Forex research

US Opening Call from Alpari UK on 25 June 2013

US data eyed as Fed officials try to ease taper concerns

Today’s US opening call provides an update on:

* Hawkish comments from Fed officials boost financial markets;
* China’s Shanghai Composite stages a massive recovery to end the session down only 0.18%;
* US economic data in focus on Tuesday.

European indices are trading more than 1% higher on Tuesday, paring some of Monday’s heavy losses after certain members of the Fed suggested that the markets have overreacted to Ben Bernanke’s comments last week.

A number of Fed officials have now attempted to ease concerns in the markets, although many of them are non-voting members. Minneapolis Fed President Narayana Kocherlakota yesterday claimed that Bernanke’s comments were not as hawkish as is being portrayed in the markets, while others attempted to reassure the markets that the Fed will remain very accommodative.

On top of that, stock markets in Asia made strong recovery late in the session, with China’s Shanghai Composite ending the session only 0.18% lower after trading down almost 6% earlier in the day. Asian stocks have been under a lot of pressure in recent weeks due to concerns over the rising interbank rates which threatens to hit growth in the world’s second largest economy. China’s Shanghai Composite is down around 16% since 29 May.

US futures are pointing to a higher open on Tuesday, following on from the positive start in Europe and encouraging end to the Asian session. The US is going to be very much in focus on Tuesday, with a few pieces of key economic data due to be released.

Durable goods orders are always a good indicator of how the economy is performing, although the figures do tend to be very volatile and rarely come out in line with expectations. New home sales are expected to rise for a fourth consecutive month, to 426,000, as recovery in the housing market shows no signs of slowing.

The CB consumer confidence figure though is the one that’s likely to attract the most interest, given how important consumer spending is for the US economy. This is the first of three pieces of consumer data being released this week and is expected to fall slightly to 75.4, from 76.2 a month ago.

The interesting thing today, and for the rest of the week, is going to be how investors react to the US economic data, now that Fed tapering could be just around the corner. We could now see a case where investors celebrate poor data and react badly to positive figures due to the impact they’ll have on asset purchases.

Ahead of the open we expect to see the S&P up 9 points, the NASDAQ up 19 points and the Dow up 77 points.
 
UK Opening Call from Alpari UK on 26 June 2013

Europe to open higher as investors boosted by strong data

Today’s UK opening call provides an update on:

• US stocks rally on strong economic data;
• Chinese stocks fall again as interbank rates remain high;
• US final first quarter GDP revision expected to be unchanged at 2.4%;
• BoE Governor King due to hold press conference on financial stability.

European indices are expected to open slightly higher on Wednesday, after investor sentiment was given a boost by some strong figures out of the US.

Even more encouraging was the reaction in the markets to the data. Given that the Fed has laid out its plans to begin tapering later this year if the economy performs in line with projections, it would not have been surprising to see strong prompt further selling in the equity markets. Instead, the release of some strong consumer, housing and durable goods orders data prompted further buying which could mean that the markets are beginning to function normally again.

If that’s the case, then it would suggest that we’ve now seen the bulk of the correction in the markets that has been talked about so much in recent months. That said, given the Fed’s focus on the labour market, and to a certain extent growth, we may still see an unusual reaction to the GDP data today and the jobs report next week. Even so, yesterday’s reaction was encouraging, not just for the US economy, but the normal functioning of the markets as well.

Overnight in Asia, markets were mostly in the green, as investors became encouraged by both the US data and the reaction to it in the markets. Chinese stocks were still under pressure, although the interbank rates did fall marginally after a People’s Bank of China official claimed that the central bank will guide rates to a reasonable range. This suggests the PBOC are willing to leave the rates at more elevated levels than what they were earlier this year, but will step in to avoid a credit crunch in the country.

Looking ahead to today and the focus is likely to remain on the US, although there’s far less data out than we had yesterday, or will have tomorrow. The release of the final first quarter GDP revision will be watched closely for any signs that the economy is performing better than expected. However, the figure is expected to remain at 2.4%, which is unlikely to prompt a reaction in the markets.

Also of note this morning is Sir Mervyn Kings press conference, in which he’ll discuss the financial stability report. This event usually attracts a lot of attention, especially over the last few years since central banks became such key players in the markets. However, with Mark Carney due to take over from King at the start of next week, traders may keep an eye on it, however it’s likely to have very little impact on the markets.

