Daily Market Lookup

• Asian stocks rebounded from a two-month trough on Thursday and the euro enjoyed a respite after sinking to its lowest in 10 months as the political turmoil in Italy that roiled global financial markets showed signs of easing. Global stocks were battered, safe-haven government prices rose sharply, and the euro tumbled earlier in the week after Italy's two anti-establishment parties scrapped plans to form a coalition. That raised the prospect of a new general election, stoking fears such a vote would effectively be a referendum on Italy's euro membership. A degree of calm, however, returned with the two anti-establishment parties renewing efforts to form a coalition government rather than force Italy into holding elections for the second time this year. A successful auction of five- and 10-year government bonds also assuaged concerns about Italy's ability to finance itself after the turbulence in its debt market sparked the biggest one-day spike in two-year bond yields in 26 years. Bond yields rise as prices fall. The dollar received some support as signs of an easing in Italy's political crisis pulled U.S. Treasury yields up from multi-week lows.
• The dollar gave up earlier gains against major currencies in morning trade in Asia Thursday as risk appetite improved after political turbulence in Italy appeared to calm down. A political stalemate in Italy had scared markets who feared renewed discussions about the future of the euro. But a decision by the country’s two largest non-establishment parties to renew efforts to form a coalition appeared to stave off the need for fresh elections. Japan released the industrial production figures, which rose 0.3% in April from a month earlier, much lower than the expected 1.4% increase. Year-on-year figures rose 2.5%, also lower than the expected 3.6% hike. The worse-than-expected data hampered risk sentiment and, ironically, supported the safe-haven yen. China released stronger-than-expected manufacturing and services Purchasing Managers’ Index (PMI) data for May. The official manufacturers PMI released by the National Bureau of Statistics (NBS) came in at 51.9 versus the estimated 51.3. The services PMI rose to 54.9 in May from 54.8 in April. However, China’s Steel Industry PMI fell to 50.6 from 51.7.
• The euro won a reprieve on Thursday, holding on to the strong gains it made on Wednesday, as Italian leaders moved to mitigate political turbulence and avoid a potentially disruptive early election. Italian Prime Minister-designate Carlo Cottarelli said on Wednesday that possibilities had emerged “for the birth of a political government,” suggesting politicians, rather than technocrats like himself, might be able to steer the country out of deadlock. That has eased fears that fresh Italian elections could strengthen the hand of anti-establishment parties, helping to bring down Italian bond yields after they spiked sharply on Tuesday. An underlying theme that has pushed the euro lower since mid-April is a slowdown in Europe and the subsequent retreat in expectations for an early rate hike from the European Central Bank Apart from developments in Italy, investors are also looking to the upcoming euro zone consumer price data at 0900 GMT, which is expected to show inflation has accelerated to 1.6 percent in May. Negotiations between the United States and China appear to be intensifying as China said on Wednesday it was ready to fight back if Washington was looking for a trade war, days ahead of a planned visit by U.S. Commerce Secretary Wilbur Ross In addition, Japan’s industrial output data was surprisingly weak, putting a damper on risk sentiment and ironically supporting the safe-haven yen.
• Oil prices took a dip on Thursday morning in Asia due to a surprise surge in inventories in the US, paired with expectations that other markets may decide to increase output next month. US crude inventories rose by 1 million barrels in the week to May 25 to 434.9 million barrels, according to data released by the American Petroleum Institute. U.S. crude production has risen relentlessly by more than a quarter in the last two years, to 10.73 million bpd, inching ever closer to top producer Russia’s output of around 11 million bpd. The OPEC and other non-OPEC members including Russia may start to increase their supply as well. Saudi Arabia, de-facto leader of OPEC, and Russia has discussed raising oil production in the second half of the year by some 1 million bpd to make up for potential supply shortfalls from Venezuela and Iran. U.S. sanctions against Iran, which produces 4% of global oil supplies, will likely cause shortages later this year when trade restrictions take effect. Production in Venezuela has also plunged to its lowest level in decades due to its ongoing economic crisis. In response, OPEC and some non-OPEC producers will meet in Vienna on June 22 to review their commitment to curb their output by about 1.8 million barrels per day until the end of this year. With the OPEC meeting just three weeks away, oil markets are likely to remain on edge. Any signs that the group may be heading towards an early exit from the production cut agreement would weigh on prices.

Gold – XAU

Gold on Wednesday made its intraday high of US$1304.24/oz and low of US$1295.83/oz. Gold was up by 0.208% at US$1301.22/oz.

