The first signs of a near-term pullback on Wall Street have come in. The reaction of the bulls today will be important to see whether this move gathers momentum. USD is looking to build some support today too. US inflation is the key focus on the economic calendar.
- Main drivers: Cautious trading continues; China inflation jumps more than expected; US inflation in focus; bond yields rebounding; on the economic calendar, US CI and Weekly Jobless Claims are later.
- Cautious early trading: Wall Street dropped back for the first time in nearly two weeks yesterday. Markets are consolidating today. Caution across asset classes, with USD tentatively higher.
- China inflation jumps: Both CPI and PPI rise more than expected [marginally risk supportive].
- US inflation in focus: US inflation is expected to jump to levels not seen since 1990 (on the headline CPI) today. Markes will be watching for how widespread the jumps are across economic sub-sectors [USD volatile].
- Bond yields recover initially: The US 10 year yield is rebounding from yesterday’s six-week lows. This is helping USD rebound, but the moves are tentative. [USD positive, for now]
- Central bank speakers: there are no central bank speakers due today.
- Economic Data:
US Weekly Jobless Claims at 1330GMT expected to reduce to 261,000 (from 269,000 last week)
US CPI at 1330GMT with headline inflation expected to increase to 5.8% (from 5.4%) and core inflation expected to increase to 4.3% (from 4.0%)
- Broad outlook: The threat of near-term profit-taking on indices. USD trying to recover.
- Forex: USD has shown signs of regaining support this morning.
EUR/USD rebound is just failing around 1.1610/1.1615 resistance and dropping back. A mild negative bias but we still play this as a range trade between 1.1515/1.1690 for now. Above 1.1615 would continue the recovery.
GBP/USD key pivot resistance around 1.3570/1.3600 is the barrier as the market falls away again. There is a continuing negative bias. And we prefer to sell into the strength. We favor pressure on 1.3410 in due course.
AUD/USD corrective bias continues as resistance has formed around 0.7420 for another lower high. We still favor selling into strength.
- Commodities: precious metals are just easing back from key resistance, oil outlook is strengthening
Gold is testing the crucial resistance at $1834. Initially backing away this morning, but whilst the support around $1800/$1810 holds we are positive for the recovery and now look for a supported weakness as a chance to buy.
Silver just easing back from key resistance $24.50/$24.80. We now look for buying opportunities whilst the support at $23.75/$24.00 remains intact. This is a key moment for the near to medium-term outlook.
Brent Crude oil after a very volatile period, three strong bull daily candles have improved the outlook. Bulls will now look to hold above $84.50/$85.10 which is initial support.
- Indices: Finally signs of a near-term correction on Wall Street, not yet reflected in Europe though.
S&P 500 futures pulled back from the all-time high of 4711 for the first negative close in 9 sessions. We are watching today’s intraday low of 4658. Initial support 4613/4627, with key support starting around 4590.
DAX still consolidating between 15,980/16,107 but remains stretched and any Wall Street correction will weigh on the DAX near term. We would then look to buy into weakness. Good support 15,755/15,845.
FTSE 100 with a positive reaction early today, the bulls are still happy to support the market. Any unwind towards 7215/7246 support is a chance to buy for the medium-term bullish breakout targeting 7700.