be aware to always trade according to the right signals, this is just an opinion 🙂
US:
Fundamentally the conditions currently are a mess. Unemployment is still on the rise, despite more and more reopening. Current estimates from the Atlanta FED state that Q2 GDP might be down more than 46%. However, the worst seems to be over but the struggle will continue with effects going on way beyond 2020 as the famous V-shape recovery is now even with the most optimistic projections off the table. Seasonally we are in the summer time where the markets are mainly flat and slightly downwards anyway, so the only remaining stimulus for higher asset prices across the band is the money press of the FED which likely only postpones the inevitable for higher debt burdens. With all of this I only expect a sideways and slight downwards movement for July. Since we have a lot of bad news potential, I stick with an ongoing crash potential and a retest of the last market lows. All it needs is a catalyst for it and there are plenty from the newly risen tensions between the US and China, to horrific market data, historical high unemployment and bankruptcy of big named companies.
EU:
The EU markets will behave similar to the US markets basically for the same reasons. Some of the macroeconomic data like unemployment in Italy seem to be in great shape, however it's highly doubtful that the lockdown and Corona impact created more jobs than a booming economy in Italy, so there is plenty of room of negative surprises and corrected numbers. A looming debt crisis in more than a handful of European countries comes on top of the aforementioned economic issues. Brexit negotiations still going on and a standstill has further potential to drag the markets down along with the economy, hence the same negative outlook for July with some downwards movement already beginning.
UK:
Current outlook on the UK economy is very negative after it turned from one of the better countries in Europe to do worse than most others. Apart from the Covid hysteria and all sorts of limitations and the length of the lockdown period, plans to raise taxes and a wasteful furlough scheme are likely to drag the economy further. Brexit negotiations are likely to be a further drag until the end of the year or a solution is reached. As being the most lagging country in Europe and the estimated biggest GDP drop since 1706, the outlook remains negative with FTSE and GBP being behind other markets.
Currencies
USD:
The drop of the USD came to a standstill and we are currently correcting in a sideways up manner. I expect the USD being slightly higher in July against the EUR and other currencies. If we see new measures taken in the US in regards of Covid we are likely to see a plummet in the USD against the JPY and some of the save haven currencies.
EUR:
After an initial surge at the beginning of June the EUR is mainly flat and is likely to further correct in July. Potential European Debt crisis, Brexit negotiations, a potential trade war between the US and China as well as the aftermath of the lockdown are all potential downwards risk while there is no symmetry into the upwards direction.
GBP:
The GBP will be affected for the same reasons as the EUR in the same way. Until lockdown measures will be lifted and the economy returns to growth the GBPs only hope in gains would be that it can be considered as a save haven from the USD and EUR drops, however in the current situation this seems highly unlikely.
Commodities
Oil:
After the rise in oil prices with the lifting in lockdown measures worldwide, oil is currently struggling to reach new heights. For July I expect a further sideways correction at the beginning and a lighter price drop from around the middle of July.
Gold:
After a light breakout to new highs Gold is going mainly sideways. For the beginning of July I expect the sideways movement to continue with another breakout attempt in the middle of the month to new highs. If that breakout should fail, the likelihood for a correction and lower gold prices by the end of the month overweighs.
Silver:
After the currently consolidating sideways movement I expect another breakout and new highs for silver in July.
Soy beans:
We had the predicted sideways movement and the breakout and now are retracing from the swing high. With the break through a support I expect soybeans to correct further downwards in July after a retest of the broken support level.
Corn:
As stated in the last outlook from the mid of June we got ready for longer-term price drops which are likely to continue for several weeks. Since we are retracing from the last drop currently, reversal signs indicating the top of the movement would be an indicator to go short and build your position up.
Zinc/Nickel:
After a fake breakout we are now back to range trading which makes it very inconvenient to trade. Selling on the top of the range and taking profits and entering a long position on the bottom of the range are still a profitable scenario for July if the swings remain big enough.
XLP/XLU:
Since most stocks might face a sharp decline over the next weeks and the situation on the vaccine front is quite nebulous in terms of who will be the pharmaceutical winner, I will have a close look at consumer staples and utilities in the coming weeks and months. Currently they both look like they will go down for the next time, however I think of turning points to be a good entry point. For those that don't want to screen the whole sectors for the best companies you can use the Sector ETFs in the S&P500 for these companies. This is a trade that goes throughout the month and might last for the whole summertime.
As always, make sure you do your own analysis. Happy and successful trading J
