What we are looking for
- USD mixed to slightly negative: A quiet phase has taken hold, but there is still a slight negative USD bias on major forex. There are few catalysts to break this trend ahead of US CPI tomorrow.
- Indices trying to move higher: Wall Street closed positively last night and European indices are playing catch up on this today. However, US futures are stuttering slightly and this may restrict any upside
- Commodities are mixed to positive: Oil has dropped marginally, but silver is leading gold higher this morning.
- Data traders: Once more, there are no data announcements today, so a quiet day for the data traders.
Markets are increasingly looking towards the next key risk event that could shape the near to medium-term outlook. There has been no tier-one data in the first part of the week. Furthermore, Fed Chair Powell avoided discussing monetary policy or the economy in his speech yesterday. Subsequently, markets have had little to go on and an element of consolidation has started to set in. There is still a mild risk-positive bias as a legacy from the Nonfarm Payrolls and ISM Services data last week, but US CPI will certainly be in focus now.
Today we see mixed moves on the USD on major forex. Precious metals are edging higher but oil has slipped slightly. European equity markets are playing catch up on late gains for Wall Street into the close last night. However, with US futures a shade lower, there is little momentum to the gains. Broadly this could be another relatively quiet session as traders bide time before US inflation.
Once more there is very little of note on the economic calendar. There are no major economic announcements due today.
Market sentiment is mixed to slightly positive: USD is mixed on major forex, whilst silver is outperforming gold. European indices are showing mild gains, with US futures slightly weaker.
Treasury yields are down slightly: Yields climbed yesterday but have dropped back slightly this morning. The US 10-year yield is -4bps. -
Fed members continue to push back on markets: Markets are still holding on to the view that the Fed will ease off on monetary policy tightening. Fed members continue to try and push back on this. Michelle Bowman says there is still “a lot of work to do on inflation” with the policy rate needing to be held high for some time. Neel Kashkari said that markets “are going to lose the game of chicken”
Cryptocurrencies ease back slightly: Crypto has had a good start to the week. Bitcoin added another +1.6% yesterday, but the move has unwound slightly early today. Bitcoin is -0.2% at $17440 with Ethereum -0.4% at $1333.
- There are no major economic announcements due.
Major markets outlook
Forex: USD is mixed today JPY is the main underperformer, with the AUD gaining the most.
- EUR/USD has remained positive above the December high of 1.0735 but is struggling for traction amid consolidation in the past couple of days. The market is still looking for a solid close above the resistance to then open a test of the key May 2022 high of 1.0785. Momentum is positive still, with the RSI in the 60s again. This suggests that weakness is a chance to buy. The importance of the 1.0440/1.0495 breakout support band continues to grow.
- GBP/USD has just stalled in its recovery in the past day or so. After mild losses yesterday, the pair is slightly lower again early today. The important factor is holding on to the breakout above 1.2075/1.2125 because the momentum is beginning to sag once more only slightly above 50 on the RSI. This could be reflective of a ranging formation. Above 1.2210 resistance opens upside towards a test of the December high at 1.2445.
- USD/JPY has been showing signs of a potential shift in outlook in recent sessions. Last week the warning signals began with the breaching of the multi-month downtrend. Although this trend has not been confirmed as broken, the market picking back up from 131.30 in recent days is again breaching it. Reaction to the 21-day moving average (c. 133.35) is a key gauge now. With the positive candle yesterday and a move higher today, we are cautious of our negative outlook now. A move back below 133.10 would re-engage the selling pressure. The resistance overhead at 133.60/134.75 is crucial.
Commodities: Gold continues higher, with silver also positive today, but within consolidation. Oil is struggling higher.
- Gold is pulling above $1880 in a move that opens $1910 as the next resistance. The price continues to climb higher within what is now a two-month uptrend channel. We are bullish on gold medium term but are mindful of chasing the market higher. The daily RSI is pushing towards 70 again and the potential for a near-term pullback is growing. We look to use near-term weakness as a chance to buy with initial support at $1859/$1865.
- Silver has been struggling for traction in recent weeks, consistently failing around $24.10/$24.50. This has also come with faltering momentum as the RSI has drifted back towards 50. The market has moved higher once more this morning, with the overhead resistance again within reach. Another bull failure would add to the growing sense of consolidation range broadly between $23.10/$24.10. A close decisively above $24.10 would be positive. Initial support is at $23.42.
- Brent Crude oil continues to build a run of higher lows over recent sessions, but the bull moves continue to falter around the 21-day moving average (c. $81.20). Long upper shadows on the candlesticks point to intraday bull failure moves and a lack of sustaining buying pressure. The market is edging higher this morning. Resistance is between $81.00/$81.55 and near-term rallies remain a chance to sell for pressure on $77.50 and the December low at $75.50.
Indices: Markets continue to edge higher.
- S&P 500 futures have rallied again to once more test the old pivot band 3912/3945 which has been a key chart feature for the past two months. Moving through this resistance would give a positive bias to a medium-term ranging market. RSI momentum is holding slightly above 50 and confirms the market edging higher. Initial support is at 3891 and holding above 3912 as support will add to the mild sense of improvement.
- German DAX is now looking to move decisively through the massive resistance of an old long-term pivot band between 14700/14800. This is a bullish move that is coming with strong momentum. Move above 14932 would be an 11-month high and would bring the psychological 15000 mark into range. There is good support now at the breakouts between 14604/14706. Momentum is positively configured and we would still look to buy into supported weakness.
- FTSE 100 bulls have regathered after the failure at a five-year high of 7747 earlier in the week. The move higher has again posted a five-year high of 7757 this morning. The next step is to complete a strong positive candle with a decisive close above 7729 (the old 2019 high). The RSI is again pushing on 70, so momentum is strong albeit becoming stretched. Initial support for a pullback is 7671/7695 and if this can hold then it would be bullish for moves to buy into weakness.
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.