The huge sell-off on Wall Street continued into the close on Friday but with the US futures ticking higher today a sense of an oversold rally may kick in. However, with the Fed meeting looming large on Wednesday, it might be a struggle to sustain positive traction. The US dollar (USD) is edging slight outperformance today but moves are fairly tentative early in the European session.
The Flash PMIs are in focus for the economic calendar today. Australian and Japanese data has disappointed overnight, so can the UK and US improve the mood?
Main drivers: Market sentiment still uncertain; Flash PMIs in focus for major economies; Crypto remains volatile; Economic calendar: Flash PMIs for UK and US.
Sentiment mixed: US futures have rebounded this morning from Friday’s oversold position. European markets are lower, playing catch up to the late selling on Wall Street on Friday. USD is a mild outperformer on forex majors. On commodities, oil is rebounding, and precious metals are mixed.
Market moves are tentative ahead of the Fed: Any risk recovery, even from oversold may struggle for traction ahead of the FOMC meeting on Wednesday.
US bond yields drop again: An early move lower on the US 10 year yield is the third session in a row of declines.
Flash PMIs disappoint: Flash PMIs for both Japan and Australia have missed estimates overnight. Eurozone flash PMIs were mixed with manufacturing improving but services disappointing. The focus will be on UK and US later [Risk negative]
Russia/Ukraine tensions remain high: The US has authorized the departure of embassy staff in Kyiv, Ukraine [Mild risk negative]
Bitcoin down again since Friday: Another fall over the weekend and into Monday, but prices are relatively stable on Monday morning, up from the weekend low of $34,000 [Bitcoin lower but stable, for now]
Central Bank speaks: There are no Fed speakers scheduled for today, the members are in a blackout period in front of the FOMC meeting on Wednesday.
- UK Flash PMIs (at 0930GMT). Manufacturing is forecast to remain at 57.9 in January (57.6 in December); Services are expected to improve to 54.8 from 53.6 and the Composite improve to 55.0 in January (from 53.6 in December)
- US Flash PMIs (at 1445GMT). Manufacturing is forecast to drop to 56.7 in January (57.7 in December); Services are expected to drop to 55.0 from 57.6.
Broad outlook: Sentiment is mixed, with US futures higher but also a minor outperformance on USD. Commodities are mixed.
Forex: AUD and NZD are underperforming again, with JPY and USD performing well in addition to CAD (due to the higher oil price).
- EUR/USD is lower but for now, hangs on to the support of a shallow uptrend channel. Support at 1.1300 continued to be watched, with 1.1270/1.1280 a key higher low. The importance of resistance at 1.1360/1.1385 is increasing again.
- GBP/USD has breached 1.3570 with the old support now a basis of resistance. The outlook is at growing risk of turning decisively corrective if the daily RSI breaches 50. Supports at 1.3490 and 1.3430 become the focus. 1.3660 is now a key lower high.
- AUD/USD has now broken the support of the uptrend channel and the old support at 0.7170/0.7185 now becomes a basis of resistance. With selling pressure mounting the support at 0.7130 will be a key test. Resistance of a series of lower highs is increasing the corrective pressure.
Commodities: precious metals are more uncertain in their breakouts in recent sessions. Oil has held on to its uptrend.
- Gold has held on to the breakout support at $1828/$1832 which will encourage the bulls. With a positive reaction this morning, there is a sense that a close above $1848 would open the way towards $1877 now.
- Silver has been leading gold higher recently but is looking less assured this morning. A close below $24.07 would threaten a deeper retracement potentially towards the $23.25/$23.45 old resistance. Resistance is now at $24.70.
- Brent Crude oil the “shooting star” one day candle (a negative signal) is still a dominant force on this chart, but holding on to the uptrend is a good sign of support. A move above $89.55 would negate the shooting star. RSI remains around 70. Support at $85.75 is now key.
Indices: Wall Street is tentatively higher in the European session but this has been seen before as selling pressure has tended to resume in the US session. European markets are playing catch up to Friday’s late Wall Street sell-off.
- S&P 500 futures have rebounded off 4382 but there is a caveat to any near-term rebound as there is little conviction in a move yet. Reaction around the old key support at 4491/4520 is crucial now for the medium-term outlook.
- DAX continued lower on Friday and remains under negative pressure today. A test of the old pivot area around 15,400 is underway. Initial resistance is around 15,585.
- FTSE 100 after a bearish engulfing one day candle (bearish key one-day reversal) and another bear candle on Friday the correction back towards 7365/7401 is continuing. Near term, rallies are struggling and corrective pressure is growing. Resistance at 7500/7515 is growing.