After a week of high volatility and wild swings in major markets, there is a sense that markets are beginning to settle down slightly. Perhaps this is set to be a period of “wait and see” now. The Russian invasion is not advancing as quickly as perhaps Putin would have liked, but it is continuing. The world waits to see what horrors might be unleashed if the advance continues to be held up to the frustration of the Russian President. 

For markets, we see indices beginning to look more supported (at least for now) whilst major forex is also more settled. However, the themes of EUR underperformance and AUD outperformance are once more playing out this morning. The sky-high oil price is also a crucial factor that will play into the monetary policy decisions of major central banks. For now, according to Fed chair Powell, US rate hikes are on track.

For data traders, we are on the lookout for the services PMIs (and ISM data). With Eurozone and UK data being just final readings, the main focus will be on the US ISM data. Higher than consensus would be USD positive.


Sentiment begins to settle: European indices are ticking higher again, with US futures holding ground. However, the oil price continues to climb sharply. There is a mild USD positive bias in forex, aside from the continually outperforming AUD.

Treasury yields stable this morning: Yields swung back higher yesterday with the FOMC on course for its rate hikes. However, yields are all but flat this morning. [Sentiment stable] 

Fed chair Powell says rate hikes are on track: In the first of his two Congressional testimonies, Fed Chair Powell said that the FOMC would start to hike rates in March despite the Ukrainian war. He cited high inflation and an extremely tight labor market. The comments were seen as in line with expectations. He also said that 2.0% to 2.5% was the neutral rate range. Powell’s second testimony to the Senate Banking Committee is today at 1500GMT. 

Bank of England’s Tenreyro on inflation: Inflation pressures have intensified, with the increase in the oil price increasing inflation and dampening economic activity. 

Fed Beige Book: Expects a tight labor market and strong wage growth to continue. 

Final Eurozone Services PMI mild downward revision: Final Services PMI saw a slight negative revision to 55.5 (from 55.8 flash) with the composite also down to 55.5 (from 55.8 flash) [EUR mild negative]

Oil continues higher: Brent Crude is another +4% higher today. 

Cryptocurrency rally stalls: The Bitcoin rebound has stalled in the past 24 hours, pulling back into the $43,000/$44,000 range. 

Economic Data:

  • UK final Services PMI (at 0930GMT) Consensus is no revision to the 60.8 flash reading. The final Composite PMI is also expected to be unrevised from the flash at 60.2
  • Eurozone Unemployment (at 100GMT) Analysts are looking for the rate to remain at 7.0% in January.
  • ISM Services (at 1500GMT) The consensus is expecting a slight increase to 61.0 (from 59.9 in January)
  • US Factory Orders (at 1500GMT) Consensus is looking for an increase of +0.7% in January (after a decline of -0.3% in December).


Broad outlook: Sentiment is relatively stable coming into the European session. 

Forex: EUR is again the main underperformer. AUD and USD are outperforming.

  • EUR/USD has fallen over with an intraday rally into 1.1120/1.1140, with the price drifting lower once more today. A restest of yesterday’s low at 1.1057 is likely, but 1.10 seems to be on now. Rallies are a chance to sell. 
  • GBP/USD has rebounded impressively from 1.3270 however unless there is a move above 1.3440 that is sustained then this still looks to be a rally that will falter. Moving back under 1.3355 opens pressure on 1.3470 again. 
  • AUD/USD is continuing to test the resistance of the key resistance band 0.7270/0.7315. This marks the highs of a three-month trading range and the strength of performance for AUD is impressive. The importance of near-term support at 0.7260 is growing. Reaction to the 12-month downtrend (today at 0.7330) will be important. A close above 0.7315 opens 0.7370 next resistance.


Commodities: Precious metals are consolidating, whilst oil continues to soar higher.

  • Gold has begun to consolidate back from $1945 in the past couple of days. However, the price is holding above $1914 initial support and above the four-week uptrend support around $1905 today. The technical outlook suggests that near term unwinding corrections are a chance to buy. Support at $1877/$1886 is still key. 
  • Silver remains strong and looks to continue to find buyers into weakness for a test of $25.53/$25.61 resistance. With the strength of the 4-week uptrend, near term unwinding moves are still a chance to buy for continued testing of the medium-term trading range resistance.
  • Brent Crude oil continues to run higher having added over 20% in the past three days. There is a hint of negative divergence (slowing upside momentum) on the hourly chart which may hint at some potential profit-taking. There are a couple of negative candles on the 4-hour chart forming too. If the price begins to pull back, the move could be sharp. Initial support is at $116.30 and $109.35.

Indices: Further signs of near-term support but the recovery is struggling.  

  • S&P 500 futures continue to test $4398 resistance but cannot breakthrough for what would be a sign of improvement. The downtrend of the past two months is up at 4460 and given the negative configuration on momentum, there is still no sustainable momentum to recovery yet. The importance of the support of near-term lows between 4227/4275 is growing.
  • DAX remains a struggle for the bulls and a recovery is some way off. A two-week downtrend comes in around 14,250 today but the run of lower highs is prohibitive to any sustainable recovery. Initial resistance is at 14,123 this morning and we favor a retest of 13,715 and below.
  • FTSE 100 fluctuations continue this morning and the market is struggling with near-term moves into 7440/7495. A move above 7570 would be needed to suggest serious positive traction forming again. Initial support at 7269 above the key 7170.

Support and Resistance levels