There was a very late bid in the oil market today that may have materialized as major events started to unfold in Russia.

In a video last week, Wagner founder Yevgeny Prigozhin appeared to say that his 25,000 strong militia was heading to Moscow to oust the leadership of the defense ministry.

„Those who destroyed our lads, who destroyed the lives of many tens of thousands of Russian soldiers, will be punished. I ask that no one offer resistance… We will consider anyone who tries to resist a threat and quickly destroy them,“ he said.

Not surprisingly, Russian officials didn’t take that well and today accused Prigozhin of armed mutiny.

They appear to be genuinely afraid of some kind of civil war after the deputy commander of Russia’s forces said in a video to „stop the columns and return them to their permanent bases.“

The Russian Federal Security Service (FSB) also released a statement saying not to obey “Criminal and Dangerous Orders by Yevgeny Prigozhin and to assist the Russian Armed Forces and FSB in apprehending him alongside other Wagner Commanders.”

Along with that, there are all kinds of rumours about what’s happening on the ground.

This could amount to nothing or to civil war but keep a very close eye on Russia this weekend.

This article was written by Adam Button at www.forexlive.com.

• US June flash S&P Global services PMI 54.1 vs 54.0 expected
• Fed’s Daly: Risks over overtightening and undertightening are ‚about balanced‘
• Fed’s Bostic: I expect jobless rate to rise from historically low level
• Fed’s Mester doesn’t speak on monetary policy
• Baker Hughes oil rig count -6 at 546
• ECB’s de Cos: We will hike rates again in July, not possible to say what comes after that
• June Belgian business sentiment -12.1 vs -9.2

Markets:

• WTI crude oil down 22-cents to $69.29
• US 10-year yields down 6.4 bps to 3.73%
• Gold up $6 to $1919
• Bitcoin up $2.4% to $30,850
• S&P 500 down 0.8%
• USD leads, AUD lags

The US dollar was in demand once again, despite falling Treasury yields. Some of that might have been a result of relative values as bund yields fell much further than Treasuries.

In any case, it was a classic risk-off day with the exception that the yen couldn’t sustain a bid. That’s a red flag because there was some initial JPY-buying after the hot Japan core CPI print earlier. Some of that extended early in US trade with USD/JPY falling to a session low of 142.77 but it was a quick turn and 100 pip rally from there to a new 9-month high.

More broadly, the peak of the US dollar strength was early in North American trade as the commodity currencies sagged and cable hit 1.2688 alongside heavy equity selling. The moves ebbed from there as buyers waded into some stocks and oil bounced more than $2. USD/CAD hit a 9-month low yesterday but 80 pips today before recovering about half the move.

AUD/USD struggled but the damage was mostly done early in the day and it sagged to the finish line. A week ago, it looked like AUD/USD could be breakout out to the upside but the lack of meaningful fiscal stimulus from China rapidly turned the tide and the pair is right back into the middle of the four-month range. Today was particularly bruising with a 75 pip loss.

Notably, today is also the seven-year anniversary of Brexit and it remains down about 20 big figures against the dollar since. Cable softened in Asia but treaded water afterwards.

Have a wonderful weekend.

This article was written by Adam Button at www.forexlive.com.

I would attribute a big chunk of this week’s equity selling to quarter-end rebalancing flows and/or the front-running of those flows. There were plenty of dip buyers in Nasdaq stocks, particularly in the magnificent seven mega stocks that have been responsible for nearly all of the equity market rally this year.

On the day:

• S&P 500 -29 points, or -0.8%, to 4395
• Nasdaq Comp -0.9%
• Russell 2000 -1.0%
• DJIA -0.6%
• Toronto TSX Comp -2.7%

On the week:

• S&P 500 -1.3%
• Nasdaq Comp -1.4%
• Russell 2000 -3.0%
• DJIA -1.7%
• Toronto TSX Comp -2.7%

Here’s an early hint: The first two weeks of July are, seasonally, the strongest time of the year.

This article was written by Adam Button at www.forexlive.com.

MUFG maintains a long EUR/USD position to its TOTW portfolio (spot ref:
1.0920), with a target at 1.1320, and a stop at 1.0620. MUFG also
maintains a long AUD/NZD position targeting a move towards 1.1200, with a
stop at 1.0700.

„We are maintaining a long EUR/USD trade idea. The pair retested the top
of this year’s trading range between 1.0500 and 1.1000, and we expect
the pair to move closer to the year to date high from April at just
below the 1.1100-level,“ MUFG notes.

„We are maintaining our long AUD/NZD trade idea to reflect expectations
for narrowing policy divergence between the RBA and RBNZ,“ MUFG adds.

MUFG sees three reasons why sustained strength in the USD is unlikely.

1. Rebounding USD: The US dollar has rebounded and has been stronger against most G10 currencies over the week following a
   previous week of weakness. MUFG suggests that this pattern of alternating between strength and weakness could continue.
2. Tightening Cycles Uncertainty: The market has arrived at a stage in the
   tightening cycles where it’s harder to determine how much further
   tightening is necessary. This means that both central banks and markets
   will become more sensitive to incoming economic data. For example, the
   sharp depreciation of the EUR today was due to weak PMI data.
3. Potential Weakening of USD: MUFG maintains that there is a likelihood
   that the Federal Open Market Committee (FOMC) will continue with its
   pause in tightening, and if this happens, it could weaken the US dollar.
   However, this assumes that there is no significant decline in growth
   outside of the US. In other words, if upcoming US economic data supports
   the notion of the FOMC extending its pause in tightening policy, gains
   in the US dollar could be reversed.

In summary, MUFG suggests that the US dollar’s strength may not be
sustained in the longer term due to the uncertainty surrounding
tightening cycles and the sensitivity to economic data. They believe
that if the FOMC continues to pause its tightening, and if the economic
data supports this stance, it could result in a weakening of the US
dollar.

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This article was written by Adam Button at www.forexlive.com.