What we are looking for

  • USD remains quiet ahead of US CPI: Forex has stalled in recent days. Ranging moves and lacking intent. US CPI can hopefully drive some direction later.
  • Indices still under pressure: There was a tech sell-off on Wall Street yesterday after two big tech stocks (Micron and NVDA) reported revenue disappointments. This move lower has a hangover into today’s session.
  • Commodities also generally stalled: Like forex, price moves on gold and oil have also been stuck in recent days. There has though been some fluctuation in silver. 
  • Data trading: Expect a jump in volatility in the wake of the US CPI today. Upside surprises have been frequent in recent months, driving significant USD positive reactions.US inflation will be key for Fed policy in the coming months, so major forex pairs, commodities and indices will all move. 


Market sentiment has been cautious in consolidation as traders have opted to sit on their hands ahead of today’s US CPI. With Fed speakers once more focusing on the need to get inflation down, the monetary policy implications of today’s inflation data could be significant. Subsequently, there has been little direction to get excited about in major forex over the first half of this trading week. Commodities such as gold and oil have also been subdued. Indices have been reacting lower to a couple of disappointments in the earnings of the US tech sector. However, aside from that, markets have been quiet.

However, this could all change today with the US CPI. Some sort of combination of upside surprises for the core and headline CPI would likely drive USD gains once more. This could subsequently drive direction in major forex. USD/JPY would be a major pair that USD gains would show, whilst Cable could see pressure on the 1.2000 support.

The economic calendar is dominated by US inflation today. US CPI is expected to show headline inflation falling back below 9%. However, core inflation is expected to pick up for the first time in four months and increase back above 6%. Upside surprises have been frequent in recent months but can this continue? Other inflation measures show core metrics continuing to decline.

Today’s news

Market sentiment remains subdued, for now: Once more, little direction to speak of in forex. We expect forex to see elevated volatility later from the US CPI. There is a shade of risk negative bias hinting in European indices and also commodities as silver and oil both drop. 

Treasury yields are very slightly lower: In the early throes of the session, yields have ticked slightly lower. Perhaps this is a reflection of a mild risk negative bias to indices and commodities.

US tech sector is a drag: NASDAQ was weighing Wall Street at the close last night and continues to do so on US futures today. A profit warning from NVDA and a revenue disappointment from Micron have led to some concern over the outlook for broad tech stocks. 

Chinese inflation lower than expected: CPI increased to 2.7% in July (from 2.5%) however was forecast to rise to 2.9%. The PPO has dropped more than expected to 4.2% from 6.1%.

Final German inflation in line: No revision to the final German HICP inflation at 8.5%.

Cryptocurrencies fall back: The promising signs of earlier in the week have dissipated and turned lower. Bitcoin fell sharply yesterday and is c. -0.5% lower today, trading around $23,000 again.

Economic Data:

  • US CPI (at 12:30 GMT) – Headline CPI is expected to fall back to 8.7% in July (from 9.1% in June). However, Core CPI is expected to increase to 6.1% (from 5.9%)

Major markets outlook

Broad outlook: All quiet on forex (waiting for US CPI) but there is a mild risk-negative bias hitting indices (following NASDAQ underperformance). This is also weighing on riskier commodities (Silver and oil lower). 

Forex: JPY and CHF are mild outperformers. Little direction elsewhere.

  • EUR/USD has ticked higher in the past couple of sessions but this is simply sustaining the 200 pip trading range between support at 1.0095 and resistance at 1.0293. Technicals are relatively neutral on a near-term basis, but the RSI remains stuck under 50 and the multi-month downtrend is intact. The pair closed slightly higher yesterday and is continuing this move today, but in effect, there are few moves of any conviction. Losing the important higher low support at 1.0095 would re-open parity again. A close above 1.0295 opens 1.0350.
  • GBP/USD consolidated early this week, holding the support at 1.2002. However, a new corrective downtrend has formed over the past week and needs to be watched now. This is adding near-term negative pressure. A move back below 1.2000 would suggest strengthening corrective momentum. Initial resistance is 1.2210 and then 1.2293. 
  • AUD/USD continues to fluctuate in what is increasingly becoming a trading range of the past three weeks. Support has firmed at 0.6875/0.6910 however, resistance is mounting between 0.7010/0.7045. Breaking either would subsequently define the outlook over the near to medium term basis. The daily RSI is neutral, hovering a shade above the 50 mark. US CPI could be key.

Commodities: Gold is holding the uptrend, with silver just easing back slightly following the breakout. Oil is looking to recover a downside break.

  • Gold has picked up from its three-week recovery uptrend and is edging towards a test of resistance at $1805. Momentum remains positive and with the uptrend intact near-term weakness is a chance to buy. This positive outlook for the recovery will remain intact whilst support between $1754/$1765 holds. Above $1805 opens $1840/$1858 as the next test.
  • Silver has just eased back following the strong bull candle that burst through resistance at $20.45/$20.60. As the market has unwound the momentum is threatening to unwind. Dropping back below $20.30 would be a disappointment, but the key support is the higher low at $19.54. Initial resistance is now $20.73.
  • Brent Crude oil has been trying to engage in a technical rally but the move failed yesterday and is turning lower again today. Having broken down last week below $98/$100 (the old medium-term range lows) there is now a bulk of resistance between 99.50/$101.35 which is holding back attempted recoveries. If the market continues to fail around here, given the negative configuration of momentum and the bearish implications of the medium-term range breakdown, we see downside as likely. We favour using rallies as a chance to sell for a test of the support at $95/$96.

Indices: Wall Street is slipping as tech stocks weigh. This has been dragging higher-risk European markets (DAX) lower.

  • S&P 500 futures have been consolidating over the past week, but yesterday’s decline is now breaking the recovery uptrend. This may just be a case of consolidation in front of US inflation, so we are not taking too much yet from this trend break. Support at 4080 ideally needs to hold to sustain the bias of pressure on the 4200 resistance. Above 4201 opens 4305 initially. 

Espresso Morning Call Indices dip as forex waits for US CPI

  • German DAX has followed the recent consolidation with a move lower as the recovery trend has been broken. We are not turning negative yet though as momentum remains positive and the breakout support at 13440 is intact. Below 13330 would seriously question the recovery. With RSI momentum solidly positive in the 50s, we still look to use weakness as a chance to buy. Near-term resistance is 13740/13785.
  • FTSE 100 is holding the breakout above 7370 and is slowly building higher along a near three-week uptrend. However, the small candlestick bodies suggest a period of indecision which needs to be watched. There is still minor resistance between 7490/7513 and a close above is needed to break the shackles and open a move towards 7650. Momentum remains positive with the RSI into the 60s. This suggests weakness is a chance to buy. There is good support in the band 7370/7415. 

Espresso Morning Call Indices dip as forex waits for US CPI

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