June 22, 2017 - Market Update (Harley Davidson buying Ducati, PIMCO on Chinese bonds, Frankurt to top London, Brexit laws blocked by Scots and Lords?, New US healhcare bill coming)

Short recap

Asia higher as oil found some ground

Europe mixed

German FinMin out with Frankfurt a good alternative to London

As ECB and banking oversight is there

Luring European Banking Authority there as well

Likely to cut taxes

PBOC not planning to shrink the balance sheet as Fed does

Macron – stronger integration of EZ to come (via common budget)

Brexit – getting tougher for May as Scottish parliament and House of Lords may unite with some MPs (Liberal and Labour) to block necessary Brexit bills

US pushing China to do more on North Korea

New healthcare bill is coming to life but watch the clash between Senate and the House

Equities

Ok to stay long equities on valuations but some macro worries appearing and volatility is extremely low

A time to buy protection going to lousy summer trading and position before wild Q3?

Harley Davidson eying to buy Ducati (belongs to Volkswagen/Audi portfolio) (EUR 1.5 bln)

Diageo buying tequila brand Casamigos (owned by George Clooney) for about USD 1 bln

Nike to sell directly on Amazon.com

RBC to cut jobs in order to push new technology

Cenovus having hard time to sell assets as oil prices are low

Wal-Mart and GM driving renewable energy sector as the largest buyers

Fed to release banks stress test results

Bonds

10-yr Trys yield at 2.15% - under pressure from falling oil and commodities

10-yr Bund yield at 0.26%

PIMCO on Chinese bonds:

Inverted yield curve pointing to stress (10 yr CGB yield dropped below 1 yr yield)

Result of tightening by PBOC and lower liquidity

Growth to decelerate into 2018

Stress in interbank market to be taken seriously

US high yield credit spreads widen on the back of stress in energy sector

That needs to cope with high debt (still growing) versus lower operating income from low oil prices

EZ bond yields diverge depending on the debt load (top EZ countries from lowest to highest)

Used to move in tandem

Germany, Finland, Netherlands, Austria

EURUSD

In the absence of data, the flows will be affected/limited by expiring options:

1.1000 (EUR 1.3 bln), 1.1090-1.1100 (EUR 1.87 bln), 1.1140 (EUR 423 mln), 1.1160 (EUR 800 mln) 1.1175 (EUR 2.2 bln), 1.1200-10 (EUR 1.7 bln), 1.1250 (EUR 2 bln), 1.1275 (EUR 660 mln) 1.1300 (EUR 74 5 mln)

Break of 1.1178 (10 DMA) to negate the trend lower

Next resistance at 1.1187 (23.6% Fibo)

Support at 1.1120/30, 1.1100 and then 1.1067 (50.0% Fibo)

USDJPY

Resistance at 111.24 (50.0% Fibo), 50 DMA at 111.15, 200 DMA at 110.85

Bidding interest on importers side on dips, while offers from exporters sit above 111.50

Stops below 111.00

Experiencing a strong correlation with real yields

Thus correction in US yields and oil higher to weaken the JPY

Expiring options will likely drive the market:

110.00-10 (USD 1.9 bln), 111.00-10 (USD 2.7 bln,) 111.50 (USD 690 mln) 111.80 (EUR 575 mln) 112.50 (EUR 1.7 bln)

Data/Events

EU Summit

ECB General Council meeting

ECB’s Hakkarainen (0820 GMT)

Fed’s Powell (1400 GMT)

Fri

Fed’s Bullard (1515 GMT), Mester (1640 GMT), Powell (1815 GMT)

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom