Selling pressure has been a feature of recent sessions, at least on equity markets. However, there were notable purchases of tech stocks through retail investors yesterday which dragged the NASDAQ off session lows. This has come as US bond yields (at least longer-dated yields such as the 10 years) have just started to stall in their move higher. The US dollar is again weakening this morning, helping major pairs such as GBPUSD to test overhead resistance, but also precious metals to rebound. All these moves are fairly tentative for now though. That caution may also be due to the testimony of Fed chair Powell later today.
- Main drivers: Risk appetite improves; US yield curve flattens; USD drops back; Watch for Powell testimony later; Economic calendar: nothing of note
- Risk appetite picks up: After several days of negative sentiment, we are seeing a rebound for risk appetite today. This is shown across major forex, with JPY and USD underperforming. Indices are bouncing
- US yields stutter: The US yield curve is threatening to “bear flatten” again, as 2 year yields rise but 10 year yields stall their advance. This is weighing on the USD this morning. [Risk rebounding]
- Notable retail buying helps NASDAQ: According to JP Morgan, the intraday rebound on the NASDAQ last night was due to significant retail trader purchases. [Risk rebound]
- US/Russian talks over Ukraine: Open talks between the two sides over the military activity around the border of eastern Europe. No breakthrough is expected this week. The talks are ongoing to prevent a Russian invasion of Ukraine. [Risk neutral, for now]
- Fed chair Powell testifies: Jerome Powell testifies on his renomination to the Senate Banking Committee. His pre-submitted prepared comments are fairly unremarkable, noting the strength of the economy despite the pandemic, a strong labor market. He is strongly committed to achieving maximum employment and price stability. [USD volatile]
- Central Bank speak: ECB President Lagarde and three Fed speakers:
- ECB’s Lagarde is speaking at 1020GMT, although the topic is about “change” so may not be especially notable for markets.
- FOMC’s Loretta Mester (2022 voter, mild hawk) speaking at 1410GMT
- FOMC’s Esther George (2022 voter, hawk) speaking at 1430GMT
- FOMC’s James Bullard (2022 voter, very hawkish) speaking at 2100GMT
- Economic Data:
- No major data due
Broad outlook: With US bond yields a little more uncertain today, risk appetite is improving slightly. Major forex has a positive risk bias, with commodities and indices also regaining ground.
- Forex: USD and JPY are underperformers, with commodity currencies (AUD, NZD, CAD) all stronger, along with GBP.
- EUR/USD is once more pulling back higher towards key resistance at 1.1360/1.1385. We retain our neutral stance, but there is a hint of positive bias creeping in with the continued pressure on resistance. Initial support c. 1.1270 above the 1.1185/1.1220 low support. The big 7-month downtrend is falling at c. 1.1420 today.
- GBP/USD is seriously testing resistance at 1.3600 as the strong positive momentum picks up again. A close above 1.3600 would be a sign of intent, with the key 7-month downtrend is just overhead at 1.3627 today. Subsequent resistance is 1.3698. Initial support 1.3531 with 1.3490 a key higher low.
- AUD/USD continues to fluctuate around the old 0.7170/0.7185 pivot. A close above 0.7202 would suggest positive traction starting to form. Initial support at 0.7149 with 0.7130 as an important near term low.
- Commodities: precious metals starting to pick up again, also oil rebounding after a near term slip.
- Gold picking back up above $1800 leaving support at $1782. The fluctuating outlook continues and this remains a very choppy trading range that lacks any sense of trend. Key resistance around $1830/$1832.
- Silver is now rebounding to form what could be a third positive candlestick in a row. Leaving $21.94 as a higher low support, the market is now testing the pivot band between $22.50/$22.70. A close above the pivot opens resistance between $23.25/$23.43. Initial support $22.19/$22.43.
- Brent Crude oil has picked up from $80.60 after a couple of days of correction. This should help to be the basis of the next leg higher. Resistance at $83.10 will be the initial test before opening the next key resistance band at $86/$87. Positive momentum favours buying into weakness, with support increasingly important at $79.60/$80.20.
Indices: sharp intraday rebounds off session lows on Wall Street but the buying needs to continue. Risk positive bias on European indices with DAX outperforming FTSE 100.
- S&P 500 futures with a strong rebound ff 4572 the market has arguably formed a “bull hammer” candlestick reversal. The move needs a solid positive session today to confirm. Reaction around resistance at 4700/4715 will also be telling for how sustainable a recovery can be.
- DAX is just starting to pick up again after bouncing off 15,720 yesterday. Initial resistance at 16,016 is the first test and then 16,080. Daily momentum still looks reasonably positive to buy into the weakness for a potential retest of the highs.
- FTSE 100 remains very steady in its moves over recent days, seemingly unruffled by recent selling pressure across other equity markets. However, in a recovery scenario, this may also lend some underperformance. Support at 7365/7401 is solid, but resistance at 7540 needs to be overcome to open the next leg higher.