Happy Monday Y’all! Lets’ start with the weekend recap and then get to the week ahead.
Eurozone
Friday’s trading mood was brought down when the German IFO index posted, showing business sentiment to be at it’s lowest level in nine months. The reading hit the German stock market hard and in turn pulled down France and therefore Mr. Euro on the forex dance floor.
Traders in the UK that were expecting a better than expected Q2 GDP reading were also left disappointing. Initial readings came in exactly as forecast, with growth in the quarter at 0.8%, giving an annualized run rate of 3.2%. The market really needed to see something better after disappointing UK data earlier in the week led to Mr. British Pound getting knocked down on the forex dance floor. With the lack of an outstanding number, Pound remains under pressure and currently dancing sideways against Ms. USA (dollar.)
Israel & Hamas
Geo-political tensions continued over the weekend, with Hamas breaking a ceasefire in Israel. There is now talk of a 24 hour ceasefire for the Muslim holiday Eid al-Fitr, which started today. There is still no talk of any real solution though. A son of a Hamas founder spoke on CNN on Friday, revealing the truth about Hamas agenda, making us wonder if a true peace can ever be achieved considering these ideologies.
Ukraine & Russia
In Ukraine, the US have published satellite images that they say proves Russia is firing at Ukrainian forces. The escalation of accusations from backing the rebels to Russian troops directly engaging will almost certainly lead to tighter sanctions from the EU on Tuesday, who outlined on Friday the extended measures they would be taking against senior officials as well as Russian companies. The sanctions aren’t exactly a comprehensive sting to Moscow, as Europe have left out key areas, specifically technology for the gas sector.
Either way it’s going to hurt Moscow and there has been a lot of talk over how Russian corporates will manage with their bankers having such limited access to capital markets. Without access to the Dollar market, corporates won’t be able to issue US Dollar bonds and will instead be forced to issue Ruble bonds to finance their operations, something a global investor is going to be very apprehensive to want to purchase. On top of this, it is forecast that $161bn in foreign debt is due to mature in the next 12 months, which they will need to service with the limited currency reserves that they have. Mr Putin may be playing hard ball, but the economic odds are stacked heavily against him and his inner circle.
South America
In other markets, the FT reports that Brazil’s central bank is scaling back its capital reserve requirements for Brazilian banks to try and get some more liquidity into the system and boost activity. The measures announced on Friday could lead to an extra $20bn of available funding. The country is currently struggling with inflation at more than 6% and GDP growth at just a shade over 1%. The central bank therefore is stuck between a rock and a hard place (known as stagflation) and cannot reduce its 11% interest rate to boost economic activity for fear of inflation rising even further.
Brazil’s neighbor Argentina looks likely to go through their third default in as many decades this week when they aren’t able to service a $500m interest payment to a group of “holdout creditors”. According to the Wall Street Journal, Argentina have been running a campaign of vilification against the US Supreme court, who have ordered that the bond be repaid at full face value to those holdout creditors. Argentina now needs to weigh up whether taking a huge hit on its foreign exchange reserves by making a payout is more costly than defaulting again and locking themselves out of international capital markets in the future.
Week Ahead
Looking to this week; it’s the USA’s turn to post their initial reading on second quarter GDP. Analysts have written off Q1 in the US and will now be looking for signs of recovery across sectors in the second quarter, which is forecast to show a big bounce back. Also for the US, with Friday being the first day of August, we’ll get to see the Non-Farm payrolls report, so two big numbers to look out for and the Fed’s policy meeting too.
Europe has a mixed bag of data, with some individual GDP readings, retail sales data and business confidence statistics as well as some combined numbers for inflation, unemployment and economic sentiment. The UK has a pretty quiet data week, but there are some earnings releases from some large FTSE players, including Rolls Royce, BAE systems and the high street banks, so do expect some volatility.
Intraday Forex Technical Levels
EUR/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 1.3455 with targets @ 1.34 & 1.3375 in extension.
If pair goes nuts: Above 1.3455 look for further upside with 1.3485 & 1.35 as targets.
What’s up on the forex dance floor: The pair stands below its resistance and remains under pressure.
Supports and resistances:
1.35
1.3485
1.3455
1.3436 Last
1.34
1.3375
1.335
GBP/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 1.702 with targets @ 1.696 & 1.692 in extension.
If pair goes nuts: Above 1.702 look for further upside with 1.705 & 1.7085 as targets.
What’s up on the forex dance floor: The pair remains under pressure and ia challenging its support.
Supports and resistances:
1.7085
1.705
1.702
1.6983 Last
1.696
1.692
1.6885
USD/JPY Intraday: bullish bias above 101.65.
Invest Diva likes: Long positions above 101.65 with targets @ 102 & 102.15 in extension.
If pair goes nuts: Below 101.65 look for further downside with 101.4 & 101.15 as targets.
What’s up on the forex dance floor: The pair is rebounding above its support.
Supports and resistances:
102.3
102.15
102
101.825 Last
101.65
101.4
101.15
USD/CHF Intraday: the upside prevails.
Invest Diva likes: Long positions above 0.9025 with targets @ 0.9075 & 0.91 in extension.
If pair goes nuts: Below 0.9025 look for further downside with 0.9 & 0.8965 as targets.
What’s up on the forex dance floor: The pair is pulling back on its support ahead of further advance.
Supports and resistances:
0.9135
0.91
0.9075
0.9042 Last
0.9025
0.9
0.8965
NZD/USD Intraday: under pressure.
Invest Diva likes: Short positions below 0.8585 with targets @ 0.8495 & 0.847 in extension.
If pair goes nuts: Above 0.8585 look for further upside with 0.862 & 0.865 as targets.
What’s up on the forex dance floor: Even though a continuation of the technical rebound cannot be ruled out, its extent should be limited.
Supports and resistances:
0.865
0.862
0.8585
0.8555 Last
0.8495
0.847
0.843
AUD/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 0.9425 with targets @ 0.938 & 0.9355 in extension.
If pair goes nuts: Above 0.9425 look for further upside with 0.945 & 0.9475 as targets.
What’s up on the forex dance floor: A break below 0.938 would trigger a drop towards 0.9355.
Supports and resistances:
0.9475
0.945
0.9425
0.9404 Last
0.938
0.9355
0.9335
USD/CAD Intraday: further upside.
Invest Diva likes: Long positions above 1.077 with targets @ 1.0825 & 1.084 in extension.
If pair goes nuts: Below 1.077 look for further downside with 1.075 & 1.073 as targets.
What’s up on the forex dance floor: The RSI is bullish and calls for further upside. Prices are shaping a bullish continuation pattern (Bullish Flag).
Supports and resistances:
1.0855
1.084
1.0825
1.0816 Last
1.077
1.075
1.073
US Index Outlook
S&P500
Short positions below 1986 with targets @ 1959 & 1952 in extension.
Alternative scenario: Above 1986 look for further upside with 1992 & 1997 as targets.
Dow Jones
Short positions below 17070 with targets @ 16725 & 16660 in extension.
Alternative scenario: Above 17070 look for further upside with 17130 & 17190 as targets.
Nasdaq 100
Short positions below 3991 with targets @ 3909 & 3883 in extension.
Alternative scenario: Above 3991 look for further upside with 4017 & 4043 as targets.
Russell 2000
Short positions below 1162 with targets @ 1123 & 1112 in extension.
Alternative scenario: Above 1162 look for further upside with 1176 & 1194 as targets.
#1 Best Selling Author. Helping you accelerate your retirement with Triple Compounding™ Former engineer on a mission to help 1 million households take control of their finances. Founder & CEO of Invest Diva.
