Exciting Developments in US Equities

US equities delivered a remarkable performance yesterday, with the S&P CFD making a strong comeback by reclaiming the 200-day moving average. It also retested crucial trend lines and horizontal resistance levels near the 4330 mark. The current outlook suggests that equities may continue their upward trajectory as long as the VIX (Volatility Index) and US Yields remain subdued. However, short-term data risks still loom on the horizon.

Treasury Yields Maintain a Downward Trend

Treasury yields remain pinned near recent lows, influenced by the QRA and FOMC actions earlier in the week, which have provided bond buyers with some relief. The upcoming US jobs report, set to be released today, poses the greatest risk to the movement in yields and is likely to set the tone for the markets in the coming trading days.

DXY’s Steady Position

The DXY, a measure of the US dollar’s value against a basket of major currencies, stubbornly hovers around the psychological level of 106. Today’s NFP (Non-Farm Payrolls) report will be the catalyst that determines whether the USD strengthens or weakens from this critical pivot point. Our preference is to consider shorting the USD if the data disappoints across the board. However, we remain cautious about chasing a higher USD if the data exceeds expectations, given the current positioning and market sentiment.

Gold: An Asset to Monitor

In other markets, gold continues to be an asset worth watching closely. With 1-month risk reversals for gold steadily decreasing, there is a potential for mean reversion. As always, it’s essential to await a trigger for any significant movement. A robust jobs report today could serve as a possible catalyst for a mean-reversion lower in gold.

FX Market Update

In the foreign exchange market, the New Zealand Dollar (NZD) is leading the major currencies higher, although the catalysts behind this movement are currently sparse. On the other hand, the USD is leading the majors lower after this week’s QRA and FOMC policy decisions.

Today’s Data Releases

  • Our expectation is to see USD shorts in the event of disappointing data. This choice is driven by positioning and the current market risk sentiment.
  • Likewise, we would expect to see potential upside opportunities in equities if the data falls short of expectations.

Stay tuned for more market insights and updates as we navigate today’s developments.

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

All trading carries risk.