European Open: BOC to Potentially Kick-Off Market Moving Events

It’s been a slow week for most equity markets (and currencies alike) but hopefully that can change with the first major central bank meeting of the week.

Canada


Asian Indices:

  • Australia's ASX 200 index fell by -6.3 points (-0.09%) and currently trades at 7,286.30
  • Japan's Nikkei 225 index has fallen by -95.76 points (-0.34%) and currently trades at 28,866.34
  • Hong Kong's Hang Seng index has fallen by -29.16 points (-0.1%) and currently trades at 28,752.22

UK and Europe:

  • UK's FTSE 100 futures are currently down -8 points (-0.11%), the cash market is currently estimated to open at 7,087.09
  • Euro STOXX 50 futures are currently up 4 points (0.1%), the cash market is currently estimated to open at 4,100.01
  • Germany's DAX futures are currently up 8 points (0.05%), the cash market is currently estimated to open at 15,648.60

US Futures:

  • DJI futures are currently down -30.42 points (-0.09%), the cash market is currently estimated to open at 34,569.40
  • S&P 500 futures are currently up 11 points (0.08%), the cash market is currently estimated to open at 4,238.26
  • Nasdaq 100 futures are currently up 1.5 points (0.04%), the cash market is currently estimated to open at 13,812.36


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Asian indices mixed, futures point slightly lower

It was mixed overnight for Asian equities with Taiwan’s TWII index leading equities lower by -0.9% as lockdowns were extended and concerns over chip shortages remain. The KOSPI 200 also tracked it lower by -0.8%. The ASX 200 is on track to close flat after a rollercoaster. New highs above 7330 were short lived before rolling over and trade beneath the open, making it on track for a bearish hammer on the daily chart. Futures markets are pointing towards a relatively flat open for Europe and US.

Mining, travel and leisure stocks helped lift the FTSE 100 to a 0.25% gain yesterday, yet a few mixed signals remain on the daily chart. A bearish hammer formed, again showing a lack of conviction from bulls who are still looking at the bullish breakout from the triangle (this continues to look less likely each passing day). However, prices remain above their 10 and 20-day eMA.

Prices closed around yesterday’s POC (point of control) so prices me be a little ‘sticky’ around this level, making it a less-than-ideal entry point for either direction. Intraday support is around 7088 and 7074, where a break beneath the latter would confirm yesterday’s bearish hammer and potentially trigger some follow-through. Whilst intraday resistance is around 7115 and the 7120 – 7122.54 highs, we’re not convinced the appetite is there to break above them from the bull-camp.

FTSE 100 S/R Levels

  • R2: 7120 - 7122
  • R1: 7115
  • Pivotal: 7098 – 7102.50
  • S1: 7088
  • S2: 7032 – 70402
  • S3: 7013.85


FTSE 350: Market Internals


FTSE 350: 7095.09 (0.25%) 08 June 2021

  • 175 (49.72%) stocks advanced and 159 (45.17%) declined
  • 38 stocks rose to a new 52-week high, 2 fell to new lows
  • 86.36% of stocks closed above their 200-day average
  • 25% of stocks closed above their 20-day average

Outperformers:

  • + 29.74%   -  Thungela Resources Ltd  (TGAJ.J) 
  • + 11.23%   -  Paragon Banking Group PLC  (PAGPA.L) 
  • + 5.89%   -  Intermediate Capital Group PLC  (ICP.L) 

Underperformers:

  • -4.83%   -  Hochschild Mining PLC  (HOCM.L) 
  • -3.47%   -  CMC Markets PLC  (CMCX.L) 
  • -3.22%   -  IWG Plc  (IWG.L) 


Forex: Razor thin ranges, BOC in focus

Currency ranges have been painfully thin as traders await the bulk of meaning full market-moving news to start later today.

BOC expected to hold rates but the focus on is whether they will taper again today. I suspect they’ll hold off until at least the July meeting, given employment data has stalled and GDP was softer than expected. And there probably is no rush to intensify their hawkish stance they were the first central bank among major economics to take the hawkish plunge. Looking forward, Canada’s rapid rollout of their vaccination program and reduction of new Covid cases should help incoming data as we head towards their July meeting. And maybe we’ll get that taper. The downside to this scenario is that volatility may be lower on CAD pairs than we’d like it to be today. Hopefully, I’m completely wrong on that.

We mentioned in today’s Asian open report that traders are slowly moving back towards the Swiss franc ahead of the BOC/EDB meetings and US CPI. This has helped to lift CHF/JPY from the support zone mentioned in yesterday’s Asian Open report and form a Morning Star (3-bar reversal) pattern on the daily chart. 121.90 will hopefully provide further support today.


GBP/JPY remains in a corrective phase of a bullish trend on the daily and four-hour charts. But perhaps that corrective phase is nearing completion. Prices have retraced lower from 156 and formed a double bottom pattern above 154.45 support and the 100-bar eMA. A bullish engulfing candle materialised three bars ago and prices are now hovering near yesterday’s high to suggest a swing low is in place.

And if we step back and assess prices action, each burst higher is connected by a series of sideways/corrective phases similar to what we have seen since prices peaks in May. Should prices break convincingly above yesterday’s Doji our bias will remain bullish above 154.45.


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Commodities:

Oil prices continued higher overnight thanks to strong fuel demand in Europe. WTI futures extended gains after closing just above $70 yesterday and now trades at its highest level since October 2018. However, a bearish pinbar is forming on the four-hour chart, so a dip back towards $70 wouldn’t be a major surprise. Brent futures are now at their highest since May 2019 with its next support level around 72.00 and 70.80.

Platinum futures are grinding lower but not at the pace we originally envisaged. Our bias remains bearish beneath the 1217.60 high and a smallish bearish engulfing candle formed yesterday, closing below the 100-day eMA. A break below 1140 assumes its next leg lower is underway.


Up Next (Times in BST)


You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.

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