Markets are taking a gentle run into the new trading week. Indices are mixed, whilst the USD strength that had threatened in the wake of Friday’s payrolls report has failed to kick on. This is allowing precious metals to tick higher and commodity currencies to outperform.
It is a light economic calendar today with the testimony of ECB President Lagarde to the European Parliament being the only scheduled event of significance for traders.
Risk appetite is mixed: Wall Street futures have been fluctuating this morning, and are currently slightly weaker. European markets are fluctuating. USD is weaker versus pro-cyclical currencies but holding ground versus EUR. Precious metals are higher, but oil is pulling back.
Treasury yields showing little direction: After sharp moves higher on Friday in the wake of payrolls, Treasury yields are steady this morning. This is playing into the lack of direction on equity markets. [Risk neutral]
UK Prime Minister Johnson ever closer to a leadership challenge: The PM’s office is said to be bracing itself for a vote of no confidence [GBP still not impacted yet]
US assessment of Russia/Ukrainian conflict is uncertain: Suggestions are that conflict could be in days and weeks, or could be done through diplomacy. [Risk uncertain]
ECB President Lagarde testifies later: Lagarde is testifying before the European Parliament’s Economic and Monetary Affairs Committee. If she discusses the potential tightening of monetary policy there is likely to be a reaction on EUR. [EUR volatility elevated]
- Eurozone Sentix Investor Confidence (at 0930GMT). Confidence is expected to improve slightly to 15.1 (from 14.9)
MAJOR MARKETS OUTLOOK
Broad outlook: Mixed sentiment this morning. USD is broadly weaker apart from a weaker EUR. Precious metals are higher. Indices fluctuating, but Wall Street futures are slipping back slightly.
Forex: USD is broadly weaker across major forex, except for mild profit-taking on EUR.
- EUR/USD has failed to overcome the key resistance at 1.1482, for now. The market is just tailing off slightly and could see some near-term profit-taking. If so, reaction around the old pivot band 1.1360/1.1385 will be key. A breakout above 1.1480 opens 1.1525 as the next resistance.
- GBP/USD has begun to form some support around 1.3500/1.3525. Holding this level will be key as to whether this move is lower in the wake of the Bank of England becoming decisively corrective again. A lower high under the 1.3625 high, potentially between 1.3550/1.3580 would be a concern for the bulls.
- AUD/USD has picked up from Friday’s reaction low at 0.7050 and is now looking to test resistance at 0.7110/0.7150. Reaction to this resistance will be a key gauge for a choppy near-term outlook.
Commodities: Gold and silver are edging higher again. Oil is easing back from multi-year highs.
- Gold has been volatile in recent sessions, but the buyers continue to be tempted between $1790/$1800. A move above $1815 would open $1828/$1832 again. A close below $1800 would be disappointing now.
- Silver has rallied to break a near three-week downtrend and is looking now positive this morning. A decisive move above $23.04 would complete a small base pattern. Initial support $22.43/$22.64.
- Brent Crude oil has just eased back from multi-year highs today and could be the second session where prices above $94.00 have been rejected. Technically the outlook is strong but stretched and another bout of near-term consolidation (or small unwind) could be seen. Breakout support is $89.50/$91.20.
Indices: Uncertainty on Wall Street with elevated volatility. FTSE 100 is holding up OK but the DAX has fallen back sharply early today.
- S&P 500 futures reacted with uncertainty and elevated volatility to the payrolls report. However, there is a sense that this could be settling down this morning with support at 4471 holding. The bulls cannot break 4525/4532 resistance to regain the upside momentum. Support at 4438 is key.
- DAX has once more seemingly found buyers willing to support the market on a test of 15,000 area. The sharp selling of recent sessions has settled but for now, the market is consolidating. A break above 15,250 is needed to improve initially but further resistance is at 15,300 and then 15,550. Initial support at 15,065.
- FTSE 100 is into consolidation mode amidst a run of choppy but indecisive candles on both the daily and four-hour charts. Support at 7502 is holding, but the bulls are struggling to sustain moves into 7570/7600. We are neutral for now.