Ahead of the open we expect to see the FTSE up 18 points, the CAC up 14 points and the DAX up 11 points.
 
US Opening Call from Alpari UK on 26 June 2013

Investor sentiment on the rise ahead of US GDP

Today’s US opening call provides an update on:

* Sentiment continues to improve on Wednesday;
* Markets may have priced in Fed tapering;
* US Q1 GDP (annualised) expected to remain at 2.4%;

Investor sentiment has received a big boost from the strong figures out of the US yesterday. European indices are trading more than 1% higher this morning and US futures are pointing to a slightly higher open as well, adding to yesterday’s impressive gains.

There was a concern yesterday that if the data came out above expectations, or significantly above as it did, that it would push equities back into the red as investors continue to worry about Fed tapering later this year. Instead, equities held on to gains which was very encouraging and suggests that markets have priced in the tapering, if not overreacted to Ben Bernanke’s comments.

It looks, at the moment, that the 5-10% correction that many people have been calling for this year has now played out. Based on yesterday’s reaction, a recovery in the US could help the rally now push on, although not necessarily at such an aggressive pace. Although, confirmation of whether this is the case should come when the jobs data is released next week, given that Fed policy appears to be focused around employment.

So far in Europe this morning, there has been very little out in terms of economic data. France was confirmed as in recession with the final revision of its first quarter GDP figure, however this was unchanged and therefore prompted no response in the markets.

We’ll probably have a similar response later in the US, when it releases the final revision of its first quarter GDP. Expectations are for it to remain unchanged at 2.4%, which will have very little, if any, impact on the markets.

Ahead of the open we expect to see the S&P up 7 points, the Dow up 61 points and the NASDAQ up 16 points.
 
UK Opening Call from Alpari UK on 27 June 2013

UK GDP and German unemployment in focus this morning

Today’s UK opening call provides an update on:

• Global equity markets boosted by revised US GDP figure;
• Chinese shares spend a rare session in the green as money market rates ease slightly;
• Focus on the Fed on Thursday, as we hear from voting members Powell and Dudley;
• US weekly jobless claims, UK GDP and German unemployment all in focus today.

Equity markets globally received a major boost on Wednesday, following the release of the revised first quarter GDP figure from the US, and futures suggest we’re going to see more of the same again today.

The idea that the markets are returning to normality following the reaction to the consumer, housing and durable goods data on Wednesday has gone completely out of the window now. Clearly when it comes to growth figures, and probably employment data which we’ll find out next week, the markets are going to favour whatever translates to more stimulus and head for the exits when it increase the possibility of tapering in September.

Even Asian indices are trading in the green across the board, with Chinese stocks also being boosted by another slight easing in money market rates. Australian shares were also given a boost over night by the news that former Prime Minister Kevin Rudd will take over as Labour party leader from Julia Gillard with immediate effect, after she agreed to step aside if she lost a leadership vote. Rudd won the vote by 57 to 45, which means he will be the person who will try to rescue Labours election campaign, three months before Australians head to the polls, a move that appears to have received the approval of the markets.

With global stock markets receiving a boost from the GDP data yesterday, a lot of the attention on Thursday will be back on the Federal Reserve to see how they view the data and what it means for the asset purchases, which Bernanke last week hinted could be tapered later this year. Two voting members of the FOMC, Jerome Powell and William Dudley, are due to speak later on this afternoon, with investors paying close attention to these comments for hints about when we can expect the tapering to begin, with most currently expecting it to be either September, or more likely, December.

There’s plenty of economic data out on Thursday, in both Europe and the US. The US data is likely to attract the most attention, given the impact that the Fed is having on global markets at the moment. In particular, the weekly jobless claims, which spiked last week to 354,000, will be watched closely for signs that businesses are beginning to lay off more people as we head into the summer months. Another figure above 350,000 here may be seen as a sign of weakness here and will therefore be positive for the markets, although it would have to be significantly above this level to have any major impact given that it’s been consistently below 350,000 for so long now.

There’s also plenty of data out of Europe this morning, including the final revision to the UK first quarter GDP figure, which is expected to remain at 0.3%. Any revision here would probably come to the downside, although I don’t think it will be big enough to send it into negative territory and leave the UK in triple dip recession, which would be another major blow to Chancellor George Osborne’s credibility.

