With the US debt default disaster averted which has been largely priced by markets beforehand, central focus this week could possibly be shifted again to the US Fed charge outlook. Following one more stronger-than-expected learn within the US Might non-farm payroll, rate of interest expectations are discovering some conviction for the necessity of one other 25 basis-point transfer from the Fed in July, whereas views have additionally adjusted in the direction of a extra extended pause in charges this 12 months. No less than for now, a promising uptick in unemployment charge and softer-than-expected wage progress nonetheless counsel that extra tightening might come as one-off strikes versus an prolonged course of.

The US greenback has resumed its approach greater (+0.6%), alongside a broad-based upmove in Treasury yields, which saved the strain on gold and silver costs. Headlines of potential oil manufacturing cuts by Saudi Arabia in July has offered an preliminary increase for oil costs, however optimism had been fast to fizzle out in immediately’s session. Market contributors could possibly be reminded of the short-lived rally again in April this 12 months, the place draw back surprises in world financial knowledge ultimately overshadowed earlier headlines of manufacturing cuts.

To see a extra sustained upside in Brent crude costs, a collection of resistance lies forward to beat. Costs are again to retest the US$78.60 stage, the place a near-term upward trendline stands alongside the Ichimoku cloud resistance. Higher conviction might have to come back from a transfer again above the US$80.00 stage with a purpose to set the bottom for a retest of its April 2023 excessive.

Supply: IG charts

Asia Open

Asian shares look set for a constructive open, with Nikkei +1.30%, ASX +1.21% and KOSPI +0.60% on the time of writing, largely displaying a follow-through from Wall Road’s rally to finish final week. The attention-catching efficiency could possibly be the 4% achieve within the Hold Seng Index final Friday, doubtlessly reflecting some expectations for upcoming coverage assist following the draw back surprises in financial knowledge to date. Additional validation might must be sought on that entrance, whereas the financial calendar immediately will convey the discharge of the Caixin companies PMI knowledge. Financial resilience stands out as the key to supply any follow-through in positive aspects.

For the Hold Seng Index, a bullish crossover on transferring common convergence/divergence (MACD) might present some reduction for the bulls within the close to time period, however a collection of resistance nonetheless stand in the way in which forward. This features a downward trendline resistance since January this 12 months and the important thing psychological 20,000 stage, which coincides with the higher fringe of the Ichimoku cloud on the weekly chart. These ranges might have to be overcome to supply higher conviction of a extra sustained upside.

Supply: IG charts

On the watchlist: Gold costs again to retest trendline assist as soon as extra

US Treasury yields have discovered a broad-based transfer greater final Friday, following the stronger-than-expected US non-farm payroll determine which means that US rates of interest might seemingly keep excessive for longer via the remainder of the 12 months. The 2-year yields had been up round 16 basis-points, with greater Treasury yields prompting gold costs to offer again nearly of its previous week’s positive aspects. The newest CFTC knowledge has revealed additional unwinding of net-long positioning amongst cash managers for the third consecutive week, with doubtlessly extra room for moderation from earlier bullish build-up if Treasury yields stay supported.

On the technical entrance, final week’s transfer has introduced gold costs again to retest a key trendline assist on the US$1,950 stage. Any additional transfer under its Might 2023 low might mark a downward break of a key assist confluence zone, the place its 100-day transferring common (MA) and Ichimoku cloud resides. That might pave the way in which to retest the US$1,875 stage subsequent.

Supply: IG charts

Friday: DJIA +2.12%; S&P 500 +1.45%; Nasdaq +1.07%, DAX +1.25%, FTSE +1.56%

Article written by IG Strategist Jun Rong Yeap