Technicals in Focus:

In daily charts, prices are above 50DMA (1326) and breakage below will call for 1316-1300. MACD is below zero line and histograms are decreasing trend and it will bring upward stance in the upcoming sessions. RSI is in oversold region and more downside is expected before it gets stretched. Stochastic Oscillator is in overbought territory and giving positive crossover to confirm bullish stance for intraday trade.

Trading Strategy: Sell on Strength

Based on the charts and explanations above; sell below 1300-1331 keeping stop loss closing above 1331 and targeting 1290-1280-1274 and 1265-1259. Buy above 1289-1265 with risk below 1280, targeting 1295-1305-1311 and 11321-1331.

Silver - XAG

Silver on Wednesday made its intraday high of US$16.54/oz and low of US$16.30/oz. Silver settled up by 0.979% at US$16.49/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 200DMA (16.77), breakage above will lead to 17.25-17.70. MACD is above zero line and histograms are increasing trend and it will bring bullish stance in the upcoming sessions. RSI is in oversold region, indicating buy signal for now. The Stochastic Oscillator is in neutral region and giving negative crossover to show downside move for the intraday trade.

Trading Strategy: Neutral

Based on the charts and explanations above, buy above 16.31-14.90 targeting 16.50-17.00-17.75 and 18.20-18.60; stop breakage below 15.00. Sell below 16.50-18.20 with stop loss above 18.20; targeting 16.00-15.60 and 15.00-14.50.

Oil - WTI

Crude Oil on Wednesday made an intra‐day high of US$68.56/bbl, intraday low of US$66.28/bbl and settled up by 0.402% to close at US$68.13/bbl.

Technicals in Focus:

On daily charts, oil is sustaining below its 50DMA i.e. 61.15 which is a major resistance and breakage above will call for 62.20-62.80. MACD is above zero line and histograms are in increasing mode will bring bearish stance in the upcoming sessions. The Stochastic Oscillator is in oversold region and giving positive crossover for confirmation of bullish stance; while the RSI is in oversold region and more downside can be expected.

Trading Strategy: Neutral

Based on the charts and explanations above; sell below 68.10-70.70 with stop loss at 70.70; targeting 67.00-66.30-65.70 and 65.00-64.20. Buy above 65.70-63.50 with risk daily closing below 65.00 and targeting 68.10-69.30 and 70.00-70.70.

EUR/USD

EUR/USD on Wednesday made an intraday low of US$1.1517/EUR, high of US$1.1675/EUR and settled the day up by 1.066% to close at US$1.11661/EUR.

Technicals in Focus:

On daily charts, prices are sustaining above 100DMA (1.2164), which become immediate resistance level, break below will target 1.2150-1.2000. MACD is below zero line but histograms are increasing mode which will bring bullish view. Stochastic is in neutral territory and giving positive crossovers to signal for bullish outlook for intraday. 14D RSI is currently approaching oversold region and giving wards directions to consider buy.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; sell below 1.1600-1.1915 targeting 1.1550-1.1450 with stop-loss at daily closing above 1.1915. Buy above 1.1550-1.1300 with risk below 1.1300 targeting 1.1600-1.1700-1.1800 and 1.1850-1.1915.

GBP/USD

GBP/USD on Wednesday made an intra‐day low of US$1.3235/GBP, high of US$1.3306/GBP and settled the day up by 0.022% to close at US$1.3282/GBP.

Technicals in Focus:

On daily charts, prices are sustaining above 50DMA (1.3953) is become major support level. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in oversold territory and giving negative crossover to confirm bearish stance. MACD is below zero line and histograms are decreasing lead to downward movement.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; short positions below 1.3400-1.3700 with targets at 1.3320-1.3260 and 1.3160-1.3100. Buy above 1.3400-1.3160 with targets 1.3450-1.3550-1.3605 and 1.3700-1.3750 with stop loss closing below 1.3160.

USD/JPY

USD/JPY on Wednesday made intra‐day low of JPY108.34/USD and made an intraday high of JPY108.90/USD and settled the day down by 0.0183% at JPY108.73/USD.

Technicals in Focus:

In daily charts, JPY is sustaining below 200DMA (109.62), which is major resistance on the daily chart. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is approaching overbought territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 110.00-112.90 with risk above 112.90 targeting 109.60-109.00 and 108.40-109.00. Long positions above 109.60-108.40 with targets of 110.00 110.50-111.00 with stop below 108.40.