Overnight Headlines

*USD held steady with minor gains for most G10 currencies

*US equities mixed with Nasdaq and S&P500 setting new closing highs

*Oil continues higher for a fourth straight day above $73

*US retail sales in focus on signs that consumer and goods demand is peaking

US equities closed mixed with growth beating value and tech continuing to lead the way, while banks were the laggards. The tech-heavy Nasdaq rose for the sixth time in the past seven sessions with the markets looking squarely at the FOMC meeting. Asian stocks are also mixed with the ASX and Nikkei gaining but China down. European futures are pointing higher.

USD is steady trading just off Friday’s high at 90.61 with EUR flat at 1.2120 and GBP muted at 1.4112. Both the figures are key for these two currencies (1.21 and 1.41) in what might be another quiet, wait-and-see session for FX. AUD took a dip lower on the release of the RBA minutes overnight which stated it was premature for the bank to cease their QE program. All AUD roads lead to the next RBA meeting in July when they will discuss the pace and size of their stimulus measures.

Market Thoughts – Stocks and the Fed

A few weeks ago, high-growth tech-related stocks were at the heart of the selloff driven by fears of rising rates. But they have regained their footing at the expense of reopening economy-linked industrials, financials and materials stocks due to yields falling sharply to levels not seen since the start of March.

There are growing expectations that the FOMC may spark some broad dollar strength in the third quarter with a mention of the “t word”, especially if the projections and dot plot forecast an earlier rate hike in 2023 – there is no hike in the current dots in 2023. All things equal, dollar strength would be on the back of rising yields so hurting tech once again and helping the reopening sectors.

Chart of the Day – FTSE 100 teasing us

We have written before about the FTSE 100 being known as the “global cyclical bellweather” due to the majority of its earnings coming from overseas with cyclical companies and sectors a dominant force. Even as global yields have eased, the index has been creeping higher after the breakout of the symmetrical triangle we highlighted at the start of June.

Yesterday, the bulls were in charge making new cycle highs above 7164 as we finally looked to be pushing on to pre-covid levels towards 7400. Bullish momentum has certainly picked up with the RSI and MACD pointing higher. But a bearish pinbar candle printed on the daily chart so things might not all be plane sailing. The prior cycle high at 7040 should offer first support before the big figure 7000 mark.