US markets resume amid souring sentiment

  • RBA minutes hint at more hikes to come: Minutes from the Reserve Bank of Australia meeting from the 7th February reflect growing fears of sticky inflation again. 
  • US trading resumes with yields up, USD up: After a day of consolidation for Presidents Day, US bond markets resume with yields moving higher. The USD is outperforming major forex.
  • Negative sentiment weighing across asset classes: European indices open lower as US futures trade around -0.5% lower. In commodities, precious metals are lower.

Inflation fears forcing central banks to further tightening

The minutes from the February RBA meeting show a pause in rates was not even an option. The FOMC meeting minutes on Wednesday will be key. 

Markets are also coming around to the realisation that the Fed will need to hike even more than previously thought. 

RBA minutes further strengthen the hawks 

The Reserve Bank of Australia hiked rates by 25 basis points to 3.35% in the February monetary policy meeting. Minutes showed that a 50bps hike was possible and that a pause was not even an option. This came after a pause in rate hikes in December.

The RBA has elevated concerns that inflation may prove to be more sticky than previously thought. It is another central bank that has erred on the hawkish side. 

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This is leading to markets needing to reassess the outlook for rate hikes for the major central banks. Australian bond yields have been rising in recent weeks, along with those of other major economies. 

Risk appetite sours

Looking more broadly, these RBA minutes play further into the growing mood of caution and concern. Traders are increasingly worried that the Federal Reserve will need to hike even more in the coming meetings.

Tomorrow’s minutes for the February FOMC meeting will be an important next gauge for markets.

For now, though, risk appetite is souring. Rising US Treasury yields and a strengthening USD have been key trends in recent weeks. 

This is impacting major forex and commodities. This negative risk bias is again evident today but is also weighing on equity markets too. Having been holding up well in recent weeks, there are signs that S&P 500 futures are falling over.

Risk faltering, USD strengthens, US futures falling over


We highlighted the prospect of a head & shoulders top on the AUD/USD pair last week. Although an intraday breach of the neckline support at 0.6855 was seen, this was not confirmed into the close.

As risk appetite falters we are seeing USD strength and AUD falling (despite the hawkish lean in the RBA minutes).

  • The resistance at 0.7030 is a key lower high (the right-hand shoulder)
  • A key 4-month uptrend has been broken.
  • The daily RSI is struggling under 50

A close under 0.6855 would confirm the top and imply c. -300 pips of downside potential towards 0.6555 in the coming weeks.

Under initial support at 0.6810, the next important support band is c. 0.6630/0.6690.

S&P 500 futures (SP500ft)

It has been a bad few sessions for US equities. Closing lower for three consecutive sessions at the end of last week, futures are trading decisively lower today.

On S&P 500 futures the rally looks to be topping out near term. Support at 4060 has been breached and a close below would complete a small top pattern.

  • A six-week uptrend channel has been broken 
  • The RSI is falling below 50
  • The market is developing a near-term corrective configuration.

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A close below 4060 implies -125 ticks of near-term correction towards 3935. The next higher low support is at 4007.

Resistance is growing at 4060/4090. A move above 4120 would abort the near-term corrective bias.

Support and resistance levels for EUR/USD, FTSE 100, and more 

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