Market Update - June 17

The risk recovery is once more approaching an intriguing crossroads. The bullish forces of ever greater stimulus from central banks (this week the Fed and BoJ have expanded their range of support) are being met by the bearish threat of second wave COVID-19 infections in Beijing.

Wall Street has certainly felt the benefit of the Fed announcement on corporate debt purchases, but this positive mood is being tempered somewhat as China has announced it is raising its emergency response in Beijing back to level 2, closing schools and cancelling flights. There is a very real concern that if these infection rates cannot be kept under control, it would be the source of fear back into markets. How the newsflow develops in the coming days could be crucial.

However, slightly tipping the balance to the risk positive side of the equation, rumours of a $1 trillion package of support measures being formulated by the US Government, including infrastructure spend and employee support. The announcement of this could once more boost confidence in the US economic recovery. So this morning, we see a state of calm and consideration across major markets. US futures tick mildly higher, but there is and edge back lower on yields. Forex majors show an edge of risk positive, but recent sessions have seesawed for the dollar (both on a closing basis and intraday). UK inflation coming in a shade softer than expected on CPI (and weaker on PPI) has been a drag on sterling early today.

AUDUSD completed its flat pattern described yesterday.6900 was midday resistance and I’m looking for that level to hold because it’s defined by the center line of the channel from the April low, which was resistance multiple times in May. Focus is on .6715 (2 equal legs down and the bottom of the short term bearish channel).

EURUSD failed in the cited zone (high was 1.1353) and focus is lower as long as price is below yesterday's high. 1.1120 is extremely well-defined from a slope perspective.  It’s also the month open! That’s the short term bearish target and may be where we end up flipping long. Watch for resistance now at 1.1280/90.

Good Trading,


Dominik Stone

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