June 9, 2017 - Market Update

Short recap

Asia mixed

Europe opening highe but correcting

Risk on or Risk off now?

ECB sees higher grow, lower inflation (2017-19), risks balanced

No further rate cuts but also no change in policy, no taper talk at all

Trump survived Comey’s testimony as nothing was revealed

North Korea playing with fire again

US labor market keeps shrinking

Equities

ECB’s very dovish stance to further support EZ equities (rates lower for longer)

ECB boosting peripheral assets on the back of some bubbles in the core

Especially peripheral financials to benefit

Deutsche Bank can not share information about Trump’s financial dealings/ties with Russia

Credit Suisse to say thank you 1.5k employees in London

Julius Bear hit by soccer bribery issue

EU banking to face consolidation as the weaker institutions (due to negative ECB rates)

Will be target by their stronger peers (case of Santander acquiring Banco Popular)

UK financials to suffer on elections outcome/Brexit talks

Bonds

10-yr Trys yield at 2.19% - slowly moving higher

10-yr Bund yield at 0.25% - slowly moving lower on very dovish ECB, no rush to tighten policy at all

UK yields moving higher on after election mess

DXY

Lately seen too much dovishness about FOMC what may change with Comey off the table

Support at 96.44 (38.2% Fibo)

Resistance at 97.85 (50% Fibo)

EURUSD

Very dovish ECB to keep pressure on EUR

But had no impact on EUR yesterday likely due to capital flows to EU assets

Mega-option expiries today to anchor-bracket (according to Reuters):

1.1100 E8.7 bln, 1.1150-60 2.64 bln, 1.1185 1 bln, 1.1200-10 1.56 bln

Also 1.1220-25 1.4 bln, 1.1250 4.07 bln, 1.1270-75 714 mln, 1.1300 1.17 bln

Resistance at 1.1200, 1.1227 (10 DMA), 1.1284, then 1.1300

Support at 1.1180 (23.6% Fibo)

Likely to focus on 1.1114 (38.2% Fibo) ahead of 1.1062 (50% Fibo) and 1.1009/00 level (61.8% Fibo)

USDJPY

Heavy resistance at 110.47 (200 DMA), 110.50 (61.8% Fibo)

Support at 109.60 (76.4% Fibo), then at 108.12

Decent support from options around 110.00 area (USD 2.38 bln expiring)

GBPUSD

Upside limited on election results and Brexit talks

Brexit talks are messy but after elections will be very messy

Putting further pressure along with a massive current account deficit on GBP

In other words 1.2500 and even 1.2000 can be reached easily

Support at 1.2688 (38.2% Fibo), 1.2618 (100 DMA) and 1.2576 (200 DMA)

…but getting the soft Brexit will be GBP positive

EURGBP

0.8850 in sight

Gold

Resistance at 1286 (76.4% Fibo)

Support at 1255 (61.8% Fibo) and descending trendline

Upcoming Data/Events

ECB’s Linde (1030 GMT)

June 11/18 – French Legislative (Parliamentary) elections (a big question mark for Macron to gain majority)

June 13/14 – FOMC meeting – China PPI correlated to PCE, lower number having any implications for Fed next week?

Lower PPI means reflation trade is fading away

June 15/16 – EcoFin meeting to discuss Greece

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

Good luck Champs!

Mr Hawk

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