The GBP/USD failed to hold to gains and tumbled toward 1.3800 amid a stronger US dollar during the American session. However, the greenback strengthened on the back of end-of-month flows.
Cable is under pressure, trading slightly above the 1.3800 zone. The greenback remains strong with USD/JPY above 111.00 and the DXY up 0.40%, at the highest since April, even as US yields drop and amid mixed results in Wall Street. End-of-month flows contribute to the dollar’s strength.
Economic reports from the US showed a larger-than-expected increase in private payrolls by 692,000 in June as reported by ADP. On Friday, the non-farm payroll report is due. Pending Home Sales rebounded in May 8%.
From a technical perspective, a slide under 1.3800 in GBP/USD would expose the June low of 1.3785. Below the next support stands at 13720. The negative tone will likely remain in place while under 1.3880 (short-term downtrend line).
Societe Generale Research highlights some of its preferred trade strategies going into H2.
“If you wanted to short duration and buy credit in the FX market, the
first thing you’d do is sell the yen. It’s the big winner when credit
spreads widen, and the big loser when bond yields rise. And you’d sell
it against something that correlates with a credit-friendly world, so we
would choose the Canadian dollar. The caveat is that long CAD/JPY
has returned almost 10% in the first half of 2021, and was, with
hindsight, the top G10 trade for that period. ,” SocGen notes.
“Our preference is still to favour currencies of countries
where rate hikes come earlier than from the Fed or the ECB. That favours
EUR/GBP. EUR/NOK and USD/CAD shorts (chart above), NZD/USD longs,” SocGen adds.
For bank trade ideas, check out eFX Plus.
XLM price bounced off intermediate support and seems technically set up to go to $0.30.
XLM price had a rough week last week with the dip toward $0.20. The level held, and slowly but surely, Stellar has traded higher from this level. It goes to show the importance of big figures and psychological levels again.
This week a triangle got formed with multiple tests of the blue ascending trend line on the 27 and 28 of June. XLM price was that much in favor that it could even break the orange descending trend line. After the clear break, it saw a retest and a bounce back up toward $0.26.
Buyers have been very much aware of these technical levels and have proven their appetite in Stellar with a large green candle each time. XLM price showed this when it hit $0.20, when it hit $0.24, with the blue trend line on June 28 and when it bounced off the intermediate support at $0.267.
Overall, sentiment in the markets was very much risk-on with the Nasdaq and the S&P500 hitting new all-time highs, and that helped XLM price as well to almost hit $0.30. But Stellar faded a little since the Asian open this morning as markets are under a bit of profit-taking.
We will need to wait until the opening bell to see the overall sentiment and if markets can get beyond this profit-taking phase to march higher. If that is the case, XLM price can complete this triangle formation and hit $0.3 by the end of this week.
XLM/USD 6-hour chart
Even if XML price breaks the short-term support at $0.267, we still have the supporting blue trend line just below near $0.26. But if that level gives way as well, expect a retest of the orange descending trend line near $0.24. This could be the case when markets are switching toward risk-off and stocks are in apparent decline.
If markets would go in complete sell-off mode for a few days, expect even a retest of the $0.20 level again by next week.Full Article
Data released on Wednesday showed the Canadian economy contracted in April but less than expected. Analysts at the National Bank of Canada point out it was the first decline in GDP after eleven months. They believe the second quarter will be slightly positive.
“Canadian GDP registered its first decline in April after 11 months of growth given more severe sanitary measures and against the backdrop of a slow start to the vaccination campaign (which has since become one of the most successful in the world). Notwithstanding the drop, total output remains a mere 1.2% from its pre-pandemic level. It should not come as a surprise that the industries most affected by social distancing measures registered some of the steepest declines.”
“Strong demand for commodities on a global basis were reflected in the monthly surge for mining/quarrying/oil&gas. Statistics Canada’s preliminary estimate for a negative May print will surely materialize as April sanitary measures spilled over into May.”
“Looking at the quarterly perspective, while the second quarter appears to be on track for a decline, nationwide reopenings as well as the easing of the strictest sanitary measures (close to 70% of the population has been at least partially vaccinated) should allow the month of June to offset prior declines. As such, we still believe the second quarter will be slightly positive for growth.”
It is the end of the month – and the quarter – and money managers are rushing to adjust their portfolios, unwinding some of the recent market moves. For gold, that means reversing Tuesday’s fall to the lowest levels since April. That drop was attributed to new Basel III regulations and also to the Fed’s hawkish policy.
