Market Update - July 1

Major forex and equity indices remain stuck on a see-saw of risk-on/risk-off as a lack of conviction has taken over in recent sessions.



Depending upon how the wind blows, there is consideration of the bearish factors of second waves COVID-19 infections versus the more bullish positioning for continued stimulus from central banks and governments. However, the feeling is that the risk recovery of Q2 which drove record gains on Wall Street. However, in the past couple of weeks, uncertainty has crept into markets, The US dollar has gone almost nowhere over the past week and this is reflected across the outlook of consolidation across major forex pairs. One market is though making ground, with the breakout on gold to multi-year highs. Can this be sustained? In the past 24 hours we have seen Treasury yields starting to pick up once more and a mild yield curve steepening. This tends to come with more positive risk environment, which is good for equities but less so for gold. The PMI data and crucial US jobs data in the coming days could be key to whether this improvement in yields continues. Initial signals from the Chinese PMIs are positive and it will be interesting to see if this continues with the European data and ISM later today.


GBPUSD




GBPUSD has reversed higher from the 25 line of the trendline from the September low. Initial focus is the underside of former trendline support. A pullback from 1.2400 (now) seems likely with the 200 hour average and short term trendline in the way.  Proposed support is 1.2314/35.


EURGBP




If Cable is REALLY bullish, I can make the bullish case for GBP crosses in general.  EURGBP, for example, sports 5 waves down and 3 waves up since the March high. The 3 wave rally retraced almost exactly 61.8% of the 5 wave decline. .8980-.9000 is the breakdown zone. Otherwise watch for recovery in EUR as brexit and Covid uncertainty weights down.


Good Trading,

Dom

UPDATE


Trades Examples - July 1





Dominik Stone

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