Markets Tread Water With US on Holiday, Dollar and Yen Soft

Market overviews

Markets are generally quiet today, with a near empty European calendar and US holiday. Major European indexes are recovering slightly but lack follow through buying. Gold and oil are staying in tight range. In the currency markets, Aussie and Kiwi recover mildly while Dollar, Yen and Euro are the softer ones. But with the exception of some Kiwi pairs, most major pairs and crosses are stuck inside Friday’s range.

Technically, Gold’s price actions have been very indecisive recently. But bearish bias is maintained as it’s staying comfortably below falling 55 day EMA (now at 1866.60). Break of 1804.96 minor support should resume the larger fall from 2070.06 through 1786.65 low. 61.8% projection of 2070.06 to 1786.65 from 1878.92 at 1748.16 could be the place where the five-wave sequence ends.

In Europe, at the time of writing, FTSE is up 1.33%. DAX is up 0.48%. CAC is up 0.22%. Germany 10-year yield is up 0.043 at 1.701. Earlier in Asia, Nikkei dropped -0.74%. Hong Kong HSI rose 0.42%. China Shanghai SSE dropped -0.04%. Singapore Strait Times dropped -0.05%. Japan 10-year JGB yield rose 0.0002 to 0.233.

ECB Kazaks supports 25bps hike in Jul, 50bps in Sep

ECB Governing Council member Martins Kazaks said he would support 25bps rate hike in July and 50bps in September. He added that inflation would “need to surprise on the low side” for it not to be 50bps in September.

But he emphasized that investors should not think that 50 bps rate hikes are “the new default.”

Japan: Industrial production appears to be pausing for picking up

In June economic report, Japan’s government said “industrial production appears to be pausing for picking up.” That’s a downgraded assessment from May’s “industrial production shows movements of picking up.” Exports continued to be “almost flat”.

It reiterated that “full attention should be given to the downside risks due to rising raw material prices, supply-side constraints and fluctuations in the financial and capital markets while there are concerns regarding the effects of lengthening the state of affairs of Ukraine and suppression of economic activities in China.”

Nevertheless, for the short-term, the economy is “expected to show movements of picking up, supported by the effects of the policies while all possible measures are being taken against infectious diseases, and economic and social activities proceed to normalization”.

BoJ Kuroda: PM Kishida didn’t say anything special about exchange rate

After a meeting with Japan Prime Minister Fumio Kishida, BoJ Governor Haruhiko Kuroda said “I told the prime minister that recent rapid yen moves were undesirable”.

“(Kishida) did not say anything special but I told him that it was important for currencies to move stably reflecting economic fundamentals,” he added. “I’ll fully watch currency movements carefully from now on as well and will appropriately respond to them while liaising with the government.”

New Zealand BusinessNZ services rose to 55.2, back above average

New Zealand BusinessNZ Performance of Services Index rose from 52.2 to 55.2 in May. Activity/sales rose sharply from 53.3 to 59.6. But employment dropped from 51.0 to 48.5. New orders/business rose from 55.2 to 62.0. Stocks/inventories ticked down from 55.0 to 54.6. Supplier deliveries rose from 40.5 to 45.0.

BNZ Senior Economist Doug Steel said that “while the improvement was far from universal across components, reflecting many ongoing challenges across segments of the service sector, the overall outcome was the first above average result since the outbreak of Delta in August last year.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0441; (P) 1.0500 (R1) 1.0556; More…

Range trading continues in EUR/USD and intraday bias remains neutral at this point. Further fall is in favor with 1.0786 resistance intact. On the downside, sustained break of 1.0339/48 will resume larger down trend. Next target is long term projection level at 1.0090.

In the bigger picture, focus stays on 1.0339 long term support (2017 low). Decisive break there will resume whole down trend from 1.6039 (2008 high). Next target is 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090. However, firm break of 1.0805 support turned resistance will delay this bearish case, and bring stronger rebound first.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:30 NZD Business NZ PSI May 55.2 51.4 52.2
06:00 EUR Germany PPI M/M May 1.60% 1.50% 2.80%
06:00 EUR Germany PPI Y/Y May 33.60% 33.50% 33.50%