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AUDUSD trades to a new 2021 low

  
Analysis, Forex

AUDUSD traded lowest level since December 2020

The AUDUSD is traded to a new session low and in the process is trading to a new low for 2021 and new low going back to December 21, 2020.
AUDUSD traded lowest level since December 2020_
The price has cracked through the June 18/June 21 lows down to 0.7476. That level is now a close intraday risk level for sellers.   Stay below keeps the sellers firmly in control intraday.
Looking at the daily chart below, the deeds 21 low comes in at 0.7461. Move below that level and traders would be targeting down toward the 0.7400 level and the 61.8% retracement of the move up from the November 2020 low at 0.73784.
AUDUSD on the daily chart

UK June final manufacturing PMI 63.9 vs 64.2 prelim

  
Analysis, Economy

Latest data released by Markit – 1 July 2021

The preliminary report can be found here. A slightly lower revision but this is still a very solid reading, with output, new orders, and employment conditions continuing to hold among the best seen throughout the survey’s history.
That said, much like the euro area’s readings earlier, supply chain disruptions are leading to a record rise in price increases. Markit notes that:

“UK manufacturing maintained a near survey-record pace of expansion at the end of the second quarter, as the reopening of economies at home and overseas supported increased production, new orders and employment. Solid business confidence and rising backlogs of work also suggest that the current upturn has further to run.

“The sector is still beset by rising cost inflationary pressures, however, as Brexit-related trade issues exacerbated global supply chain delays. The resulting widespread raw material shortages drove purchase prices up to the greatest extent on record, leading to an unprecedented steep rise in selling prices. There are also widespread reports of supply issues causing disruptions to production schedules and impeding the re-building of buffer stocks.

“The continued inflationary impact of capacity issues at both manufacturers and their suppliers will be a further factor keeping headline inflation above the Bank of England’s 2% target in coming months.” 

Eurozone June final manufacturing PMI 63.4 vs 63.1 prelim

  
Analysis, Economy

Latest data released by Markit – 1 July 2021

A slight revision higher with the headline being yet another fresh record for a fourth consecutive month now as manufacturing conditions in the region keep more solid as virus restrictions are loosened, with output coming in strong.

That said, there is a consistent theme across all the readings and that is despite more robust demand conditions in general, there is marked supply-side constraints that are persisting – which is leading to price rises at a record pace in Europe.
It remains to be seen if said disruptions will eventually come to dampen demand prospects but for now things are still holding up well as the reopening gets underway.
Markit notes that:

“Eurozone manufacturing continued to grow at a rate unbeaten in almost 24 years of survey history in June as demand surged with the further relaxation of COVID-19 containment measures and vaccination progress drove renewed optimism about the future.

“However, the sheer speed of the recent upsurge in demand has led to a sellers’ market as capacity and transportation constraints limit the availability of inputs to factories, which have in turn driven industrial prices higher at a rate not previously witnessed by the survey. Manufacturers are clearly willing to pay more to ensure sufficient supplies of key inputs.

“Encouragingly, there are several survey indicators which add to hopes that the current spike in prices will prove transitory.

“Widespread issues such as port congestion and a lack of shipping containers should soon fade as the initial rebound from the pandemic passes. Similarly, recent months have seen safety stock building as companies seek to protect themselves against potential future supply-chain disruptions, which has exacerbated the imbalance of demand and supply in the short-term. Once sufficient stocks are built, this effect should likewise fade.

“Finally, we have also seen the expansion of capacity via record employment growth and greater capital expenditure on business equipment and machinery. This expansion should raise output in sectors that are currently straining to meet demand, and hence remove some of the upward pressure on prices for these goods.”

Economic data coming up in the European session

  
  Analysis

Euro area manufacturing PMI data in focus

Summer
The dollar was a solid performer going into the month/quarter-end yesterday with there being not much unwinding even after the London fix.
That takes the likes of EUR/USD back to the post-FOMC lows around 1.1850 and while ranges are narrow today, technicals may come into more importance later before we get to the US non-farm payrolls release tomorrow.
USD/JPY also managed a close above 111.00 and that may prove to be an important technical breakout for the next upside leg to extend.
Data releases won’t offer much in Europe later today as the OPEC+ meeting takes center stage, so focus on the charts instead before the payrolls on Friday.
0600 GMT – Germany May retail sales data
Prior release can be found here. German retail sales is estimated to show a solid bounce in May after a more dismal Q1, with looser restrictions also set to bolster the outlook further going into the latter stages of Q2 and 2H 2021.
0630 GMT – Switzerland June CPI figures
Prior release can be found here. Swiss inflation is expected to keep more subdued despite price pressures in general being more solid across the globe as of late. That will keep things as it is when it comes to the SNB so no change to the narrative there.
0715 GMT – Spain June manufacturing PMI
0730 GMT – Switzerland June manufacturing PMI
0745 GMT – Italy June manufacturing PMI
0750 GMT – France June final manufacturing PMI
0755 GMT – Germany June final manufacturing PMI
0800 GMT – Eurozone June final manufacturing PMI
Focus will be on the final readings in France, Germany, and overall Eurozone though they should not tell us much of anything new since these will be the final releases.
0830 GMT – UK June final manufacturing PMI
The preliminary report can be found here. There shouldn’t be much to add with UK manufacturing conditions keeping more solid after the reopening in April.
0900 GMT – Eurozone May unemployment rate
Prior release can be found here. Labour market conditions in the region are expected to keep steadier and the German report for June does provide some encouragement that things are on the right track going into 2H 2021.
1130 GMT – US June Challenger layoffs, job cuts
Prior release can be found here. A reminder that it is NFP week in the market. The data provides information on the number of announced corporate layoffs by industry and region and acts as a general labour market indicator.

OPEC+ in focus today after quarter-end charade

  
  Analysis

The OPEC+ meeting takes center stage today

OPEC
Things are looking fairly quiet in the market for the time being with attention turning away from the month/quarter-end and on to the OPEC+ meeting later today.
The dollar held firmer yesterday and pushed forward with gains but oil was a decent performer, with WTI keeping steady to settle around $73.50.
The expectation is for a 500k bpd output increase by OPEC+ but there are risks that the bloc may hike output by a bit more than that, though there is some degree of consideration that they may not want to risk unsettling the market at this stage.
Either way, as long as demand conditions and the global economic outlook keeps as it is, I would expect any hiccups here to still be overlooked with oil prices likely to stay perky in the bigger picture of things.
Some posts to chew through before the main event later:

China Caixin/Markit Manufacturing PMI for June 51.3 (expected 51.8)

  
Analysis, Economy
51.3 is a 3 month low
  • 14th month straight in expmanison
  • Export sales stagnated
  • employment continued to rise
  • easing cost pressures
From the report, summary comments:
  • Overall, the manufacturing sector continued to stably expand in June, despite the impact of the pandemic. Both demand and supply in the sector remained stable, as did external demand, showing the momentum of economic recovery still remained in the post-epidemic period. The job market continued to improve and businesses were highly optimistic, with the measure for future output expectations in June higher than the longterm average. Inflationary pressures eased somewhat, but manufacturing enterprises’ purchasing prices and factory-gate prices still rose. The shortage of raw materials continued in some regions. The manufacturing sector has gradually returned to normal. In the second half of this year, the low base effect from last year will weaken. Inflationary pressure, coupled with the economic slowdown, is still a serious challenge for China.
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