In the eurozone, the focus will firstly be on German unemployment data which is expected to show a small increase of 8,000 in the number of unemployed, with the rate remaining extremely low compared to its neighbours, at 6.9%. Shortly after this, we have a number of business and consumer confidence figures for the eurozone, all of which are expected to show a slight improvement in June, benefitting from a lack of attention and bad news in the eurozone recently.

Ahead of the open we expect to see the FTSE up 22 points, the CAC up 9 points and the DAX up 31 points.
 
US Opening Call from Alpari UK on 27 June 2013

Europe flat ahead of speeches from FOMC members

Today’s US opening call provides an update on:

  • European markets flat ahead of speeches from two voting Fed members;
  • German unemployment falls to 6.8%;
  • Revisions show UK narrowly avoided double dip recession in 2012;
  • Weekly jobless claims, personal consumption and home sales data in focus.

European indices are lacking any real direction early in the session on Thursday, while their US counterparts are expected to open marginally higher.

A lot of the movement in the financial markets recently has been driven by the comments from Ben Bernanke in relation to the Fed’s asset purchase program. With two Fed policy makers, Jerome Powell and William Dudley, due to speak early in the US session, a lot of the attention today is going to be on these comments and in particular, what impact the revision to first quarter GDP has on the Fed’s policy.

So far this morning in Europe, the economic data has been mixed, which is contributed to the current flat equity markets. On the positive side, German unemployment fell by 12,000 in June, while the unemployment rate was revised back down to 6.8%.

However the consumer and business confidence figures were pretty mixed, while Irish first quarter GDP was well below expectations, showing a contraction of 0.9%, while the previous quarter’s growth was revised lower.

There was also some good and bad news for the UK, although the bad far outweighs the good. On the upside, a revision to the GDP figure for the first quarter of 2012 means that the economy was flat at 0% and was therefore never in a double dip recession. That said, this is merely a technicality and revisions have also shown that since 2008, growth has been significantly worse than previously thought which is a much more concerning statistic.

Looking ahead to the US this afternoon and aside from hearing from the two members of the Federal Reserve, there’s also a number of economic releases which could have an impact on the markets. Of particular note is the weekly jobless claims, given the Fed’s focus on the labour market.

Ahead of the open we expect to see the S&P up 1 point, the Dow up 16 points and the NASDAQ up 2 points.
 
UK Opening Call from Alpari UK on 28 June 2013

German retail sales and inflation data in focus this morning

Today’s UK opening call provides an update on:

• Fed members struggle to ease concerns over tapering;
• US and Japanese data helps push stocks higher over night;
• German retail sales and inflation in focus this morning.

European equity indices are expected to open relatively flat on Friday, despite stocks in the US and Asia both rising over night off the back of some rather dovish comments from a few Fed members and strong economic data.

I think the opinion among most, if not all, Fed members is that the markets have somewhat overreacted to Ben Bernanke’s comments last week. The decision to taper later this year is not set in stone. The Fed will only begin tapering if the economic data falls in line with the Fed projections for growth and employment. If not then tapering will be delayed. This does not appear to have been acknowledge in the markets. As many members have suggested, the decision is not based on the calendar, but the economic data.

The data out of the US on Thursday was quite positive on the whole. Weekly jobless claims were roughly in line with expectations, while personal income rose more than expected and pending home sales increasing at a much faster rate of 6.7%, compared with forecasts of 1%. All in all, this points to an economy that is continuing to improve in the second quarter and is showing no signs of slowing as we head into the third.

The data out of Japan over night was also quite encouraging as industrial production improved at a much faster pace than expected in May, while the national CPI figure was higher than expected, at -0.3%, up from -0.7%. The core CPI figure, which doesn’t include volatile food prices, was also a strong point, as it remained in inflationary territory at 0.2%. This suggests that while it may have brought large amounts of volatility to the markets, “Abenomics” may in fact be working and the 2% inflation target in two years may not be an unachievable target after all. The only real downside in the data came from the unemployment rate, which remained at 4.1%, despite expectations of a drop to 4% in May.

While the focus is likely to remain on the US again today, with another Fed member, Jeremy Stein, due to speak and the Chicago PMI and UoM consumer sentiment figures due out, there’s also a couple of key pieces of data out of Europe first this morning. German retail sales are expected to have risen in May, with an improvement of 0.2% expected, while inflation is expected to have risen to 1.7% this month, compared to a year earlier, which won’t help the chances of another rate cut when the ECB meets next month.

