European Open: AU Inflation Runs Hot, GBP/USD Eyes Break of June High

Australian inflation beat expectations, but can Canada’s do the same later today? But before that we’re looking for GBP to extend its run above the June high.

UK

Asian Indices:

  • Australia's ASX 200 index fell by -52.3 points (-0.7%) and currently trades at 7,379.10
  • Japan's Nikkei 225 index has fallen by -422.75 points (-1.51%) and currently trades at 27,547.47
  • Hong Kong's Hang Seng index has fallen by -59.27 points (-0.24%) and currently trades at 25,027.16

UK and Europe:

  • UK's FTSE 100 futures are currently down -7.5 points (-0.11%), the cash market is currently estimated to open at 6,988.58
  • Euro STOXX 50 futures are currently up 1.5 points (0.04%), the cash market is currently estimated to open at 4,066.33
  • Germany's DAX futures are currently down -16 points (-0.1%), the cash market is currently estimated to open at 15,503.13

US Futures:

  • DJI futures are currently down -85.79 points (-0.24%)
  • S&P 500 futures are currently down -28.75 points (-0.19%)
  • Nasdaq 100 futures are currently down -6 points (-0.14%)


Learn how to trade indices


Asian equities down but bearish volatility subsides

Asian equities were in the red again overnight as the fallout from Beijing’s regulatory tightening weighed on sentiment. The MSCI’s broad APAC index (excluding Japan) was down just -0.31%, whilst shares market in Japan tracked Wall Street lower to fall around -1%. Whilst the Hang Seng is down -0.3% its days range held above yesterday’s low and sits around 25k, so clues are appearing that a trough could be forming ahead of today’s FOMC meeting.

Yet with state-run media calling for calmness, one has to question how long until the markets become supported via intervention to slow the bleeding. But given the magnitude of losses seen these past few sessions, if word gets out that the market is being support it could provide a sentiment boost and market rally, if history is anything to go by.

Despite the FTSE’s best efforts to break beneath the 6948 low, it failed yesterday to produce a (potentially) bullish hammer on the daily chart. A break above its high is required to confirm yesterday’s candle as such, although a break above this week’s high would also clear several moving averages. The initial upside target remains the same as yesterday; between 7088 (last week’s POC) – 7011.


FTSE 350: Market Internals


FTSE 350: 4026.43 (-0.42%) 27 July 2021

  • 129 (36.75%) stocks advanced and 203 (57.83%) declined
  • 19 stocks rose to a new 52-week high, 7 fell to new lows
  • 78.92% of stocks closed above their 200-day average
  • 52.71% of stocks closed above their 50-day average
  • 22.79% of stocks closed above their 20-day average

Outperformers:

  • + 6.23%   -  Mitie Group PLC  (MTO.L) 
  • + 5.62%   -  Croda International PLC  (CRDA.L) 
  • + 3.77%   -  Just Eat Takeaway.com NV  (TKWY.AS) 

Underperformers:

  • -9.33%   -  Moonpig Group PLC  (MOONM.L) 
  • -8.43%   -  Reckitt Benckiser Group PLC  (RKT.L) 
  • -6.47%   -  Ascential PLC  (ASCL.L)


Forex: AUD rises with inflation, FOMC and CA CPI up next

The Australian dollar was the strongest currency overnight on a strong CPI report. Inflation rate shot past expectation to its highest level in nearly 13 years at 3.8% YoY. Yet core inflation remains below 1.6% YoY, meaning it has remained stuck beneath the lower bound of RBA’s target of 2-3% for over 5 years. AUD rose across the board but gained the most tractions against the Swiss franc. But at just 0.26% higher volatility remained capped as the data set will do little to stir hawkish sprits from a highly dovish RBA. 

AUD/JPY remains in the lower third of yesterday’s bearish range and, until we see a break above 81.66 our bias remains bearish over the near-term.

We may find volatility subsides ahead of the FOMC meeting and press conference later this evening, especially in the hour or minutes leading up to it. To see our view on the dollar for today’s meeting please see today’s video.

View today’s video: USD and Silver Break Lower Ahead of FOMC (WTI)

GBP/USD stopped just shy of our 1.3900 target yesterday, thanks to a sixth day of lower covid cases and a growth upgrade from the IMF (International Monetary Fund). Ahead of today’s open we find ourselves in a very similar situation as to yesterday; prices are consolidating near their highs, beneath a resistance cluster after breaking higher the day before.

Due to the strong bullish trend developing on the hourly chart our bias remains for a break above the June high. But as we saw yesterday, prices first dipped towards support before breaking higher. And as we have an FOMC meeting on tap (which we suspect may disappoint hawks) then its plausible to expect at least a shakeout from current levels first before its real moves get underway. A rise in covid cases and hawkish FOMC would likely ruin that bias.


Learn how to trade forex


Commodities:

Copper futures found resistance at the weekly R2 pivot yesterday and prices are now consolidating ahead of the FOMC meeting. Should the Fed remain quiet of tapering plans then copper could benefit not only from a weaker US dollar, but the prospect of continued stimulus. Our bias remains bullish above 4.435 (prior resistance) and for a run for the June high at 4.888.

WTI continues to consolidate above the 70.00 – 70.76 support zone, a zone which remains pivotal over the near-term so the bias remains bullish above it (should prices break to new highs) or a counter-trend move is confirmed with a break below it.


Up Next (Times in BST)

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.


How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log-in if you’re already a customer.
  2. Search for the pair you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

More from Commodities

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.