Morning scan across the markets: Equities are down across the board, oil prices are elevated, precious metals catching some breathing room, US Treasury yields subdued for now and DXY remains flat.
Geopolitics are still in focus as US/Iran tensions continue to broaden, with minimum flow of oil through the Strait of Hormuz.
Fed continues to provide hawkish stance with latest rhetoric coming from Jefferson and Logan.
Markets are still not pricing in broadening of the war in the Middle-East. A further catalyst is going to be necessary to move the market back into the defensive mode that we saw in the past couple of months. For now USD remains bid, however if we just stay in the current environment where there are tit-for-tat strikes between the US and Iran, the USD will loose appeal and market will look through the headlines.
This morning I am looking at EUR/AUD short setup. I have missed the entry yesterday and the current levels look attractive again.
At 10am London time the Inflation report for Eurozone is coming out with Headline YoY expected at 2.8% from the prior 3.2%, MoM expected at -0.1% from the prior 0.1%, and Core YoY 2.4% from prior 2.6%. Overall the inflation is expected to tick lower and I will be on the lookout. If the prints come in line with expectations it will still be considered bearish for EUR as the probability of lower inflation trend rises, and the trimming of hawkish bets could weigh on EUR. If it comes lower than expected I will be looking to take advantage of another leg lower and go long on AUD.
I am currently watching 1.64 and 1.64250 for short opportunity to drive the pair into 1.63.
UPDATE: Sunday Market Open
CLOSED AT BE - Due to the geopolitical risk premium starting to increase on the back of US and Iran war further broadening, I have decided to close all my positions in the risk assets. Risk-off sentiment can prevail going into the new week and there is no need to be exposed to choppy price action. I will assess the situation going forward and await better situation to drive the pair lower. But for now I am remaining on side-lines on this pair.
UPDATE: 20th July
The position played out as expected. Over the night the strikes between the US and Iran have continued, however the market looked through the headlines. She full sentiment shift happened on the reports from both US and Iran, stating that they are remaining open to diplomatic resolutions. The flows in cyclical currencies continued throughout the Asian and London session which resulted in AUD strength.
UPDATE: Sunday Market Open
CLOSED AT BE - Due to the geopolitical risk premium starting to increase on the back of US and Iran war further broadening, I have decided to close all my positions in the risk assets. Risk-off sentiment can prevail going into the new week and there is no need to be exposed to choppy price action. I will assess the situation going forward and await better situation to drive the pair lower. But for now I am remaining on side-lines on this pair.
UPDATE: 20th July
The position played out as expected. Over the night the strikes between the US and Iran have continued, however the market looked through the headlines. She full sentiment shift happened on the reports from both US and Iran, stating that they are remaining open to diplomatic resolutions. The flows in cyclical currencies continued throughout the Asian and London session which resulted in AUD strength.
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