Tuesday July 6th, 2021

The US$ and oil prices trade higher, while equity markets and yields dip as markets await US service PMI results. The US ISM Services Purchasing Managers Index is expected to show a moderate decrease to 63.5, but the number still reflects robust US growth. A quickening US recovery keeps the Fed tapering discussion in focus and investors will be looking for more clues on the Feds direction with the release of the Fed minutes on Wednesday. In other news, Australia’s central bank tapers its QE but reaffirms its lower rates outlook. Eurozone retail sales rebound more than expected in May. US WTI oil hits nears 7-year highs after OPEC+ talks end. In the currency markets, Chinese Yuan trades holds steady as markets await the Fed minutes. Australian dollar rallies after the central bank announces its tapering. CNY is flat while Asian currencies are down 0.25% on average vs US$. Trading currencies remain strong with MXN is flat, ZAR & JPY are up 0.15%, AUD strengthens 0.65%, NZD rallies 0.8% while the outlier NOK falls 0.4% vs US$. Focus remains on today’s US PMI for intraday direction ahead of US Fed minutes Wednesday.

Crude prices continue to strengthen with US WTI testing near 7-year highs after OPEC+ producers disagree over plans to raise supply in the face of rising global demand. OPEC talks on Monday extended, then broke down without conclusion and no date has been set for resuming negotiations. C$ holds on to Mondays gains finding support from strengthening oil prices and from the BoC Business sentiment which continues to improve as reopening continues across Canada. No Canadian data out today, so focus will remain on oil and US data for intraday direction. Support resets at 1.2300, resistance at 1.2450.

Euro drops from intraday highs amid a strengthening US$, Delta variant and mixed German data. The US$ bounces off its lows as the US returns from their 4th July celebrations and markets await the Fed minutes on Wednesday. Eurozone rebounded more than expected but German ZEW figures came out with mixed results. The Delta variant continues to expand across Spain, Portugal and is now entering Germany with markets increasing worried of fresh lockdown measures. Support rebounds to 1.1825 while resistance holds at 1.1925.

EURGBP edges weaker and tests the .8550 support level as the rising delta variants across Europe adds pressure to the Euro. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).

GBP weakens into the US opening amid Brexit and a strengthening US$. The Brexit pendulum continues to swing, and the EU is threatening legal action over disagreements related to the Northern Ireland protocol. The UK PM announces “Freedom Day” will go ahead on July 19th, with England ditching their covid restrictions. GBP remains vulnerable to further weakness ahead of US Fed minutes. Support holds 1.3790 while resistance resets to 1.3925.