European Open FX Majors Pause at Key Levels USDJPY Coils at Its Highs

Asian Indices:

• Australia's ASX 200 index fell by -40.4 points (-0.55%) and currently trades at 7,272.60
• Japan's Nikkei 225 index has fallen by -98.31 points (-0.34%) and currently trades at 28,693.22
• Hong Kong's Hang Seng index has fallen by -166.15 points (-0.57%) and currently trades at 28,827.95

UK and Europe:

• UK's FTSE 100 futures are currently up 8 points (0.11%), the cash market is currently estimated to open at 7,045.47
• Euro STOXX 50 futures are currently up 16.5 points (0.41%), the cash market is currently estimated to open at 4,080.80
• Germany's DAX futures are currently up 57 points (0.37%), the cash market is currently estimated to open at 15,588.04

US Futures:

• DJI futures are currently up 210.22 points (0.61%)
• S&P 500 futures are currently up 9.25 points (0.06%)
• Nasdaq 100 futures are currently up 7.5 points (0.17%)

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Indices

China’s Caixin manufacturing PMI read as revised lower in its final read for June, from 52 down to 51.3. This supports softer PMI data seen across the manufacturing and services sector from official figures released yesterday. On a more positive note, Japan’s quarterly Tankan survey shows an improvement with the big manufacture’s index rising to 14 from 5, with its fourth consecutive expansion being led by stronger exports.

In today’s session Markit economics release final PMI reads for Germany, eurozone and UK. And initial jobless claims, Markit PMI and ISM manufacturing PMI are the main events in the US session.

It was a strong finish in last quarter for global equities. Retail and healthcare stocks were the strongest performing sectors in Q2 for on the STOXX 600, whilst insurance, travel and leisure stocks were the worst performing. Although it was blue chip stocks which came out on top as the STOXX 50 rise 5.3% compared with the 5.2% rise on the STOXX 600. The FTSE 100 rose 3.5% in Q2 compared with 3.9% for the broader FTSE 350 although both indices were effectively flat for the month of June.

Futures markets are pointing towards a firmer open for cash indices. The FTSE 100 is expected to open around 7045, and 7,000 remains a key level for bulls and bears to monitor today.

FTSE 350: Market Internals

FTSE 350: 4030.03 (-0.71%) 30 July 2021

• 74 (21.08%) stocks advanced and 268 (76.35%) declined
• 13 stocks rose to a new 52-week high, 7 fell to new lows
• 81.2% of stocks closed above their 200-day average
• 43.02% of stocks closed above their 50-day average
• 12.25% of stocks closed above their 20-day average

Outperformers:

• + 6.40%   -  Indivior PLC  (INDV.L) 
• + 5.94%   -  Dixons Carphone PLC  (DC.L) 
• + 4.53%   -  WM Morrison Supermarkets PLC  (MRW.L) 

Underperformers:

• -6.11%   -  Chrysalis Investments Ltd  (CHRY.L) 
• -5.15%   -  TP ICAP Group PLC  (TCAPI.L) 
• -4.68%   -  Cineworld Group PLC  (CINE.L) 

Forex: Several FX majors pause around key levels

• Canadian exchanges will be closed today due ‘Canada Day’, so volatility may be lower for CAD pairs without an unexpected catalyst.
• ECB President Christine Lagarde speaks at 08:00 BST at a hearing before the Committee on Economic and monetary Affairs. ECB board member Andrea Enria will also speak at 09:00.
• BOE Governor Andrew Bailey speaks at 09:00

Looking across FX majors a theme quickly becomes apparent; the majority are at or approaching their prior cycle highs/lows. USD/JPY is meandering around the June high, EUR/USD around its June low, GBP/USD printed A Doji just above its June low yesterday, AUD/USD is losing momentum as it approaches its June low. Given we have NFP tomorrow and have just seen the US dollar index move (and stall) near resistance, then we should be open for the potential for a retracement or pause in trend.

That is not to say we’re dollar bearish, as we would welcome dips on the US dollar index towards 92.13/20 support before its next leg higher. But when so many pairs are near inflection points against a particular currency, more often than not, the market tends to pause or retrace slightly.

Out of all the majors, price action on USD/JPY appears to be the cleanest. It reached our initial target around the June high yesterday and is now consolidating in a tight pattern ahead of UK and US open. Were it not for other majors approaching their key levels we’d be rooting for a bullish breakout but, given that they are, we are open for a break in either direction before resuming its bullish trend.

If prices retrace today we’d like to see 110.76 hold as support and would consider bullish setups around 110.76 – 110.87 (previous resistance and daily pivot). Take note of the resistance zones made up of daily and weekly pivots, residing around 111.35 and 111.60 which are viable targets for bulls.

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Commodities:

Gold extended its gains to a two-day high overnight, finding support at 1764.67 and forming a swing low on the hourly chart. Our bias remains bullish above this key level today.

Soybeans rallied 6.7% yesterday and nearly closed gap resistance at 1442’4. Given the false break beneath January’s low two weeks ago and subsequent rally, perhaps the corrective low has been seen at 1289’0. A break above 1442’4 assumes bullish continuation.

Up Next (Times in BST)

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