Ahead of the open we expect to see the FTSE down 4 points, the CAC down 2 points and the DAX up 5 points.
 
Technical Analysis from Alpari UK on 28 June 2013

EURUSD

This pair is beginning to look quite bullish again, in the medium term, having found support earlier in the week, from the 50-week SMA. The recovery in the pair since hitting these lows means the pair now looks on course to close back above the middle bollinger band on the weekly chart, which could also be seen as a bullish signal. It also found support from the 61.8 fib level, of the move from 4 April lows to 18 June highs which looks a little bullish. That said, for this bullish outlook to be confirmed, I will need to see a daily close above where both the 50 and 200-day SMAs intersect the 50 fib level. The pair only broke below here this week so this will either confirm the break, or whether it was a false breakout. If it finds resistance here, as it has this morning, it would be quite bearish for the pair, with the next support level once again being the 61.8 fib level around 1.30, followed by 1.2950. With the 4-hour chart looking bullish, having broken above a descending channel and through the middle bollinger band, a break above the 50 fib can’t be ruled out, and would prompt a move towards 1.3150 and 1.3175. As it stands, it simply looks a question of which fib will break first.
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GBPUSD

While sterling is continuing to look weak on both the monthly and weekly charts, the pair has been heavily sold over the last couple of weeks, so may be due some kind of correction. The daily chart supports this more bullish outlook in the short to medium term, with the pair having found support between the 50 and 61.8 fib levels, around 1.5250, from the descending trend line, dating back to the start of the year. The pair broke above here earlier this month, before finding resistance around 1.5750, so this has naturally become a new area of support. If the trend line continues to hold, we could see the pair push higher over the next week or so, with the next level of resistance coming around 1.53, followed by 1.5335, where the descending trend line intersects the 50 fib level on the 4-hour chart. If the trend line of the daily chart is broken, the pair should find support around 1.52, followed by 1.5182, from the 61.8 fib level, and 1.5150.

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USDJPY

This pair is looking quite bullish again, having recovered well from the heavy losses it sustained earlier this month. The fact that it broke immediately back above, and found support from, the 100-week SMA goes some way to confirming this. It’s also looking a little bullish on the daily chart, having broken above the 50 fib level this morning after finding strong resistance here earlier this week. It is now finding resistance around 99, a previous level of resistance. A break above here would maintain this bullish short term outlook, with the next target being 100, which was previously a major level of resistance and now lies close to the 61.8 fib level. It is worth noting though that the pair has become a little overbought recently and may therefore be due some kind of retracement. If we do see a pull back now, the pair should find support around 98.50 and 98.11, where the ascending trend line intersects the 50 fib level. This is also a previous level of resistance.

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US Opening Call from Alpari UK on 28 June 2013

Mixed markets bringing a close to a strong week for bulls

Today’s US opening call provides an update on:

  • Indices mixed with FTSE heading towards first weekly rise since mid-May
  • ECB disputes German claims that QE is being considered
  • German retail sales provide mixed messages
  • Looking ahead to US consumer sentiment and Canadian GDP data
  • FOMC member Stein due to talk, bringing potential volatility

Global indices are expected to provide an mixed end to the week, as the UK FTSE100 heads towards the first weekly rise in over a month. The failure of markets to fall on Tuesday following strong consumer confidence and home sales data provided some indication of where the markets looked set to move, with global markets paring some of the previous week’s losses. The linkages between strong data and early tapering would ordinarily provide a sell-off in the markets, yet the subsequent rise led to an increased awareness of correction owing to potentially oversold markets. US markets also shared the same fate, posting a strong rise in the S&P500 every day this week, reacting to both positive and negative events with a more bullish tone despite recent weaknesses innate in the markets.

The ECB have moved to deny recent reports from German newspaper Sueddeutsche Zeitung that the central bank were considering a US style QE programme in the near future. Speculation has been rife over recent months of a potential asset purchase plan owing to the much publicised shift away from austerity and towards growth within the single currency. However, a spokesperson of the ECB has moved to dispute such claims, announcing that the reference to a ‘360-degree perspective’ by Mario Draghi was not in relation to any quantitative easing measures.

