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European bourses are higher as German inflation hits 13 years high.

Summer markets are low volume and range bound but there is scope for trends to continue lack of market-moving news. The UK is continuing to be in lockdown for a further 4 weeks as the covid-19 variants cause greater disruption.

Morning Brief

European equities are starting the London session off positively as this morning’s data at the European open showed UK unemployment dropping through Q1 2021 when compared to the previous quarter, to stand at 4.7%. The news came in as expected but unemployment is still higher than pre-pandemic levels and the UK is still struggling with new covid-19 variants and disruptions. Last night Prime Minister Johnson announced that there would be a further 4 weeks of lockdown measures.

German Final yearly CPI rose 2.5% in May which was as expected following on from preliminary results. It was the highest inflation reading since September 2008, due to higher energy prices and the removal of the temporary VAT reduction at the start of 2021.

A long dispute between the US-based Boeing company and the European aircraft builder Airbus is likely to be resolved in an announcement today. If everything gets signed off it will potentially eliminate the reinstatement of punitive tariffs between the two major trading blocks.

Later today we receive information out of the US for NY Fed Manufacturing, US PPI, and retail sales and we also have some central bankers talking.

The UK FTSE 100 is targeting yearly highs having printed a higher high yesterday of 7191.76 and is currently trading 7182.90. The momentum and price action are all looking bullish so a close below the 20-day exponential moving average would be the first sign of real weakness.

The German DAX is also trading higher and set a new all-time high yesterday, again with momentum and price action all looking very bullish. The RSI indicator is nowhere near overbought, so the potential is for higher prices for longer.

The EURUSD is continuing to trade higher having found support yesterday at the 1.2100 level and the 50-day ema. If the correction is over, it was only a small correction and a close above the 20-day ema will signal the resumption of the growing bullish momentum. The moving averages and the previous market structure is going to cause some problems for bulls until there is a clear breakout of the channel to the upside. If the bears prove too strong the 200-day ema is below the 1.2000, so a potential drop of 100 pips is still on the cards.

WTI is enjoying the relatively weak US dollar and is hanging out around the $71 per barrel price level. The higher price in Oil is keeping the USDCAD in a tight sideways consolidation with the daily RSI around the 50 lines. I still expect the overall price action to push a bit higher but there is significant resistance above from market structure and the Ichimoku cloud.

Tomorrow is the FOMC statement and press conference, so markets will be relatively quiet today if all else stays equal.


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