Worries for US inflation persist

Pound rallies in anticipation of the new UK labour government

In the FX market the main move yesterday may have been the strengthening of the pound across the board. Pound traders were excited as reports surfaced yesterday stating that the new UK PM Burnham is to appoint current Home Secretary Shabana Mahmood as the new finance minister. There were market worries for the possible appointment of a finance minister who would be inclined towards being fiscally expansive. Mahmood is considered as more conservative, easing market worries and allowing the sterling to rise. Burnham is expected to be officially named UK’s new PM at the 20^th of July. 

Mixed signals from US equity markets

US equity markets tended to send mixed signals yesterday. US stock markets in general were supported as US inflation cooled down, yet the tech sector suffered some losses. Also the drop of SpaceX’s share price is impressive, at some point it even reached below the IPO level of $135, as the end of the lockup period nears. 

Oil prices stabilise as tensions in the Middle East escalate

Oil prices tended to stabilise, yet tensions between the US and Iran seem to be escalating. The US military struck a number of targets in Iran, while Iran responded in kind. Fewer ships passed through the Straits of Hormuz after the US re-imposed its naval blockade, and should worries of oil traders about oil supplies through the region intensify further, we may see oil prices rising. 

Gold’s price remains steady

Gold’s price remained relatively steady yesterday and during today’s Asian session. The issue is that gold failed to gain on the back of the softer than expected inflation reports both at a consumer and a producers’ level. Traders seem worried that tensions in the Middle East are to keep oil prices high. Such a scenario could boost inflationary pressures in the future, forcing the Fed to remain hawkish, thus keeping gold bulls at bay.

Other highlights for today

Today we get UK’s GDP and manufacturing output rates for May and from the US we get the weekly initial jobless claims figure, July’s Philly Fed Business index and June’s retail sales. On a monetary level we note that Switzerland’s SNB is to release the minutes of its last meeting, and on the calendar Dallas Fed President Logan and Kansas Fed President Schmid  appear, while in tomorrow’s Asian session Fed Vice Chair Jefferson speaks.

Charts to keep an eye out

GBP/USD rallied yesterday breaking the 1.3510 (S1) resistance line, now turned to support. We maintain a bullish outlook for the pair given also that the RSI indicator has risen nearing the reading of 70. Yet we also note that cable’s price action has reached/breached the upper Bollinger band which may slow down the bulls or even cause a correction lower. Should the bulls remain in charge, we may see GBP/USD aiming if not breaking the 1.3655 (R1) resistance level. Should the bears take over, which currently seems as a remote scenario, we may see GBP/USD breaking the 1.3510 (S1) support line and continue to break also the upward trendline guiding the pair and the 1.3300 (S2) support level.

WTI’s remained stable between the 76.60 (S1) support line and the 82.00 (R1) resistance line. The RSI indicator remained just above the reading of 50, implying the continuance of a rather neutral market sentiment, allowing us to adopt a bias for sideways motion of the commodity’s price for the time being. Should the bulls regain control, we may see WTI’s price breaking the 82.00 (R1) resistance line with the next possible target for the bulls being set at the 88.60 (R2) resistance level. Should the bears get in the driver’s seat, we may see WTI’s price dropping, breaking the 76.60 (S1) support line, opening the gates for the 71.65 (S2) support level.

GBP/USD daily chart

• Support: 1.3510 (S1), 1.3300 (S2), 1.3155 (S3).
• Resistance: 1.3655 (R1), 1.3865 (R2), 1.4000 (R3). 

WTI daily chart

• Support: 76.60 (S1), 71.85 (S2), 67.05 (S3).
• Resistance: 82.00 (R1), 88.60 (R2), 93.30 (R3).