Headlines

* RBA leaves official cash rate steady at 4.1%

* Rally in global shares halted, aussie falls on RBA’s pause

* US ISM Manufacturing extends slump in June, eyes on services data  

* Tesla jumps as it beats on Q2 delivery estimates as price cuts pay off

FX: USD traded in a narrow range amid holiday-thinned liquidity. The DXY is trading around the 50- and 100-day SMAs near 103. The 2-year yield pushed up again to fresh cycle highs. It is nearing the banking crisis top at 5.08% seen in March. The 10-year yield is trying to break long-term trendline resistance just above 3.80%.

EUR was relatively rangebound. The 50-day SMA is acting as near-term support at 1.0881. GBP printed a doji candle which was also an inside day. Cable has just slipped below 1.27 this morning in quiet trade.  USD/JPY is consolidating its recent gains just below 145. Japanese authorities intervened at that level last September. AUD has fallen after the RBA’s decision to stand pat. The 100- and 200-day SMAs sit at 0.6692/3. USD/CAD is tracking sideways below the early February low at 1.3262.

Stocks: US equities edged higher even as fresh data renewed concerns over economic growth. A steeper than expected contraction in factory activity indicated that the manufacturing sector was in recession. The benchmark S&P 500 added 0.1% and the Nasdaq 100 settled 0.19% higher. The Dow eked out a gain of 0.03%. Tesla grabbed the headlines as its price cutting policy delivered more cars than forecast in the second quarter. Apple closed 0.8% lower after becoming the first company to close with a market cap above $3tn. The tech giant is reportedly being forced to make cuts to its headset production plans.  

Asian stocks traded mixed with holiday volumes on Wall Street. Markets digested the RBA decision and China’s chipmaking metals export ban. The Nikkei 225 underperformed and slipped below 33,500. The Hang Seng moved higher, but gains were limited. Recent stimulus pledges are battling with US-China trade friction.  

US equity futures are very quiet. European equity futures are pointing to a modestly higher open. The Euro Stoxx 50 closed flat yesterday.

Gold is trying to build a base above $1900. Resistance sits at the 100-day SMA which has acted as good support previously around $1940/5.  

Day Ahead – Quiet day expected ahead of more top tier data

Inevitably, US Independence Day means thin volumes in markets. But there is still a lot going on for sure with the RBA decision overnight to the fore. We predicted a “hawkish hold” in our Week Ahead preview and that is pretty much what we got. There has been limited downside in AUD as the RBA kept their hawkish tone and the door open for future rate hikes.

Focus is on the US ISM data this week ahead of Friday’s NFP report. Yesterday’s manufacturing numbers painted a grim picture with a sector in recession. It was the worst reading since May 2020. It was also the eight straight month below the boom/bust mark of 50. The only good feature was that the prices paid element fell to the lowest since December. Focus is on the services sector data released on Thursday. Can it take up the slack from the continued weakness in manufacturing to keep employment buoyant?  

Chart of the Day – EUR/AUD dips below resistance again

The RBA’s second pause of the year meant rates were held at 4.1%. Of course, the decision buys time to see how the data and inflation will evolve.  The labour market tightness has eased but remains, while inflation is still too high. We note the bank went on to deliver back-to-back rate hikes in May and June after its previous pause in April.

EUR/AUD is down for a fourth straight day after climbing for nine days in a row. Prices popped up to 1.6553 in late June and above the August 2021 top at 1.6436. That becomes resistance again after capping the upside in late May. Support sits at the February 2022 high at 1.6225.