European Industrial Production MoM (May) rose from a survey of 0.3% to 0.8%. The pair bounced off a 1.3050 level as bulls attempt to defend the 1.3025, a 9-year low. There is resistance at the 1.3100 psychological level and a failure to break above it bears may target the 1.3025 level.
European stocks were lower on Wednesday despite strong UK GDP data. FTSE100 was down by -0.41% as 7200 near-term resistance holds. Bears may target near-term support at 7100 and a breach below that level could open the way for a further drop towards the 7000 psychological support.
DAX plunged by -0.92% as the index remains range-bound between the 13000 resistance and 12700 support. A break below the 12700 support could renew selling pressure towards the 12400 level. CAC40 lost by -0.73% as bulls fail to maintain gains above the 6000 psychological level. The selling pressure could cause bears to target the 5800 support, however, if bulls maintain the 6000 level could open the possibility of the 6100 resistance.
US Stock futures edged higher ahead of a key inflation report. S&P500 futures rallied by +0.26% as bulls bounced off the 3800 support. Gains are capped by the 3900 resistance and a failure to hold above the 3800 support could cause bearish targets at the 3700 level.
Nasdaq 100 took a breather rising by +0.31% after a huge plunge from 1200 resistance on Tuesday. The index is sitting on 11725, 6-day support. Further tightening could see bears targeting the 11000 level. DJIA index rose by +0.10% as bulls attempt to defend the 31000 psychological support. Upside gains are capped by the 31500, an 11-day resistance.
The benchmark US10-year bond yields dropped by -0.64% for the 3rd day breaking below the 3.00% ahead of the US CPI data. The inflation data is expected to rise to 8.8% from the previous 8.6% in June. The nearest support level is at 2.80%, a 9-day low.
