S&P is flirting with trend resistance – EURUSD with engulfing patterns

On Thursday, European stocks lost for second day in a row and looks to end the week with a loss for the second week in a row. Especially Financial and Utilities have been under pressure. In the US, markets are also looking fragile, but the S&P is resilient and flirting with trend resistance projected from the all-time highs. US main indexes lost 0.1-0.3% yesterday and Asia has followed suit with the Nikkei down 0.4% and ASX down 0.8%. China is closed for public holiday. In FX, the US Dollar strengthened for the first day in five and there are reversal patterns in most majors – EURUSD and AUDUSD with engulfing patterns while USDJPY could be showing more upside with hammer from yesterday.

Commodities markets took a step back with the higher USD, and oil is back below $50/barrel. Gold spot continues on the bid and looks to take home its second week of gains.

EURUSD and AUDUSD engulfing patterns

20160610 AUDUSD.Daily 20160610 EURUSD.Daily

Europe gapped lower on the opening on Friday despite decent German inflation figures as well as a positive surprise in the French Industrial Production. DAX looks to make the third daily loss, but still some room down to next support at the 38.2% fibo retracement in the wave from Dec 2015 – 2016 highs.

GER30 Daily

20160610 GER30Daily

From the UK, Inflation Expectations came out at 2%, which is higher than the previous 1.8%. Cable is under pressure and is showing a daily wedge, which could narrow ahead of the Brexit referendum on June 23. We recommend being cautious with position sizes in GBP-pairs due to the conditions and as we get closer, margins requirements will be increased, which will affect the liquidity and increase trading risk. The FTSE is back in the range between the 50- and 100-day SMAs with a bearish bias, which could be extended at a close below 6150.

The US session should open on a relatively quiet note, but we have event risk in the CAD as May Employment figures are released. Consensus point towards an unchanged unemployment rate at 7.1% with an Employment Change of 3.8k from -2.1k in April. USDCAD has found a short term bottom at the 1.2650-area, but should we see better figures, coupled with bids in oil prices, the down-trend will be reignited. Given the current fragile risk scenario, we would buy on dips towards support.

USDCAD Daily

20160610 USDCAD.Daily

From the US, the Michigan Consumer Sentiment data will be released at 16CET. Overall, the indices are expected to drop, but still stay elevated. The market is set up for negative figures, so the surprise would be to the upside in risk should the figures come out better than expected.

Next week will be key for the summer, as we have important data from China as well as the FOMC meeting on Wednesday, revealing the FOMC’s stance on the current monetary outlook and will show how the committee is positioned internally as well.

Have a nice weekend

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