How high can XAU/USD go?
The Technical Confluences Detector is showing that gold is battling $1,766.50, a price where the Simple Moving Average 10-4h and the previous monthly low converge.
Critical resistance awaits the precious metal at $1,775, which is the meeting point of the 5-day SMA and the all-important Fibonacci 61.8% one week.
Immediate support awaits XAU/USD at $1,764, which is the confluence of the previous week’s low and the Fibonacci 38.2% one day.
Further down, another cushion is $1,749, which is a juncture including the Pivot Point one-day Support 1 and the PP one-week S2.
The Confluence Detector finds exciting opportunities using Technical Confluences. The TC is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.Full Article
The USD/CAD weakened after the release of US and Canadian economic data. Recently it bottomed at 1.2354, a fresh daily low. Recently rebounded to 1.2390 after the dollar climbed to fresh highs across the board, and it is hovering around 1.2380, modestly lower for the day.
The loonie is outperforming in the market on Wednesday and is among the few currencies to rise versus the greenback. The DXY is up by 0.25%, trading above 92.20. At the same time, US yields are falling sharply.
Economic data from Canada contribute to the strength of the CAD. Real GDP growth in April came in above expectations, and the inflation indicators released on Wednesday showed acceleration from the previous months.
In the US, the ADP employment report showed an increase in private payroll of 692,000, above the 600,000 expected. The Chicago PMI dropped more than expected to 66.1. On Thursday, PMIs are due, and also jobless claims data. The key report will be Friday’s NFP.
Update: A probe lower to the 21-day moving average found some support just after the open on Wednesday but the picture still shows a lot of uncertainty. The Nasdaq remains overbought on the RSI but is at least not pushing higher so this may self-correct. VIX is calm and has not pushed on with recent gains but European markets are jittery as the delta variant is causing increasing concern there. Risks remain, delta variant, Nasdaq overbought on RSI, and what is looking increasingly like a bearish triple top here on the Russell 2000.
For a broader more comprehensive view of the market, the Russell 2000 (IWM) is a good proxy given it is made up of 2,000 stocks, while the Nasdaq and Dow are narrowly concentrated. The Dow is practically invitation only with just 30 stocks. The Nasdaq 100 has the top 100 non-financial companies that trade on its exchange, and even the S&P 500 is a bit narrowly focused with 500 stocks. Apologies if this is a bit obvious, but we try and cater to a broad range of traders here at FXStreet, and some may have shifted from FX and not be as familiar with the makeup of the main US equity indices.
Now that it is established that the Russell is the broadest measure of the overall US equity market, how is it performing? Frankly, it is lagging and needs to pull its socks up before it pulls everything down. The Nasdaq 100 has recently taken on a leadership role and outperformed the other main indices for June, reversing its underperformance earlier in the year. We have mentioned previously, but the inflation and yield fear that spooked markets has subsided. The US 10-year yield was heading for 2% but has now retreated and appears to be planning a quiet summer below 1.5%. The Fed did its best to convince markets that inflation will indeed be “transitory,” to use its own language. Whether this pans out or not has yet to be seen and the latest inflation data, US PCE, and wholesale prices have hit multi-decade highs.
For now, markets have put inflation worries toward the back of their minds, which has allowed the interest rate sensitive Nasdaq 100 to surge. Apple (AAPL) had been slumbering but has recently put in a nice move (see here), and Tesla (TSLA) too has turned things around, surging through some key levels (see here). Facebook (FB) joined the $1-trillion-dollar club. Microsoft (MSFT) joined the $2-trillion-dollar club, and Alphabet (GOOGL) has set more record highs.
Can all this Nasdaq boom continue while other stocks and indices are left in the dust? The chart below shows us the relative performance of the main indices since April. The Russell (IWM) underperformed in May along with the Nasdaq 100, but by early June it had caught back up. This trend has resurfaced in late June for the Russell 2000, but the Nasdaq 100 has surged to new highs. So will the Russell play catch up or is it signaling to us that things are about to turn?
Just a quick word on the relative means of trading the Russell Index. For analysis, we are using the exchange-traded fund (ETF), ticker IWM, as opposed to using the futures contract, ticker RTY. Both are more or less mirror images.