German retail sales figures provided mixed messages earlier this morning, with the annualised figure falling from 2.7% to 0.4%, falling short of expectations that we would see a reduction of around 0.6%. However, some respite was found in the monthly number, providing a clear improvement of 0.8% from -0.1% the month before. German consumer activity has been in focus this week, with the GFK consumer confidence survey providing a welcome rise, from 6.5 to 6.8. The importance of retail sales figures is often underestimated, yet this provides both a factual level of consumer activity, along with an increased perception of confidence within the economic environment.

Looking ahead, the Canadian monthly GDP figure is due for April. Market expectation is of a reduced figure of 0.1% from a 0.2% rise in March. There is likely to be strong reactions within the market should this figure come in above or below expectations, however, given this is a monthly rather than quarterly figure, it carries less weight than usual GDP figures. Also, the UoM consumer sentiment index is due out later for the US economy. Should we see a fall in line with expectations or below, it could bring about an uptick in indices given the linkages between poor data and delayed QE tapering.

Lastly, the FOMC member Stein is due to speak later today, which could bring further volatility to the markets. Jeremy Stein is a voting member of the board, thus bringing added credence to his opinion, and thus we are looking for any comments as to whether he expects tapering to occur sooner or later. This follows Fed member Dudley’s comments yesterday which spiked markets owing to his view that tapering within 2013 is certainly not a foregone conclusion.

US markets are expected to open higher, with the S&P500 +3 points and DJIA +14.5.
 
UK Opening Call from Alpari UK on 1 July 2013

Manic start to the week ahead of payrolls on Friday

Today’s UK opening call provides an update on:

  • Chinese manufacturing data points to further slowdown in June;
  • Japanese manufacturing data improves more than expected;
  • European manufacturing PMIs in focus this morning;
  • Mark Carney takes over as BoE governor ahead of meeting on Thursday.

European equity markets are expected to open mostly lower on Monday, after two manufacturing PMIs in China pointed to another slow down in growth in June.

Once again though, both pieces of data, the official release which is approved by the government and the HSBC figure, told very different stories. Both shows the figure coming down compared to last month, which is a concern, however the official figure remained in growth territory while the HSBC figure was well into contraction territory. Given the skepticism surrounding any data from the Chinese government and the ongoing cash crunch, traders are going to be more inclined to view the HSBC figure as a more accurate reflection of conditions in China’s manufacturing.

Things were more encouraging in Japan, where the Tankan manufacturing data came in much improved from the first quarter, while most releases were even ahead of expectations. There’s no doubt that manufacturers are largely benefiting from the weaker yen so far this year, and the releases prompting further weakening here with the dollar hitting highs of 99.53 during the session.

With it being the first week of the month, there’s a long list of economic data due to be released, including the daddy of them all, the non-farm payrolls, on Friday. Given the sensitivity in the markets to anything related to the Fed’s asset purchases at the moment, there’s likely to be a lot of caution in the lead up to this figure, quickly followed by large amounts of volatility.

This morning though, it’s going to be all about the eurozone and the UK, with manufacturing PMIs due to be released, followed by inflation and unemployment data for the eurozone.

We’re expecting a bit of a mixed bag from the eurozone PMIs, with improvement expected in the French, Italian and eurozone figures, and a decline expected in Spain and Germany. If anything, this should be seen as a positive thing, if they come in in line with expectations, given just how poor the French, Spanish and Italian figures were only a few months ago.

It also highlights the fact that the other countries are falling more in line with the eurozone’s powerhouse, Germany. With industries in all now contracting at a similar rate, they may be able to come up with a solution that’s mutually beneficial.

Following this we have the release of the CPI figure and the unemployment rate. Both of these are going to be extremely important when it comes to the ECBs rate decision on Thursday. Despite the fact that unemployment is already at all time highs for the eurozone, and expected to rise again to 12.3%, I expect the ECB will leave policy unchanged on Thursday, especially if inflation rises for a second month to 1.5%.

The ECB is not going to want to rush into a decision like this, especially with inflation on the rise. When rates were last cut, inflation was falling rapidly and there was a lot of hints from policy makers and politicians in the week or so before the announcement, and we have not seen that yet.

In the UK, the manufacturing PMI is expected to remain in growth territory for a second month, at 51.3. This is a very positive sign for the UK, given the amount of time it’s spent in contraction territory over the past couple of years. In fact, we haven’t seen two or more consecutive months of growth here since this time last year, and that was the only time in the last two years that we’ve had that.

