There is a mild positive bias that has formed early on Monday. This continues the corrective bias on USD and upside pressure for indices to test key resistance. There has also been a breakout on oil to multi-year highs.
- Main drivers: Mixed to mild positive sentiment again; Oil breaks out on OPEC supply talk; China COVID cases; UK and EU discussions on Northern Ireland; a big week for US corporate earnings; German Ifo data.
- Mixed to mildly positive sentiment: a mixed handover from Asia and mixed US futures.
- Oil at 3-year highs: Oil has again broken out to three-year highs and is within touching distance now of 2018 high. It comes as Nigeria calls on OPEC to resist pressure to increase production faster. [Oil positive]
- China COVID cases: China expects COVID cases to increase and there are signs of some provinces increasing restrictions [potentially risk negative further out]
- Big week for tech earnings: 164 of the S&P 500 report results this week, with the tech giants in focus: Facebook is today, whilst Apple, Amazon, Google, Microsoft are all this week [NASDAQ volatility increases, impacting across markets]
- UK & EU discussions on Northern Ireland trade: Large gaps remain between the two sides in the new talks on the Nothern Ireland Protocol. [increases GBP volatility]
- Central bank speakers: No Fed speakers – FOMC now into the “Blackout Period”.
Bank of England’s Tenreyo (mild dove) speaks at 1200GMT
- Economic Data:
German Ifo Business Climate at 0800GMT came with a slight negative surprise at 97.7, down from the 98.2 forecast (98.8 last month).
- Broad outlook: Mild risk positive and USD negative bias is impacting across major markets today.
- Forex: USD continues to slip lower.
EUR/USD testing 1.1665. On a closing break higher, we look for a further recovery towards 1.1750. The importance of support at 1.1610/1.1625 is growing.
GBP/USD picking up off 1.3735 and we look for pressure on 1.3835 to resume.
AUD/USD again finding buyers around 0.7450/0.7475 support.
- Commodities: Renewed weakening of US is helping metals higher.
Gold putting growing pressure on $1800 again despite Friday’s failed upside break. A close above $1810 opens $1834. Gold is at a crucial near-term crossroads.
Silver rally continues to build higher lows and looks to pressure $24.82 resistance. We look to buy into weakness. Support growing between $24.00/$24.10
Brent Crude oil breaking out for a test of $86.95. A move above this resistance is a 7 year high and means there is little real resistance until $100/$104.
- Indices: Wall Street hitting all-time highs and European markets testing key resistance levels. S&P 500 futures edging into all-time highs. Momentum remains strong for further gains. Expect volatility off Big Tech earnings.
DAX testing resistance around 15,600. A breakout opens 15,770/15,800 initially.
FTSE 100 ticking higher towards a test of 7246. A key crossroads in the post-COVID recovery. Breakout opens 7550 as the next key resistance.