What are we looking at today:

  • Market sentiment is holding up well: Despite bond yields shooting higher in the wake of Powell’s speech, equity markets are holding up well today. However, a stronger USD, higher yields and the strength of the oil price are all ominous signs that are negative for sentiment.
  • More Fed speakers: Fed’s Mester, Daly and Williams all speak today.  
  • Data trading: It is another quiet day on the calendar, but it may be worth watching the Richmond Fed Manufacturing data for any further signs of a slowdown.  


Fed chair Powell has shaken up bond markets once more. An overtly hawkish speech has placed the prospect of +50 basis points hikes at upcoming meetings for the FOMC. Bond yields have spiked higher once more, with the Treasury yield curve moving ever closer to inverting. An inverted yield curve is a prime signal for a subsequent recession. 

The USD has also strengthened once more, with the Japanese yen coming under the most pressure on major forex. USD/JPY accelerating above 120 is a six-year high. Other significant moves we have seen include the strong rally on oil which rallied almost +8% yesterday. However, volatility remains elevated for oil and in the past few hours, further strong gains have pared. This move will need to be watched for whether it turns into something more considerable.

The economic calendar is rather quiet again today. The Richmond Fed Manufacturing Index is expected to turn negative, and any downside surprise to this would be bearish for broader sentiment. There are more Fed speakers today. Daly (non-voter, dove) Mester (voter, hawk) and Williams (voter, leans dovish) are on the docket. 

Today's news

Sentiment looks fairly steady, for now: Equity markets are still looking reasonably positive this morning. However, with bond yields continuing to rising and a stronger USD, the negative signals are flashing.  

Treasury yields spike higher, flattening the yield curve more: Yields have shot higher since Powell’s speech yesterday. The 10 year Treasury yield closed +15bps higher and has continued to 2.34% today. The 2 year Treasury yield was +16bps higher yesterday and is up to 2.17% today. This means a further tightening of the spread (now just +17 basis points) and flattening of the yield curve. 

Fed chair Powell strikes a hawkish tone: Powell noted yesterday that the “labor market is very strong and inflation is much too high”. The Fed could “more aggressively” raise rates by more than a +25bps hike at “a meeting or meetings”. This is the most hawkish we have heard from Powell and has sent bond yields spiking higher.  

Russia/Ukraine war latest: Ukrainian President Zelensky is prepared to ensure a commitment for Ukraine not to join NATO.   

Oil price continues to pull sharply higher again: We saw a gain of almost +8% on Brent Crude yesterday. An early spike higher again this morning has just been reversed though. This remains a highly volatile market.

EU looking to ban the purchase of Russian oil: Support within the EU is growing, but there are a few dissenting voices, with Hungary thought to be a stumbling block.

Cryptocurrency jumps: Bitcoin is pulling higher and a close above $42,500 would be a near-term positive move. Key resistance remains at $45,800. 

Economic Data:

  • Richmond Fed Manufacturing (at 1230GMT) – the survey is expected to turn negative at -1 in March (from +1 in February) 

Major market outlook

Broad outlook: Sentiment is holding up well today, despite the continued pull higher on Treasury yields.

Forex: USD continues to strengthen, especially versus JPY. However, NZD, AUD and GBP are outperforming.

  • EUR/USD has deteriorated in the past couple of sessions and fallen further back from the important resistance at 1.1120. This now means a broken recovery uptrend and re-affirming the six-week bear trend. Breaching support around 1.1000 could now mean that this becomes a basis of resistance. The next support area is between 1.0900/1.0950.
  • GBP/USD has been choppy under the resistance at 1.3195/1.3210 in recent days, a breakout would complete a small base pattern. An intraday fall and subsequent rebound are now putting more pressure on the recovery trend. The uptrend comes in around 1.3135 this morning, with 1.3087 as a key higher low.
  • AUD/USD has continued to hold up well in the past few sessions. A consolidation just under the key support at 0.7440 is holding ground, and the potential for a decisive upside break is still there. However, holding the support around 0.7360 will be important. 

Commodities: Precious metals continue to consolidate in ranges. Oil has dropped back from earlier gains.

  • 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. Initial support at $1918 may come under threat as the market has slipped lower this morning.
  • Silver has broken a corrective downtrend and is beginning to look more range-bound. Consolidation is forming between $24.45/$25.53. With the RSI around 50 on the daily chart, there is an uncertain feel developing. Initial support at $24.82 protects Wednesday’s low of $24.45. Resistance is at $25.30/$25.53. 
  • Brent Crude oil has driven strongly higher in recent days but has just begun to pare some of these gains this morning. The reaction to the breakout above $115.55 will be an initial gauge. However, resistance is intact around $120/$122. Volatility remains high for intraday price moves.

Brent Crude Oil

Indices: Recoveries are holding and are even threatening resistance this morning.

  • S&P 500 futures fell initially around Powell’s speech yesterday but the buying pressure has returned and a move above 4484 resistance would be the next step forward. Holding on to support around 4418 is important for continued recovery and moves towards 4585.
  • DAX has lost some of its momentum in recent sessions, but holding above the band of support of around 14,100 maintains the positive outlook for recovery. The bulls need to break through 14/560/14,570 to re-open moves towards the key 14,800 resistance area.
  • FTSE 100 recovery remains on track. Even as other major indices have stalled in recent days, FTSE has pushed for upside as intraday weakness continues to be bought into. Initial support of 7405/7415, with the uptrend coming in around 7345 The initial resistance at 7496 protects key resistance at 7560.

Support and Resistance levels