Staying with the UK, today is Mark Carney’s first day as Governor of the Bank of England. The new Governor doesn’t have long to settle into his new role though, with the next meeting of the MPC taking place this Thursday. No change in rates or asset purchases is expected at this meeting, however we can’t count out some kind of forward guidance in relation to interest rates, especially given that Carney has favoured this policy in the past. Now it’s just a case of whether he can sell it to the other policy makers.

Finally today, it’s over to the US for the release of the official manufacturing PMI and the the ISM manufacturing PMI. Both are expected to be in growth territory at 52.4 and 50.1 respectively.

Ahead of the open we expect to see the FTSE up 5 points, the CAC down 9 points and the DAX down 37 points.
 
Technical Analysis from Alpari UK on 1 July 2013

EURUSD

The euro is continuing to find solid support around the key 1.30 level this morning, having already found support here for the last three days. This can be taken one of two ways. Firstly, there’s clearly a lot of buyers at this level, given the inability of the market bears to force a close below here, which may suggest the pair looks bullish. On the other hand, the pressure on this level has been continuous, which suggests there’s still plenty of traders that are looking to break this level and force a significant move lower. The fact that this is also the 61.8 fib level adds more significance to a break of this level as it would suggests that the recent downtrend is in fact a reversal of the uptrend which began at the start of April, rather than a retracement. With the pair also finding strong resistance to the upside, around 1.3075, from the 50 and 200-day SMAs, as well as the 50 fib level, the direction of the pair in the medium term will probably be decided by which level breaks first.

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GBPUSD

Sterling is trading higher against the dollar this morning, after finding support at the end of last week from the descending trend line that it broke above on 5 June. The pair is also finding support here from the 61.8 fib level. A break below here would be quite a bearish signal, while a failure to break this level would suggest there’s a bullish bias in the markets. The pair is currently oversold on the daily chart, which would support a push higher, at least in the short term.If we do see a move higher, the pair should find resistance around 1.5221 and 1.5234, from the 50 and 61.8 fib levels on the 4-hour chart. Above here it should find further resistance around 1.5270, where the descending trend line, dating back to 19 June intersects a previous level of support and resistance. If we see a move lower, the pair should find support around 1.52, followed by 1.516 and 1.5135.

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USDJPY

The dollar is pushing higher against the yen again this morning, as the pair closes in on 100 for the first time since breaking back below here at the start of last month. It opened above the 50-day SMA this morning, after finding strong resistance here last week. The next level of resistance will come around 100 from the 61.8 fib level. This was also previously a major level of resistance. If we do see a break above here, it would be very bullish for the pair, with the next level of resistance coming around 100.70. Alternatively, given how strong the rally has been recently, and the fact that the stochastic on the daily chart is showing as overbought, we could see it pull back from here. If we do, it should find support around 99.50, followed by 99.25 and 98.75.

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US Opening Call from Alpari UK on 1 July 2013

Europe off to a positive start, US manufacturing data up next

Today’s US opening call provides an update on:

* Chinese manufacturing slowdown adds to growth concerns;
* Eurozone PMIs largely positive as Spain avoids contraction;
* Eurozone unemployment revised significantly lower;
* US manufacturing in focus this afternoon.

European equities are back in the green this morning, following the release of some encouraging figures out of the eurozone and the UK.

The day got off to a shaky start over night, when both the HSBC manufacturing PMI and the official PMI fell in June, adding to concerns about Chinese growth this year and next. The ongoing cash crunch in China, along with falling external demand, is already expected to have a negative impact on growth. The fact that these figures are heading in the wrong direction goes some way to confirming these fears.

While these figures both suggest that a slowdown in China is likely, there is a very key difference between the two. The official PMI shows that the industry is growing, while the HSBC figure suggests otherwise. Given that there are many who believe the official Chinese figures are unreliable, then based on the HSBC data, there could be much more pain to come.

Things are looking much better for the eurozone, where most PMIs showed a significant improvement in June. Spain’s progress has been the most impressive, moving from deep in contraction territory in March to avoiding contraction in June. This is the first time it has not contracted since April 2011. Things also continued to improve for the UK, with the manufacturing PMI rising to 52.5, much higher than expectations and last month’s figure. It’s also the first time we’ve seen three consecutive months of manufacturing growth since the start of last year.

Eurozone unemployment has also been a real positive point this morning, after April’s figure was revised down 0.2% to 12%, although this did rise to 12.1% in May. This is still well below expectations of 12.3% and suggests that the decay in the eurozone may be slowing and it may be finally turning a corner.

