Daily Market Outlook, July 27, 2021

Overnight Headlines

  • Fresh Squabbles Slow The US Senate Bipartisan Infrastructure Negotiations
  • US Covid Travel Restrictions To Remain In Place As Delta Variant Spreads
  • UK Government To Consider Relaxing Travel Restrictions From EU And US
  • China's Industrial Profit Growth Slows In June On High Raw Material Prices
  • Japan's Service Prices Rise For Fourth Straight Month As Demand Rebounds
  • Leaders Of North And South Korea Exchange Letters, Agree To Rebuild Ties
  • Tesla Shares Rally After Hours As Record Car Deliveries Drives Profit Surge
  • China's Regulatory Crackdown Stocks Extend Declines Into A Third Day
  • China May Impose More Steel Export Tariffs To Tame Surging Prices
  • Bitcoin Drops After Amazon Denies Reports Of Accepting Crypto Payments

The Day Ahead

  • Today’s economic data are second tier type releases that would not normally be expected to have a significant impact on markets. In the UK, the CBI retail survey will provide the first indications for July in that sector. Last week, official retail sales data for June showed slower growth than earlier in Q2 but overall sales seem to be holding up relatively well. One reason why sales may have moderated is because consumers may be switching to spending on services as restrictions are eased, so the CBI survey may be watched for any evidence of this. Another factor to look for will be any evidence of disruptions to retail supply chains from labour shortages due to the ‘pingdemic’.
  • Eurozone M3 money supply is expected to post annual growth of about 8% in June. That is down from a rate of about 12.5% back in January but is still well above the growth rate prior to the pandemic suggesting that the European Central Bank’s accommodative monetary policy is still supplying substantial amounts of liquidity to the economy.
  • US May house price data are expected to show evidence of further rapid rises. Some Federal Reserve policymakers think that the purchase of mortgage-backed securities as part of the Fed’s asset purchase programme is helping fuel these rapid price gains.
  • Also in the US, the Conference Board’s consumer confidence measure is forecast to hold at a relatively high level in July but still below where it was prior to the pandemic. The data will be watched in particular for indications whether concerns about inflation are having an impact on confidence. Meanwhile, June durable factory orders are likely to provide more evidence that activity in the manufacturing sector remains solid despite ongoing supply chain concern

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

  • EUR/USD: 1.1725 (907M), 1.1750 (1BLN), 1.1775 (515M), 1.1800 (322M), 1.1825 (812M), 1.1850-60 (1.4BLN)
  • USD/CHF: 0.9200 (363M). GBP/USD: 1.3930 (241M).
  • AUD/USD: 0.7380 (344M), 0.7400-10 (300M), 0.7520 (851M).
  • EUR/NZD: 1.6900 (540M)
  • EUR/CAD: 1.4800 (261M)
  • USD/CAD: 1.2380 (960M), 1.2500 (415M), 1.2600 (550M) 1.2635 (220M), 1.2700 (510M)
  • USD/JPY: 109.50 (1BLN), 111.00 (632M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.1950 Bullish above

  • EUR/USD opened 0.29% higher at 1.1802 and traded 1.1800/12 in quiet trading
  • Short-term trend lower showing signs of fatigue as 5 & 10-da MAs tilt higher
  • Resistance is at the 21-day MA at 1.1822 and break may spark short-covering
  • Support and buyers are camped between 1.175060 which has held on dips
  • Medium-term signals remain bearish, but short-term correction brewing

GBPUSD Bias: Bearish below 1.40 Bullish above.

  • Cable holds above 1.3800 as downtrend in new UK COVID-19 cases supports GBP
  • Number of new UK cases fell for the sixth day in a row on Monday.
  • Stops above 1.3800 were tripped on Monday, en route to 1.3833 (10-day high)
  • 1.3833 approximates to 38.2% Fibo of 1.4250-1.3573
  • 1.3787 (last week's high) and 1.3774 are support points below 1.3800
  • IMM specs recently flipped to first net GBP short since Dec

USDJPY Bias: Bullish above 109 Bearish below

  • USD/JPY heavy in Asia, pulls back some, 110.38 to 110.17 EBS
  • Move in tandem with easing US yields, Treasury 10s fall back to @1.280%
  • USD/JPY offers tipped from @110.50, trail up, bids towards 110.00, below
  • Tech support from ascending 55-DMA at 109.99, Ichi cloud 109.15-87 below
  • Some option expiries in area today - 109.50 $992 mln, 111.00 $632 mln
  • Risk so-so on in Tokyo, Nikkei +0.4% @27,940 but E-minis -0.2% @4407
  • JPY crosses buoyant - GBP/JPY 152.24-59, EUR/JPY 130.06-26, AUD/JPY 81.19-52
  • Cross upside limited though, GBP/JPY against good resistance.
  • Service prices up some more in June, +1.4% y/y, May +1.5%

AUDUSD Bias: Bearish below .76 Bullish above

  • AUD/USD falls to 0.7363 as Chinese equities sag: CSI300 and SSEC down 2%
  • Hang Seng down 3% ...
  • The Australian dollar is widely viewed as a proxy for risk appetite
  • 0.7363 = intra-day low. 0.7371-0.7390 was Asian session range.
  • 0.7332 was Monday's low, after China stock losses hurt AUD.
  • Victoria to ease COVID-19 curbs, NSW records 172 new case