Today’s macro agenda (GMT 3)
- 10:55 Germany: unemployment rate and number of unemployed (June)
- 11:00 Switzerland: ZEW and Credit Suisse investor sentiment (June)
- 12:00 Eurozone: CPI (June)
- 15:15 US: ADP employment change (June)
- 15:30 Canada: GDP (April) and PPI (May)
- 16:45 US: Chicago PMI (June)
- 17:00 US: pending home sales (May)
- 17:30 EIA weekly petroleum status report
At the time of writing, the euro was changing hands at 1.1899. The pullback halted at 1.1878, which is 76.4% of the upward move from 1.1847 to 1.1975. market participants remain focused on three key events: the rapid spread of two highly infectious Covid-19 virus strains: Delta (Indian) and Lambda (Peruvian), the US payrolls report (July 2), and the OPEC meeting (July 1).
In Britain, the first cases involving Lambda Covid variant infections were detected. It is considered to be more transmissible, so investors are monitoring its spread as well as the actions being taken by authorities.
The DXY dipped from 92.15 to 92.00. The dollar is in a state of constant flux, so there is nothing to focus on. The loosening relationship between the USD and the yield on 10-year UST yield has weakened this correlation. Now the dollar index might rise with falling yields, so it is unclear when it is a defensive asset and when it is not.
Option sellers look set to benefit from market swings ahead of the key upcoming events with patchy news set to heighten asset volatility. The more pronounced the volatility, the higher the options will go. And the more expensive options become, the more profit they will make after the market lapses into a side trend before the options expire.
On the dollar index, it makes sense to take a closer look at the 91.95 level. If it fails to hold, the DXY will drop to 91.88. As for the euro, we expect the price action to recover to 1.1930 (45-degree angle) as part of the correction. Meanwhile, FX players are advised to keep an eye on the AUDUSD ( 0.18%) and NZDUSD ( 0.17%) pairs. Upside in Antipodeans customarily points to a speculative mood and a growing level of risk appetite. These two pairs are now delivering strong returns against the greenback. In our view, this suggests that risk appetite is on the rise and an upward correction could be in the cards.