From the chart below we can see the large, effectively sideways range the Russell has traded in since the beginning of 2021. While the other indices have proudly been showing off regular new highs, the Russell appears unloved. This cannot continue forever. At some stage, something has to give. We pointed out in our analysis of the S&P 500 on Tuesday (see here) that the Nasdaq RSI (Relative Strength Index) had crept into overbought territory, and that remains the case. The delta variant is also growing in spread and causing fresh lockdowns in parts of Asia and a delay to reopening of economies in some EU countries. Finally, we identified the VIX at low slumbering levels, but Tuesday saw a modest 3% spike to 16.5 – not huge but worth watching.
There is no strong trend in evidence for the Russell 2000 to fall back on. The 9 and 21-day moving averages are flatlining, as is the MACD (Moving Average Convergence Divergence). The RSI is trending lower. Breakouts can be powerful trades to jump on, and if the Russell does manage it then expect a strong continuation. $234.53 remains the high and breakout level from March. A retracement to $205 could get ugly due to a lack of volume beneath. Putting in a retracement here would mean a bearish triple top.
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Uniswap price hit $21 last night before dipping lower toward $18. All the technical elements and fundamental indicators are still in favor of UNI going upwards.
Uniswap price hit an essential barrier at $19.30 last night. UNI had last seen this level on June 21 and has not been tested since. The rejection at $19.30 and the downturn looks standard, with short-term profit-taking and Uniswap price now looking for support where buyers will come in again.
From a technical point of view, UNI has respected the blue upward trend line three times. A bounce off that trend line would make sense for buyers to come in, and Uniswap price would head higher toward $19.30 again. The level UNI is looking for is around $18, which will act as a psychological level and at the 23.6% Fibonacci level. So there are three technical reasons to go long UNI.
Once the bounce off that blue trend line happens, UNI can go to $19.30 again for the retest. That would be the third test and is highly likely to break to the upside. Even if it does not break to the upside, we would then fall into a triangle technical setup, which would squeeze UNI higher. It is only a matter of time before UNI will reclaim $19.30.
The RSI favors the long UNI as well, with the RSI around 55, so nowhere near overbought or oversold. With the general risk-on sentiment from the past few days, momentum is certainly in favor of Uniswap price trending higher.
The profit target is $21.05, which has proven its importance on June 13 with a triple bottom and June 21 with support on an initial test to the downside by Uniswap price. Only after the clear break lower did $21.05 become resistance with two rejections to the downside, and UNI has not made it back since.
The level looks more than ready for a retest.
UNI/USD 4 hour chart
However, sentiment this morning in the markets is lackluster. Markets are not sure which way to look for direction, and the risk-on tone might not be there today to support Uniswap price. So once the blue trend line and the level at $18 would break to the downside, UNI will dip lower toward $17 and look for a bounce off the orange descending trend line. Should even the orange trend line and $17 not hold, then be ready for a retest of $15.Full Article
After losing nearly 100 pips in the first two days of the week, the NZD/USD pair staged a modest recovery on Wednesday but struggled to preserve its momentum. As of writing, the pair was virtually unchanged on a daily basis at 0.6988.
Earlier in the day, the kiwi found some demand despite the mixed data from New Zealand. The ANZ Activity Outlook Index improved to 31.6% in June from 29.1% and beat the market expectation of 29.1%. On a negative note, the ANZ Business Confidence Index edged slightly lower to -0.6 from -0.4 in June.
On the other hand, the Automatic Data Processing (ADP) Research Institute reported that private sector employment in the US increased by 692,000 in June. This print surpassed the market expectation of 600,000 and helped the US Dollar Index (DXY) push higher.
Currently, the DXY is up 0.22% on the day at 92.27 and remains within a touching distance of the multi-month high it set at 92.40 on June 18.
There won’t be any other data releases from the US in the remainder of the day and the USD’s market valuation is likely to continue to drive NZD/USD’s movements. On Thursday, May Building Permits data from New Zealand will be looked upon for fresh impetus.
Crude Oil Stocks Change in the US was -6.7 million barrels in the week ending June 25, the weekly report published by the US Energy Information Administration (EIA) revealed on Wednesday. Analysts’ estimate was for a decrease of 4.6 million barrels.
This report doesn’t seem to be having a major impact on crude oil prices. As of writing, the barrel of West Texas Intermediate was up 0.45% on the day at $73.75.
“US crude oil refinery inputs averaged 16.3 million barrels per day during the week ending June 25, 2021, which was 187,000 barrels per day more than the previous week’s average.”
“US crude oil imports averaged 6.4 million barrels per day last week, decreased by 0.5 million barrels per day from the previous week.”
“Total products supplied over the last four-week period averaged 20.0 million barrels a day, up by 13.3% from the same period last year.”Full Article
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