It's (Probably) Coming Home! + Daily Market Outlook

K, a very good morning to you, and I'm sure you saw the game last night. Scenes like this, Harry Kane putting in the rebound off his own penalty to take England into a major tournament final for the first time in 55 years. So as predicted actually by the Goldman Sachs probability model, you might have seen that emailed out to the community last last night. I've been tracking that and I'll be very keen to see what their model punches out now that England are going to be facing, of course, the mighty Italy in the final on Sunday. And to give you some stats there in terms of what that looks like between the competition between those two, England have won just one of the last 8 meetings against Italy. And that would— you'd have to go back almost 10 years, 9 years in fact, to August 2012, the last time that happened. So I don't want to make people um, nervous. But I would say put that to bed, that was history. This is a new team, this is a new moment, and it's coming home. Um, but one thing I would say is that the last two matches that they played more recently in friendlies have both finished in a 1-1 draw. And so could it all come down to penalties? Uh, and what a day that would be, particularly for Gareth Southgate, if that did play out in that way. But Yeah, amazing scenes last night, and the mood of the nation obviously lifted, and the mood of the market's pretty quiet as a byproduct of that. I'm sure there are a few people nursing some, some sore heads this morning, and markets are relatively quiet at the European Open today. A couple of things to get you up to speed on though, and starting from a chronological order, we closed on Wall Street last night positive across the board. Albeit we're just starting to see a little bit of weight come into some of the equity indices, um, and generally a bit of consolidation really up at these higher bound levels after we had that sell-off, uh, going back, um, 2 days ago. The recovery really that then followed thereafter into the close on Tuesday, and then we just kind of remained supported to a larger degree, um, through the period of yesterday's session. It's interesting, isn't it? You've got these V-shapes Um, again, that, that was prior to the open yesterday, same timing as yesterday, and we had that dip and then drive again, push up to all-time highs, becoming a fairly frequent pattern now in the S&P. But yeah, a little bit of weight has come in during the APAC session, but this has been quite common. And when we do get a further extension into the close on Wall Street, which has typically been met in the final 30 minutes of trade with some pretty aggressive buying. We kind of then just fade that move and peter out as Asia takes hold. And as far as Asia is concerned, there are a couple of different things. Hong Kong's underperforming on the back of the pressure on technology firms at the moment. Japan was a little bit lower in the local market, subdued with the virus state of emergency for Tokyo looking imminent. And then the Chinese yuan was a little bit weaker as well overnight. As well as their stock index being a little bit lower, but did find some reprieve on the fact that there were some reports circulating about China's cabinet floating the possibility of cuts to banks' reserve requirements to support economic growth. Reserve requirements being that mandatory capital being kept on their, the balance sheet to withstand through any economic kind of difficulties. So some talk of relaxation of that adds to generally easing putting more liquidity into the system. And so investors took the talk of cuts to the reserve requirement ratio, the RRR, as a kind of strong easing signal ahead of June economic data due next week in China, which is expected to follow the tone of recent data, which is slowing down a little bit further. And so that kind of offset some of the slight negativity in Asia overnight. And then Australia's New South Wales state, which has been in focus this week after rolling over that lockdown in Sydney, they reported its biggest daily rise in locally acquired cases of COVID-19 this year. Again, as the Delta variant, the more transmissible variant, continues to be the dominant factor there for that pickup in case rates. So yeah, that's it. Overall, Asia a little bit softer. Um, for those aforementioned reasons. And so a bit of profit taking from the highs in the US indices. Otherwise, you know, just looking at the NASDAQ, again, kind of relative consolidation here at these higher bound levels, as you can see. For the moment, the NASDAQ— I'd kind of look at the setup at this, that we are at pretty much all-time highs. And so really looking at this chart, I mean, there's so many good levels of support now, I think, on the downside. So unless something really definitive were to change, even if we did sell off, I think you'd be encountered by 1, 2, 3 good layers of support, which are typically classified by just these multiple inflection points. You can see resistance, support, resistance, support here again. And so even though short-term, um, the market's looking a little bit more vulnerable this morning given that Asia-Pac moved to the bottom end of this more near-term area of consolidation defined by 14772 at the low. And you've got the daily S1 with that lower level at 14729 will be a solid level, followed then by, um, just scaling that move back down using the price patterns of the incline that we've had on this fairly continuous move higher that we've seen in the likes of the NASDAQ. As far as the DAX is concerned, DAX future again a little bit lower, just in sync with the rest and the broader equity thing theme. But just looking here at the DAX, I mean, we are in and have been for the last 10 or 12 trading sessions basically a trading range. When you're looking at it from a slightly higher timeframe, this is on a 60-minute candlestick. So at the moment we're up towards the upper bound of that range. And so really, unless we start going to either side of that, coinciding and mindful of where those US indices are, I'll kind of be looking at it in that way, in a range-bound type activity. Currency markets pretty flat overall, not too much going on. The euro here just having a little bit of a pickup through late Asia and as Europe have come in just to retest up around its pivot, which as you can see was also that low that we printed from the other day around the 1.1821 mark. Cable trading down about 17 at the moment, but similar to the euro setup, a little bit of recovery just coming of late, but failing to really see too much in the way of definitive direction just yet. Yields in the US still remain lower, um, and that's irrespective of the fact that the, the dollar's still generally firmer, but the Dixie has weakened a little bit as Europe have come in. So you can see here we're getting continuation of that yield-related move, and we did have the FOMC minutes last night. What did they reveal? Well, just looking through these charts, I mean The