The focus for the rest of the day is now going to switch to the US, where we have more manufacturing data due. An improvement in both the ISM PMI and the official PMI is expected here, with both remaining comfortably in growth territory.

Ahead of the open we expect to see the S&P up 10 point, the Dow up 92 points and the NASDAQ up 18 points.
 
UK Opening Call from Alpari UK on 2 July 2013

Markets expected to open lower ahead of UK construction PMI

Today’s UK opening call provides an update on:
• European equities expected to open lower
• Australian interest rate remains at 2.75%
• Spanish unemployment expected to fall
• UK construction PMI second consecutive month of growth
• US factory order figure predicted to improve

A mixed morning for the markets, as Europeans equities are expected to open lower despite the Japanese Nikkei continuing to advance higher. A comparatively quieter day today from an economic release standpoint, with markets focused upon the RBA decision to hold rates steady, along with the upcoming UK construction PMI and Spanish unemployment figures.

European markets are expected to open lower today, off the back of strong gains seen yesterday. The ability of markets to rally globally yesterday morning, against a backdrop of a worsening Chinese manufacturing sector, provides evidence that we have moved back into a more bullish period. The ability of markets to rally on both good and bad news provides increased credence to the notion that we are set to return to the kind of bullish market sentiment which saw the creation of highs seen back in late May.

However, today appears to be one of consolidation after yesterday's gains, paring some of that upside before a further push higher. Taking a look to the Japanese market, the Nikkei 225 is beginning to look increasingly isolated in it's activity despite previous clear linkages between the overnight performance of this key Asian market and the subsequent open of markets within Europe. A shift seems to be in place where previously Europe took its lead from Japan, moving in a similar direction, albeit with a more muted rate. However, this correlation appears to be waning somewhat, with the Japanese becoming increasingly isolated in it's activity and able to rally despite global markets looking lower for the day.

This morning we had the latest interest rate decision from the RBA which decided to hold the headline rate at 2.75%. Australia has suffered significantly over the recent period, with the deterioration of both export prices along with export recipients, in the form of China. This was highlighted clearly yesterday, with the release of Chinese manufacturing PMI data pointing to a deteriorating environment along with export price deterioration of -10.5% against this time last year. Subsequently, there seemed to be an increased chance that RBA governor Glenn Stevens was set to reduce this rate today as a means to further deteriorate the value of the Australian dollar. This was not the case and may provide some stability for their ever weakening currency going forward. That being said, I do expect the RBA to serious consider a rate reduction to 2.5% next month.

Later today, Spanish unemployment is expected to fall for a fourth consecutive month, with a reduction of around 83,500 expected for June. This comes off the back of a strong manufacturing PMI figure yesterday and serves to portray the Spanish economy in an increasingly positive light. Given the previous conjecture surrounding the perceived innate weaknesses within the Spanish economy personified by rampant unemployment, a strong figure today would highlight the strides that has been made in the country over the past 12 months.

Later in the day, the construction PMI for the UK is released, which is expected to remain in growth territory for a second month. Like with the manufacturing PMI yesterday, it's very rare that the construction PMI remains in growth territory, so a figure above 50 today would be a very encouraging sign for the UK economy after what has been a largely positive second quarter. The construction PMI has outperformed expectations on the past two occasions, along with the manufacturing and services figures. Given yesterday's strong manufacturing PMI release, there is high expectations that we may see today's number also come in above expectations for the third consecutive occasion.

Over in the US, the focus is going to be on the May factory orders figure, which is expected to increase by 2.1%; an improvement over April's 1% figure. This would provide a boost given the last time we saw two consecutive months of growth was over six months ago. That being said, this figure has disappointed on the past two occasions and thus markets will be wary of another beat. Furthermore, given the regular movement into and out of expansion, the volatility provides markets with less reason to follow this figure as a key indicator of economic performance.

European markets are expected to open lower, with the FTSE -5, CAC -1 and DAX -14 points.
 
