What are we looking at today:
- Market sentiment looking slightly cautious: With the oil price having rallied strongly again, equity markets are starting to look more cautious. This is also coming with USD beginning to build support.
- Biden telephone call with President Xi: The two presidents are set to speak today as the US continues to warn of Chinese support for Russia’s aggression.
- Data trading: It is a quiet European morning for the calendar. Into the US session, Canadian retail sales could potentially impact CAD trades.
Throughout the week, market sentiment has been boosted by the prospect of progress in the peace talks between Russia and Ukraine. However, markets seem to be talking the Russians at their word, something that could prove costly, given consistent lying and subterfuge in recent weeks. The oil price pulling strongly higher yesterday suggests that perhaps broader sentiment may be about to turn negative once more. For major markets, we see indices tailing off in their recent rallies, whilst the US dollar is also beginning to build support again.
The economic calendar is quiet this morning. Into the US session, traders will be looking at Canadian Retail Sales potentially impacting CAD whilst US Existing Home Sales is relatively lower tier US data and is unlikely to impact USD too greatly.
Sentiment begins to sag slightly: The positive sentiment of recent sessions is looking more cautious this morning. The oil price has risen sharply in the past 24 hours and the USD is also showing signs of building support.
Treasury yields picking up slightly: Yields across the curve are just picking up slightly again today. This will help to lend support to the USD.
Oil price moving higher again: Oil rallied by c. +9% yesterday and is higher again today. This is helping to support commodity currencies, however, is a warning sign for the broader sentiment. The sharp correction earlier this week was driven by the prospect of progress in peace talks. This progress is seeming to be questioned now.
Russia/Ukraine war continues: Few new headlines of note. The attacks on Ukraine continue, but the Ukrainian forces continue to resist. Reports suggest Russians are making very slow gains but are being heavily restricted. The search for a diplomatic solution continues, but just how genuine the Russian intentions remain to be seen.
US President Biden to speak to China President Xi today: The US is concerned that China is or may support Russia in its aggressions.
The Bank of Japan maintains monetary policy, as expected: No changes, with rates kept at -0.10% and the 10-year JGB yield target at zero. Once more the BoJ continues to say that it will take further easing steps as necessary. There was also a slight downgrade of the economic assessment.
Quadruple witching today: This is where options contracts across indices and equities expire on the same day. It can lead to spikes in the volatility of market pricing.
Cryptocurrency is beginning to slip lower again: Bitcoin rallied strongly earlier in the week but is beginning to consolidate just under $41,000.
- Canadian Retail Sales at 1230GMT – sales are expected to increase by +2.4% in January (-1.8% in December)
- US Existing Home Sales at 1400GMT – sales are expected to decline by -1% on the month to 6.10m in February (from 6.5m in January).
Major market outlook
Broad outlook: Sentiment is looking cautious and is threatening to turn sour. USD is beginning to build support and oil is higher again.
Forex: Commodity currencies (AUD, NAD, CAD) are benefitting from the stronger oil price, but the USD is broadly starting to pick up again.
- EUR/USD has been strong in recent sessions but has just turned back from around the important resistance at 1.1120. An unwinding move is developing this morning and a test of initial support at 1.1040/1.1060 is being seen. Uptrend support is around 1.0975 today, with 1.0900 a key higher low.
- GBP/USD has been volatile in the wake of the dovish hike from the Bank of England. A “long-legged doji” reflects uncertainty, with the market buzzing around the flat line early today. A failure yesterday has left resistance around 1.3195/1.3210, with 1.3085/1.3125 an initial basis of support. It is a mixed outlook for now.
- AUD/USD has rallied sharply in the past couple of sessions and the bulls will be eyeing the 0.7440 reactions high. However, the hourly chart does show a rolling over and a potential corrective move under 0.7370 could swing the market lower once more.
Commodities: Precious metals are slipping back slightly. Oil has rallied hard in the past 24 hours.
- Gold has rebounded from the $1880/$1900 support but has just started to ease back from a rebound high of $1950. Given the importance of resistance at $1958/$1970 this is an important moment. A failure back under $1926 would hint at growing corrective momentum again.
- Silver rally has just started to falter around the neckline resistance of the top pattern at $25.30. This also comes at the resistance of the 55 periods moving average on the 4-hour chart. As with gold, this has the feeling of an important crossroads in the outlook. There is pivot support of around $25.00 and a breach would suggest renewing downside. Resistance at $25.53.
- Brent Crude oil has recovered strongly to move into the key resistance band $107.30/$111.65. If oil can rally through the lower high at $115.55 it would be a key breakout. Volatility remains high for intraday price moves.
Indices: There is a sense of caution drifting into markets this morning, which is consolidating the recent recovery moves.
- S&P 500 futures have just eased back from a test of the key 4418 resistance. The market is also around the downtrend resistance of the 2022 trend lower. This makes the next move an important one. A bull failure and break back under 4435 would be disappointing and question the recovery. Closing above 4418 would be an important bullish development.
- DAX recovery has been impressive but is just starting to ease back towards the breakout at 14,123 to leave resistance at 14,560. The recovery uptrend comes in at 14,150 today. For now, this is a consolidation and a positive response from the bulls would suggest further gains towards the key 14,800 resistance area will be seen.
- FTSE 100 has recovered impressively with another strong bull candle yesterday, but the market is just easing back slightly this morning. The recovery uptrend is around 7235 which is in the recent breakout support band 7224/7264. The next important resistance overhead is at 7460.