What are we looking at today:
- Market sentiment settled but with a slight USD positive bias: Major markets are looking relatively settled this morning. Major forex is just beginning to take a USD positive bias as the European session gets going. Commodities are mixed. European indices are slightly higher, but US futures are a touch lower.
- Another speech by Fed chair Powell: Powell speaks again today at 1200GMT. Markets moved significantly on Monday when Powell spoke.
- UK Spring Budget: Chancellor of the Exchequer Sunak (finance minister) gives his fiscal update, including potential changes to taxation.
- Data trading: It is another quiet day on the calendar. US Hew Home Sales is the data for the US session, however, oil traders will be watching the EIA crude oil inventories.
Despite Treasury yields continuing to climb higher (the 10-year yield has jumped by almost +0.25% in just over two days), there is still an appetite to buy equities as indices move higher. Fed chair Powell induced the sharp run higher on Treasury yields on Monday and will again be eyed with another speech today Traders of UK assets will also have a busy day. Initial reacting to UK inflation coming in higher than expected will play out this morning, but later there is also the UK Government’s fiscal budget update.
Moving into the European session, there is an edge of USD positive bias forming across major forex. Precious metals are mixed, but the oil price is again ticking higher. US index futures are beginning to slip back, so it will be interesting to see if the early gains on European indices can hold.
The economic calendar is again somewhat quiet today, but there are more Fed speakers to watch out for. For the data, US New Home Sales and EIA Crude Oil Inventories will be watched. However, Fed Chair Powell has another speech early in the US session. Powell caused bond yields to spike on Monday with a hawkish speech. Any further snippets on interest rate moves would be the market moving again.
Sentiment starting to favour USD positive trades: A USD positive bias is emerging as the European session develops. US index futures are slipping slightly and this may begin to weigh on the initial gains on European indices. Commodities are mixed.
Treasury yields continue to tick higher: Yields are again edging higher, albeit not at the strength of earlier in the week. The 10 year Treasury yield is around +0.25% higher this week, with the 2-year yield +0.26%.
FOMC speakers increasingly hawkish: More Fed speakers are favouring more aggressive rate hikes. Mester (2022 voter, hawk) favours +50bps at some meetings. Perhaps more interestingly, Daly (non-voter in 2022, leans dovish) said that she is looking at whether interest rates need to go above the neutral rate.
Russia/Ukraine war latest: Zelensky noted that talks are difficult and confrontational.
Oil price in choppy consolidation: Brent Crude has topped out at $120.25 for now, but is now fluctuating in consolidation between $113.40/$118.40.
Cryptocurrency slightly lower: Bitcoin is slightly lower this morning, but holding just above $42,000.
- New Home Sales (at 1400GMT) – sales are expected to have improved to 810,000 in February (from 801,000 in January)
- EIA Crude Oil inventories (at 1430GMT) – oil stocks are expected to increase by +0.1m barrels (after a 4.3m barrels increase last week).
- Eurozone Consumer Confidence (at 1500GMT) – Confidence is expected to fall sharply in March to -15 (from -8.8 in February).
Major market outlook
Broad outlook: There is an edge of USD positive bias suggesting a slight risk negative move. This is reflected in US index futures.
Forex: USD is outperforming slightly across major forex.
- EUR/USD regained a degree of support yesterday but continues to trade under the six-week downtrend and below the 1.1120 key resistance area. from the important resistance at 1.1120. A close below support around 1.1000 would suggest a negative bias towards the next support area between 1.0900/1.0950.
- GBP/USD broke decisively through key resistance at 1.3195/1.3210 to complete a small base pattern and imply recovery towards 1.3400. Reaction to today’s early unwinding move will be key as this old resistance now becomes supportive. Expect a choppy session with the UK Budget in addition to the inflation reaction. Resistance initially at 1.3298.
- AUD/USD has broken out above 0.7440 for a five-month high. Reaction to a pullback will now be key as USD has started to strengthen this morning. There is good support now in the band 0.7360/0.7440 and holding the support around 0.7360 will be important. The next key resistance is 0.7555.
Commodities: Precious metals continue to consolidate in ranges. Oil has started to develop a choppy consolidation.
- Gold has continued to build a ranging phase, now between $1895/$1950. With the daily RSI hovering around 50, there is more of a mixed outlook forming. The 4-four chart reflects a marginal downside bias in the range. Initial support at $1910.
- Silver has built a consolidation between $24.45/$25.53. With the RSI around 50 on the daily chart, there is an uncertain feel developing. The market has ticked slightly higher early today, but rallies are fading between $25.30/$25.53.
- Brent Crude oil has pulled back from resistance around $120/$122 and has been choppy over the past day or so. Intraday swings continue and the market is settling between $113.40/$118.40.
Indices: Recoveries are showing signs of losing some momentum this morning. However, GFSE 100 remains strong.
- S&P 500 futures remains positive following the break above 4484 resistance which opened 4585 as the next key resistance. However, there is an early consolidation today and the market is just easing back slightly. Reaction to support around 4418 will be a key gauge.
- DAX has lost some of its momentum in recent sessions, and although remains supported above the 14,100 breakouts, there is a sense of consolidation starting to build. The bulls need to break through 14,560/14,585 to re-open moves towards the key 14,800 resistance area.
- FTSE 100 remains the exception, with a continued run higher of positive candlesticks on the daily chart. The move through initial resistance at 7496 has now opened key resistance at 7560 as intraday weakness continues to be bought into.
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