Technical Analysis from Alpari UK on 2 July 2013

EURUSD

The euro has had a positive start to the week against the dollar, however just as we saw last week, it’s facing significant resistance again around 1.3065, from both the 50 and 200-day SMAs. Just above here we also have the 50 fib level, of the move from this year’s lows to last month’s highs, that it broke below last week. The pair appears stuck now between the resistance here and the 61.8 fib level below that has been a solid support over the last four days, around 1.30. Over the next couple of months, I expect the pair to remain in a range between 1.30 and 1.34, before eventually breaking to the downside. That said, this may come sooner and just depends on who wins the current tug of war between the bears trying to push the price below 1.30 and the bulls trying to push it above 1.3065. With traders likely to be cautious ahead of the ECB rate decision on Thursday and the US jobs report on Friday, we may have to wait a few days for this move, with the pair continuing to trade in the 1.30 – 1.3065 range in the meantime.

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GBPUSD

Sterling is trading higher against the dollar this morning, after finding support once again around 1.52, where the descending trend line that it broke above on 5 June intersects the 61.8 fib level. The gains in the last 24 hours in the pair have been minimal though which suggests, as with EURUSD, that traders are acting with caution ahead of the BoE meeting and US jobs report later this week. We could continue to see the pair push higher in the coming days, although it is currently finding resistance from the descending trend line, dating back to 19 June highs, which is limiting any move to the upside. If we see this resistance broken, it should trigger a move towards 1.5275, a previous level of support and resistance, followed by 1.53, where it should find resistance from another descending trend line, dating back to 17 June highs. If instead we see a break below the 61.8 fib level, the next support should come around 1.5150, a previous level of resistance, followed by 1.5120, from the ascending trend line, dating back to this year’s lows.

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USDJPY

The dollar rally over the last few weeks has seen this pair climb around 600 pips, before inevitably finding strong resistance just below 100. Not only is this a previous level of resistance, it’s also the 61.8 fib level, of the move from May’s highs to last month’s lows. There was never really a doubt that this pair would reach 100 again, especially once the Fed hinted at tapering, which is positive for the dollar. It was always about how the pair would react to the 100 level. In the longer term, I do think we’ll see this level broken. However, before we see this, we may see another retracement, following such an aggressive move higher. If we do see this, then the next major support levels will come around 99 and 98.50, previously key levels of support and resistance. A break above 100 should see the pair find resistance around 100.50, followed by 100.80 and 101.40.

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US Opening Call from Alpari UK on 2 July 2013

Traders risk averse ahead of volatile end to the week

Today’s US opening call provides an update on:

  • Economic calendar looking pretty thin ahead of a busy end to the week;
  • RBA keeps interest rates on hold but talks down the currency;
  • UK construction grows at fastest pace in a year;
  • Spanish unemployment falls at fastest rate since before the financial crisis.

European indices are trading in the red across the board on Tuesday, as traders turn more risk averse ahead of what is going to be a volatile end to the week.

There was a lot of economic data out on Monday, most of which was quite encouraging, sending equity markets higher. The economic calendar today though is looking pretty light by comparison, with factory orders in the US the only noteworthy release. As a result, there’s likely to be an element of caution in the markets today, with US employment figures due tomorrow and Friday and two major central bank meetings on Thursday.

The Reserve Bank of Australia rate decision over night came as no real surprise to the markets, although the comments from central bank officials in the statement did a good job of talking down the currency. Officials claimed that the Aussie dollar was not cheap, which prompted talk that the RBA could be prepared to cut rates again in the coming meetings.

Talking down the currency is something we’ve seen on numerous occasions by central banks, with ECB President Mario Draghi doing it better than most. This may be the tactic for the RBA over the next couple of months, despite the aussie falling more than 13% since April. I still think we could see another rate cut from the RBA as early as next month, given the ongoing slowdown in China and the collapse in commodity prices. It’s only a matter of time before the aussie breaks below 0.91 against the greenback and targets the previous lows around 0.88.

The UK economy is continuing to show signs of a recovery in 2013, with growth now expected to rise from 0.3% in the first quarter to around 0.5% in the second. This morning it was the construction PMI which gave investors reason to be optimistic about the UK, rising to 51.0 in June, the highest level since May last year.

It was also another good day for Spain, after seeing its manufacturing PMI move out of contraction territory for the first time since April 2011, yesterday. Today, official figures confirmed that the country’s unemployment fell by 127,200 in June, the biggest drop in the figure since before the financial crisis began.

Looking ahead to the rest of the day and the focus is going to be on the factory orders release in the US. We’ll also hear from Jerome Powell, an FOMC voting member, which is likely to followed closely, especially ahead of the US jobs report on Friday.

Ahead of the open we expect to see the S&P up 3 point, the Dow up 19 points and the NASDAQ up 9 points.
 
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