minutes came out basically, uh, here, and as you can see, absolutely no reaction. And in fact, equities were the same. The dollar perhaps saw a little bit of reaction, but very tame to the actual minutes. And what did they say? Um, the Fed minutes indicated officials were not ready to communicate a schedule for scaling back their bond buying program due to the uncertainty over the course of the recovery. They did, however, want to establish a plan in case a move is needed sooner. But overall, they saw some progress toward the taper move, but uncertain on the inflation outlook as well amid upside risks. But the bottom line, I think, being that they weren't ready yet to see substantial progress to start communicating on tapering was, was one of the main take-homes. So perhaps, if anything, that could lend its hand to be slightly more supportive to this general move we've been seeing developing in yields of late. And then as far as the oil market is concerned, um, still have fairly choppy, just short-term here, going back to the price activity from yesterday afternoon, just forming a short-term trend line that's being tested here at the moment as prices gets, gets kind of wedged into this price pattern. Um, so keeping an eye there, any further rundown, then obviously you've got the, the initial low that was seen at 71.62. That was the overnight APAC low, and then yesterday's low comes in just above the 71 handle. One thing to be aware of, of course, we did have the delayed API— so this is the oil setup that I was just describing from the short-term price action from this morning that I'm just keeping an eye on here. So this is the current— this is yesterday's low, the APAC low where we're trading at the moment. Did have the API oil inventories last night did show a drawdown of 7.983 million, the 7th straight consecutive week of the drawdown being more than expected. Expectations were for a draw of just about half of that, really. Cushing, a build of 152,000. Gasoline draw, 2.736 million. Distillate build of 1 million. So again, looking at the oil chart, going back to half 9 when that came out, not really much in the way of a reaction, to be honest. And we're pretty much trading scratch from where we were prior to that coming out. So Again, the fact that drawdowns have been very common, the fact in context as well, the market's still much more focused and sensitive to the OPEC developments, I think has just kind of belittled that kind of number, irrespective of the fact that the drawdown was actually quite sizable to that respect. Otherwise, the other news that's come out from overnight— or last night, I should say— that might be of interest to you as an update is that policymakers at the ECB have agreed apparently to raise their inflation goal to 2% and allow room to overshoot it when needed. This is according to people familiar with the matter, because the confirmation of this ECB ongoing strategy review isn't due officially to come out until midday. And then the ECB president Christine Lagarde will follow that, follow that up with a press conference at 1:30 today. And then sandwiched in the middle, you've got the ECB minutes from their last policy meeting, also coming out at 12:30 today. A couple of thoughts then, just generally with what the ECB have done here. So they've said they've agreed to raise their inflation goal to 2% and allow room to overshoot it when needed. And the decision then is a change from their previous target of, quote, below but close to 2%, which some policymakers felt was too vague. So this revamped strategy, if anything, could give officials the justification for sustaining ultra-loose monetary policy because inflation, as we know, has pretty much undershot target for several years. And so does that give it reason to keep it lower to try and get it above target? And also, given the flexibility, that they could allow room to overshoot it as well. So that would be my overall take on that latest tweak. I wouldn't expect confirmation of when Lagarde comes out to have any kind of impact on the euro when that happens later on today. Final point on the oil market was— and this is that oil chart— and obviously in the context, oil has been quite under pressure, obviously from the fallout that we've seen from the various OPEC discussions that we've had. So having peaked up and around the highs earlier this week at around the $77 handle, we've now backed down to trade at $70 2 handle at the moment. So on a higher time frame, still susceptible a little bit perhaps to a pullback. On the broader context, 70 is the next key area of support. Short term though, there's obviously a couple of key levels here to look at for the last 24 hours. But Saudi Arabia's oil minister has reportedly conceded that the next OPEC+ meeting could take place no sooner than August, given the ongoing clash with the UAE stalling the group's output policy past July. So, um, it looks like that might be put off for the time being at least, but we continue to watch quite closely and remain vigilant because we know how erratic the communication strategy from OPEC can be, particularly when we're going through a period of friction like we're seeing at the moment. Um, okay, otherwise let's have a look at the calendar for today. What have we got? So pretty quiet, in fact, nothing really major coming out, out of the European morning, so to speak. We have just had then the German trade data come out. So get you up to speed on that. The trade balance headline surplus of €12.6 billion, but expected €15.4 billion. Exports 0.3% against 0.6% month on month. Nothing really too significant there, I'd say, in terms of to be aware of for any strategies this morning. So yeah, the calendar today is very quiet. You've got those ECB events happening later. So initial jobless claims, one of the main events coming out for this afternoon, and as you can see here, is expected to print at 350, which would be a new pandemic low from the 364 that was seen last week. The total number of claimants likely to decline further in the coming weeks. As well. So that positive trend likely to continue due to the early phase-out of those federal enhanced employment benefits across many states ahead of that official September expiration date. And as schools reopen and demand over the summer starts to pick up as well, getting more people back into work, naturally we should see a positive pattern continue here. So not— I don't think this number is going to be a particularly meaningful surprise even if it came in down at the lower end. Um, but something to look out for, of course, at 1:30. The DOE oil inventory numbers are later than normal, 4 PM instead of 3:30, of course, given the US holiday. So just be aware of that. Um, and we'll be recovering that, um, in full in the Amplify Live community, Tim, on the live stream, of course, this afternoon. Um, and that is it. Gonna leave it there. Um, well done again to the England football team. But the job is not done yet. The best is yet to come. And so it's coming home.