Market Roundup
- Cable hits 1.2798 low in Asia, 1.2997 recovery high in Europe
- GBP/USD -0.6%, USD/JPY -1.3%, EUR/USD -0.15%
- DXY -0.04%, DAX -1.85%, Brent -0.6%, Iron -1.83%
- Germany May Ind Orders 0.0% vs -2.0% previous, 1.0% exp
- Riksbank unch rates but lowers rate path-SEK mixed/choppy
- German 10-year Bund yield below -0.20% for first time
- Japan MOF official closely watching market moves
- Japan Post CEO - Eyeing acquisitions at home - Nikkei
- BoJ-inspired ETFs for big spending firms struggle to get investors
- China postal bank moves toward $8 bln IPO – Nikkei
- Japan Cab spokesman – No comment on FX, long-term rate levels
Economic Data Ahead
- (0930 ET/1330 GMT) Brazil's automakers' association will release auto sales figures for the month of June. Automobile production increased 3.2 percent and sales gained 2.8 percent in May from April.
- (0945 ET/1345 GMT) Financial firm Markit releases its final reading of purchasing managers index for the services sector. The index is expected to edge up to 51.5 from prior 51.3.
- (1000 ET/1400 GMT) The Institute for Supply Management is likely to report that U.S. non-manufacturing index for the month of June increased to 53.3 from a reading of 52.9 in May.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- (1400 ET/1800 GMT) The Federal Reserve will release its June meeting minutes.
- (0900 ET/1300 GMT) Fed Governor Daniel Tarullo participates in a panel about monetary policy and regulation.
- (0945 ET/1345 GMT) FedTrade operation 30-year Ginnie Mae max $1.325 bln.
- (1145 ET/1545 GMT) FedTrade operation 15-yr F.Mae/ Fr.Mac max $675 mln
FX Beat
USD: The dollar index, against a basket of currencies edged down to 96.41, having touched an early high of 96.47
EUR/USD: The euro struggles to extend its recovery momentum as uncertainty surrounding Brexit continues to trigger global risk-off sentiment. The major trades flat at 1.1085, having touched a low of 1.1035 earlier in the session. Markets will continue to track developments around Brexit, ahead of U.S ISM non-manufacturing PMI and FOMC June meeting minutes. The short term bearish trend from 1.14278 till 1.09115 will come to an end only if the pair breaks above 1.11880 level. Any break above 1.1188 would take it to next immediate resistance 1.1235 (21 day MA and also 61.8% retracement of 1.14279 and 1.0911)/1.13000. The minor resistance is around 1.1100/1.1150. On the lower side, break below 1.1070 (trend line joining 1.09723 and 1.10239) targets 1.1000/1.0970.
USD/JPY: The greenback trades lower at 100.66, failing to sustain gains above 101 level. The yen strengthened as selling pressure across global equity market weighed down on riskier assets. The short term trend is slightly bearish as long as resistance 102 (hourly Kijun-Sen) holds. The minor resistance is around 102 and any break above confirms minor trend reversal, a jump till 102.69/103.50 is possible. On the lower side minor support is around 100 and any break below 101.40 will drag the pair till 98.80/98.
GBP/USD: Sterling breached 1.2800 level, declining to its lowest level in 31 years due to increasing uncertainty in financial markets after the Britain voted to leave the European Union. The major attempted a minor recovery to trade at 1.2985 after slumping to 1.2791, however, still 0.3 percent down for the day. The recovery is likely to remain fragile as growing concerns over Brexit impact on the economy and speculations of a rate cut by the BoE, weigh on the pound. Against the euro, the pound was lower at 85.27 pence, having touched an early low of 86.26 pence, its lowest since September 2013. On the higher side major resistance is around 1.3000 (21 HMA) and any break above 1.3000 will take the pair till 1.310 (55 H EMA)/1.3180 (90 H EMA). On the lower side any break below 1.2790 will drag it till 1.2760 (161.8% retracement of 1.32263 and 1.39806).
USD/CHF: The Swiss franc extended losses against the dollar. The greenback rose above the 0.9800 level, pulling away from a low of 0.9684 touched in the previous session and was last trading 0.1 percent higher at 0.9780. The short term decline from 0.9960 till 0.9512 will come to end if the pair closes well above 0.9840. On the higher side, major resistance is around 0.9840 and any indicative break above 0.9840 will take the pair till 0.9900/0.9960 in the short term. Any near term weakness can be seen only below 0.9670 (21 day MA) and any violation below targets 0.9630/0.9580/0.9520. Overall bullish invalidation is only below 0.9500.
