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Video / 27 June 2017 at 8:16 GMT

From the Floor: Markets brace for triple dose of Fed talk

#SaxoStrats
  • Fed's Yellen, Harker and Kashkari slated to speak on Tuesday
  • USDJPY pushes through resistance, but has little fundamental support from US rates
  • US technology stocks dented again overnight
  • European bank stocks remain in focus after Italian rescue operation
  • Avis and Hertz leap on deals with Alphabet and Apple
  • Oil drifting higher on short-covering
  • WTI crude finding support at $42/barrel, but not safe before breaking $46 /b
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By John Acher

Financial markets will be closely monitoring speeches on Tuesday by three Fed officials, including chairman Janet Yellen, for new impetus amid the summer lull, which has dampened activity especially in the forex market.

Yellen is scheduled to speak in London at 1700 GMT, preceded by Philadelphia Fed president Patrick Harker at 1500 GMT and followed by Minneapolis Fed president Neel Kashkari at 2130 GMT.

Monday's session in the FX markets was summery thin — "like the third day of a weekend" — so traders are hungry for new signals.

"We have volatility continuing to edge lower,” says Saxo Bank's FX strategy chief John J Hardy, adding that the Fed seems to be keeping one eye firmly on financial stability, even as the US economy has suffered something of a weak patch.

USDJPY has pushed through resistance, but enjoys little fundamental support from US rates, so a follow-through remains doubtful, Hardy says.

USDJPY breaks through resistance
USDJPY
Source: Saxo Bank 

US technology stocks were dented again on Monday despite strength elsewhere in US equities, and European bank shares remain in focus after an Italian rescue operation boosted sentiment towards Italy's troubled banks, says Saxo Bank's equities strategy chief Peter Garnry.

"On a tactical level, I think you could be short US technology stocks at this point,” says Garnry.

Shares in car rental chains Avis and Hertz leapt on Monday as Alphabet made a deal for managing a self-driving car fleet for Avis, while Apple inked deal with Hertz, and the industry seems to be moving fast on autonomous driving, Garnry says.


WTI finding support

Recently battered crude oil prices are drifting higher on short-covering, with WTI finding support at $42/barrel. But WTI is not safe before breaking back above $46/b, and a challenging July lies ahead, says Saxo Bank's commodities strategy chief Ole Hansen.

WTI crude oil price finding support, but still vulnerable

WTI oil price
 Source: Saxo Bank

"We have seen a little bit of an improvement in the oil markets over the past week,” says Hansen. "The long-short ratio is way down, that leaves the market less exposed to selling at this stage."

US oil inventories remain key to sentiment in the oil markets, and fresh figures are due from the American Petroleum Institute later on Tuesday.


Janet Yellen
 Fed chief Janet Yellen is scheduled to speak in 
London on Tuesday. Photo: The Fed


John Acher is a consulting editor at TradingFloor

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