What are we looking at today:
- USD strength continues: After a period of choppy consolidation on the Dollar Index, the market is breaking higher again this morning.
- US yields continue higher: Longer-dated yields continue to move higher. This is helping USD to strengthen.
- Indices under selling pressure: The relatively upbeat payrolls report from Friday has done little to stem the tide of selling pressure on Wall Street. The new trading week has begun similarly, with US futures lower again.
- Data trading: No significant data due today.
The new trading week has begun where Friday left off. There is a consistent theme of selling pressure on higher risk assets across major financial markets. This is playing out via a tide of USD strength that continues to flood through forex and is also weighing on commodities. Add this to the fears of higher bond yields, inflation concerns and worrying signs in the US corporate earnings, and there is a mounting bias of selling pressure on Wall Street.
Today also marks a significant day in the calendar for Russia, being Victory Day. There will be attention paid to the speech of President Putin, with fears that he could mark the occasion by significantly stepping up the invasion efforts in Ukraine.
It is a quiet day on the economic calendar today. There is no major data due, however, a speech by FOMC’s Bostic may cause some action later today. Bostic is not a voter in 2022 or 2023 but is one of the more hawkish Fed members.
Market sentiment remains negative: Higher US bond yields, a stronger US dollar and selling pressure on equity indices
Treasury yields moving higher: The US 10 year yield has continued to move higher in recent days and is again higher today, well clear of 3.0% and moving to around 3.17% this morning. Shorter dated yields are relatively contained for now.
The China trade data slows: There was a significant deterioration in trade flows in April. Imports were again all but and exports only grew by 3.9% (after 14.7% growth in March). These numbers were though slightly less bad than the forecasts had been expecting.
Victory Day in Russia: This was supposed to be the day that President Putin was able to celebrate victory over Ukraine. However, the lack of progress has prevented this from happening. Subsequently, the fear is that Putin could use his speech to significantly step up the invasion and escalate geopolitical tensions.
EU fails to agree on the Russian oil ban: The EU ambassadors met again on Sunday but once more failed to agree on a ban. Hungary still seems to be a stumbling block, but the ability for countries to wean themselves off Russian oil without causing themselves significant economic damage appears to be difficult.
Cryptocurrency under mounting selling pressure: Crypto is in a difficult moment with significant selling pressure across risk assets. Bitcoin is another -6% lower today under $34,000. The next key low is $32,950 from January.
- No key economic data is due
Major markets outlook
Broad outlook: Market sentiment remains negative with the USD strong and indices under selling pressure.
Forex: USD is decisively outperforming once more. The AUD and NZD are key underperformers.
- EUR/USD has failed to mount any serious recovery threat during the consolidation of the past two weeks (between 1.0470/1.0640) and the support at 1.0470/1.0500 is set to be tested again today. A break below 1.0470 opens 1.0325 (Dececmber 2016 key low) as the next support. Initial resistance is at 1.0600 with 1.0635 now key.
- GBP/USD a massive downside break of 1.2410 opened a move towards 1.2250 as the next support. This continues to be tested this morning. Selling into strength remains the most viable strategy. Initial resistance begins around 1.2380 and up towards 1.2475 which is a basis of overhead supply throughout the past week.
- AUD/USD the sharp bear failure has been a significant move and the market is now on the retreat to test the key support around 0.6965/0.7000. Below 0.6965 opens the next support at 0.6775. Technicals point towards mounting downside pressure now. Initial resistance is now 0.7030/0.7085.
Commodities: Precious metals continue to struggle against the ongoing USD strength. Oil is just consolidating around range resistance.
- Gold has fallen away and is now testing the support around $1861/$1871. A move below $1850 opens $1820/$1825. Momentum is increasingly correctively configured to suggest that rallies are a chance to sell. There is growing resistance around $1890/$1920.
- Silver continues to fall towards a test of the key support around $22.00/$22.10. With the recent bull failure and stream of negative daily candles, intraday strength remains a chance to sell. Below $22.00 opens $21.40. Initial resistance is at $22.63 with mounting resistance between $23.25/$23.55.
- Brent Crude oil rally towards the 6-week range resistance (around $116) has just started to consolidate this morning. If this consolidation continues there will be questions surrounding the ability to breakout. A close above $116 is needed to open the next resistance around $121/$124. Initial support is around $110/$111.
Indices: Wall Street is increasingly close to a significant break below support. European indices are also lower.
- S&P 500 futures have moved below the important support band 4100/4140. Friday’s session was already the lowest close since May 2021 but a move below 4055 would add confirmation of a downside break. Momentum is bearishly configured and intraday rallies are struggling for any traction before selling pressure resumes. Initial resistance is at 4152.
- DAX having formed a “bearish engulfing” one-day candlestick at the four-month downtrend, the DAX has fallen decisively once more. A closing break below 13,550 (the April reaction low) would be the next step lower. Momentum is negatively configured to suggest that rallies remain a chance to sell. Initial resistance is at 13,790/13,900. The next support is at 13,275.
- FTSE 100 has turned decisively lower in the past few sessions and is now set to test the support at 7299. Momentum has turned into a corrective configuration in the past week and suggests that near term rallies will struggle. Below 7299 the next support band is 7050/7075. Initial resistance is at 7422/7440.
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