AUD/USD: The Australian dollar retreated from sessions lows, slightly supported by gold price rally amid risk-aversion market profile. The major slumped to a low of 0.7484 largely on the back of renewed risk-off sentiment across the financial markets. The Aussie trades 0.1 percent higher at 0.7472, hovering towards session high of 0.7484. Markets now await FOMC meeting minutes and AiG Performance of Construction Index for further momentum. On the higher side any break above major resistance 0.7550 will take the pair till 0.7580/0.7635. The major support is around 0.7370and break below will drag it till 0.7320/0.7280.
NZD/USD: The New Zealand dollar attempted a minor recovery to trade above the 0.7100 level, however it was still trading 0.5 percent lower at 0.7115. The Kiwi was dragged down by a drop in the Global Dairy Trade price index, combined with declining oil prices and broad based US dollar strength. Markets attention now remains on U.S. ISM non-manufacturing PMI data, ahead of FOMC meeting minutes. Immediate support is located at 0.7141 (Ju-30 Low), while on the higher side, resistance is seen at 0.7159 (5-DMA).
Equities Recap
European shares slumped as investor’s fear of instability in the European Union after Britain's pound declined below $1.30 for the first time in more than three decades.
Europe's FTSEurofirst 300 declined 1.1 pct, Germany's DAX slumped 1.6 pct, France's CAC dropped 1.5 pct and Britain's blue-chip FTSE 100 index edged down 0.5 pct.
Tokyo's Nikkei declined 1.85 pct at 15,378.99, Australia's S&P/ASX 200 index dropped 0.59 pct at 5,197.20 points and South Korea's KOSPI 200 lost 1.88 pct.
Shanghai composite index gained 0.4 pct at 3,017.29 points, while CSI300 index edged up 0.3 pct at 3,216.80 points. Hong Kong's Hang Seng index slumped 1.2 pct at 20,495.29 points.
Commodities Recap
Oil prices declined for a third consecutive session, weighed down by a stronger dollar and increasing economic concerns following Britain's vote to leave the European Union. Global benchmark Brent oil was 1.7 percents down at $47.35 a barrel at 1032 GMT, while U.S. crude traded at $46.35 a barrel, down 25 cents.
Gold rallied to its highest in over two years, as investors rushed towards safe-haven assets amid tumbling global markets after Britain decided to leave the European Union. Spot gold was trading 1.3 percent higher at $1,373.89 an ounce by 1036 GMT, having touched its highest since March 2014 at $1,375.02. U.S. gold was up 0.5 percent at $1,365.30.
Treasuries Recap
The US 10-year Treasury yield fell to record low following global rally in so-called safe-haven assets and falling bond yields around the world. Also, investors wait for June FOMC meeting minutes (due at 18:00 GMT) in an attempt to estimate the Fed's likely next step. The yield on the benchmark 10-year Treasury note fell 3 basis points to 1.336 percent and the yield on short-term 2-year note dipped 2 basis points to 0.542 percent.
The UK gilts strengthened after data showed that service PMI fell more than expected in June. The yield on the benchmark 10-year gilts fell nearly 3-1/2 basis points to 0.737 percent, yield on super-long 40-year bonds dipped 3-1/2 basis points to 1.336 percent and the yield on 25-year bonds also slid 3-1/2 basis points to 1.513 percent.
The Eurozone periphery bonds plunged as fears over instability in the European Union returned, which trigged a worldwide selloff in lower-rated debt and a flight to haven investments such as German bunds. The 10-year Italian sovereign bond inched higher 2 basis points to 1.263 percent, Portuguese 10-year bonds yield bounced 2-1/2 basis points to 3.038 percent, Spanish 10-year bonds yield climbed more than 2 basis points to 1.190 percent.
The German 10-year bond yield fell to new low of -0.19 percent as investors poured into safe-haven instruments amid losses in riskier assets including crude oil and stocks. The yield on the benchmark 10-year bond fell nearly 1 basis point to -0.185 percent, yield on super-long 30-year bonds dipped more than 2-1/2 basis points to 0.321 percent and the yield on 20-year note slid 2 basis points to 0.153 percent.
The Japanese government bonds rallied as overnight fall in US Treasury yields has large positive impact on JGBs. In the early Asian session, the yield on Japan’s 20-year government bond fell below zero to -0.005 percent for the first time ever and the 30-year yield was just 0.015 percent, as investors seek safety after Britain’s vote to leave the European Union. The yield on the benchmark 10-year bonds fell 3 basis points to -0.277 (record low), short-term 2-year JGB yield fell nearly 1 basis point to –0.328 percent, super-long 40-year bonds slid more than 4 basis point to 0.044 percent, the yield on 30-year JGB also tumbled 4 basis points to 0.023 percent and the yield on 20-year JGB fell 3 basis points to 0.009 percent.
The Australian government bonds continue to rally as investors poured into safe-haven assets amid deepening global economic growth fears. The yield on the benchmark 10-year Treasury note fell 9 basis points to 1.848 percent and the yield on short-term 2-year note also dipped 6 basis points to 1.532 percent.
