Overnight Headlines

*USD rose to a one-week high, largest single gain in two weeks

*US equities rose modestly, S&P500 closed at an all-time high

*Gold dropped to 10-week lows below $1760

USD broke out of its recent range, climbing above 92 and making a move to post-Fed highs at 92.39. EUR/USD slipped to 1.19 and GBP/USD fell to lows of 1.3814 before recovering slightly. AUD and CAD suffered the biggest losses with AUD rolling over through the 200-day SMA and back towards the cycle lows at 0.7477. NZD similar, with bears targeting 0.6923.

US equities ended higher with the S&P500 notching up its fourth straight day of gains, while the Nasdaq led the way with Big tech outperforming again and closing at another record peak. The strong US consumer confidence report and a rise in employment expectations boosted risk sentiment. Broad-based gains are being seen in Asia with US and European futures mixed.

Market Thoughts – Eurozone inflation and US ADP in focus

We get the first look at June inflation data out of Europe this morning with consensus expecting headline and core prints to remain relatively subdued at 1.9% y/y and 0.9% y/y respectively. These are fairly tame readings compared to those elsewhere and especially in the US and will hardly trigger a change of heart by the dovish ECB, particularly with the outlook remaining muted.

This afternoon sees the forerunner to NFP with the release of the ADP employment report and this will be monitored for any signs that private sector hiring has quickened. Although not a great predictor of Friday’s headline number, a big beat or miss today can cause short-term volatility.

Chart of the Day – EUR/USD below 1.19

The dollar is the strongest major this month with widespread gains across the FX space. The recent Fed meeting points to more sensitivity around data and potential tapering, while the ECB do not want to be dragged into premature tightening with the bank remaining one of the last doves standing.

EUR/USD’s consolidation above the recent lows eased oversold conditions after prices pierced the lower Keltner band after the FOMC meeting. The pair moved lower yesterday in line with the medium-term bearish trend and sellers will be eyeing up yesterday’s low at 1.1877 ahead of the cycle lows at 1.1847 and the year-to-date low at 1.1704. Resistance above sits at a Fib level at 1.1950 and the 200-day SMA just below 1.20.