The dollar has started the new trading week slightly on the backfoot, with a slightly improved appetite for risk forming this morning. After causing a stir last week on a pause in its vaccination trials, the AstraZeneca/Oxford University collaboration for a COVID vaccine has resumed. Although there has been little real move through bond markets, there is a mild improvmenet in equity markets and the dollar is slipping back. This move may be tempered due to comments from Repbulican leaders over the weekend that suggested a fiscal package agreement seemed to not “look that good right now”. Having digested a dollar rebound and equities decline in recent weeks, broad markets have begun to form ranging conditions in recent sessions and this looks set to continue today.
Wall Street closed a mixed session just a shade higher on Friday with the S&P 500 +0.1% higher (at 3341). US futures are though pulling decisively higher with the E-mini S&Ps +1.1%. Asian markets were higher overnight with the Nikkei +0.6% and Shanghai Composite +0.3%. European markets look towards mildly positive early moves with FTSE Futures +0.1% and DAX Futures +0.4%. In forex with a better feel to risk appetite today, we see USD slipping slightly across major pairs, with NZD and GBP stronger. In commodities the weaker dollar is helping gold and silver to find support, whilst after a phase of recent selling pressure the oil price is also beginning to look a shade more stable with gains of just under half a percent.
There are no major announcements on the economic calendar today. However, there will be interest for sterling traders in the Bank of England’s monetary policy hearing before the Treasury select committee with Governor Bailey speaking during the European morning.
Chart of the Day – AUD/USD
This is a key crossroads for the Aussie. A corrective slip over the past couple of weeks from 0.7415 has unwound the market to the latest breakout support around 0.7240. The fact that this is also a confluence of the three month uptrend support (today also at 0.7205), makes this an even more significant basis of support for the medium term outlook. A closing break back below last week’s low of 0.7190 would be a signal for further correction. We also note the 14 day RSI has not been below 50 since the recovery really got going in April makes this also a key signal to watch as weakness has consistently been bought into. There is a key band of support 0.7060/0.7240 which would be a neutral zone for the market, whilst below 0.7060 turns the market decisively medium term corrective. Bulls will be looking to hold positions above 0.7325 (last week’s high) to generate positive momentum to test 0.7415 once more.
A rather choppy phase of trading for the euro has just begun to show signs of stabilisation. Three positive closes in a row have come to firm the support around 1.1750 with the late August lows and the four month uptrend. With the RSI turning higher again around the 50 mark this is a move that can still be considered to be an unwind within a broad uptrend. For this to continue the support of 1.1750 needs to hold now. Losing support would test 1.1695 as the key medium term support and at that stage a corrective drift could turn more considerable. Hourly indicators reflect the near term minor improvement but needs to now move to hold initially above 1.1880 but then a close above 1.1915 is needed to generate sustainable improvement again.
Thursday’s decisive decline was the latest in a line of deteriorating chart factors for Cable. Having broken 1.2980/1.3000 the market has rapidly retreated to the next key band of support between 1.2650/1.2810. Cable has lost its bullish outlook and is now in a medium term neutral zone. If support at 1.2650 is broken then a much deeper move lower can be expected. The bulls need to be careful as the near term drive lower may have stalled in the last couple of sessions but there is nothing that suggests renewed buying pressure around here. A near two week trend lower is around 1.2980 today and a move back into the 1.30s is needed to suggest the bulls are regaining control. The coming days will be crucial for the medium term outlook.