What are we looking at today:
- US dollar gains have stalled, for now: USD has been strong, but this move is just seeing a slight unwind today. With Treasury yields still moving higher, this unwinding move on the USD may be short-lived.
- Oil price paring yesterday’s selling momentum: Oil fell sharply yesterday, but there is a slight pullback today. Reaction around $113.40/$115.75 resistance will be key.
- Russia/Ukraine peace talks making progress: There are signs that Russia genuinely is engaged in a process of de-escalation. The talks in the coming days will be important in establishing this.
- Data trading: In the US session, the US Consumer Confidence is the big data focus. Consensus is expecting a deterioration to the lowest level in 12 months. Any negative surprise would be a hit to broader sentiment.
Is it possible that the peace talks could be finding some common ground? The next couple of days of negotiations could be crucial. It appears that Russia may be willing to yield on some of its red lines (a “denazified” Ukraine for one). But we might know more in the coming days.
European indices continue to grind higher this morning. Markets had been in a holding pattern in recent sessions, but a strong move higher yesterday is continuing this morning. It means that key resistance levels are now in sight for the S&P 500 futures and German DAX especially. The oil price pulling sharply lower by -9% yesterday has played a role in this move and although there is a minor pullback rally this morning, there are signs that oil could be turning corrective again. There has been a renewed strength in the US dollar in recent sessions, although there seems to be a kickback against this move today. However, with US Treasury yields still climbing, we expect any USD weakness to be short-lived.
The economic calendar is weighted into the US session. US Consumer Confidence is expected to fall again in March, to 12-month lows. The JOLTS data is expected to show jobs opening reducing slightly but the quit rate remaining steady in February.
The sentiment is positive: Indices are higher again with the oil price still trending lower. Precious metals are lackluster whilst the US dollar is also slipping back.
Treasury yields ticking higher again: Shorter-dated yields continue to rise, and more aggressively than longer-dated yields. The curve continues to flatten and spreads narrow.
Russia/Ukraine peace talks: Signs of progress continue, with Russia seemingly willing to drop certain conditions.
Oil price still under downward pressure: A sharp decline in oil yesterday as concerns over demand in China from lockdowns came amid a potential easing of geopolitical tensions.
Cryptocurrency rallied decisively yesterday, more settled today: After yesterday’s strong gains, we are seeing Bitcoin unwind slightly this morning.
- US Consumer Confidence (at 1500GMT) – Consensus is expecting a reduction to 107.0 in March (from 110.5 in February)
- US JOLTS (at 1500GMT) – Job openings are expected to fall slightly to 11.1m in February (from 11.3m in January), with the quit rate remaining steady at 4.3m (4.3m in January).
Major market outlook
Broad outlook: positive sentiment with USD unwinding gains.
Forex: USD is slightly underperforming, with the massively oversold JPY outperforming on a near term unwind.
- EUR/USD breached support at 1.0960 but has not confirmed the move, with a bounce this morning back towards 1.1000 and the 8-week downtrend. Resistance at 1.1045 is increasingly important near term. For now, we look to use near-term strength as a chance to sell. A close below 1.0960 would open the next support at 1.0900, with a test of the 1.0805 key low back in play.
- GBP/USD has broken the key near-term support band 1.3085/1.3120 and is now consolidating. Momentum is increasingly corrective and we look to use near-term gains as a chance to sell for a test of 1.3000 in due course. Initial resistance is now 1.3085/1.3120.
- AUD/USD has lost upside momentum just under the 0.7555 key resistance to add resistance at yesterday’s high of 0.7540. Although there is a slight tick back higher this morning, the potential for a near-term pullback into 0.7360/0.7425 is growing. A move below 0.7466 would suggest a correction is forming.
Commodities: Precious metals trade with a near-term corrective bias, as does oil now.
- Gold is faltering on a near-term basis, forming intraday lower highs and putting pressure on $1910 support. A breach would turn the market increasingly corrective for a test of key support at $1895.
- Silver has fallen sharply back from $25.85 and is falling through the old ranging range of last week and is now eyeing a test of the support between $24.45/$24.56. A breach of $24.45 would be a key near to medium-term outlook change.
- Brent Crude oil fell sharply yesterday but is now looking to rebound this morning. The move is now up from yesterday’s low at $109.45 and is into the resistance band of overhead supply $113.40/$115.75. A bull failure in this band would confirm the new corrective outlook. The market remains highly volatile.
Indices: Indices are edging higher towards a test of key resistance levels.
- S&P 500 futures have gained for three solid sessions in a row and are now shaping for the test of the key February resistance at 4585. How the market reacts to this level will be a key gauge in the coming days. The 4-hour chart shows positive momentum and buying into weakness. Initial support is at 4493/4510. Above 4585 would be a key improvement and opens 4671 and 4739 next resistance levels.
- DAX has broken higher from the consolidation between 14,100/14,585. This implies a +475 tick upside target but more importantly a test of the three month downtrend and key resistance band 14,800/15,000. Support is now in place between 14,390/14,585.
- FTSE 100 remains a little sluggish in the rally but does continue to make gains and is eyeing a test of the key resistance of the late February high at 7559. There is still a mild positive bias to momentum as the market edges higher. Initial support at 7457.
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