What we are looking for
- USD gains have eased back: The near-term USD rally is giving back some of its gains on major forex. A mild USD negative bias is creeping back in, but markets are fairly settled.
- Indices increasingly in consolidation: The sharp selling on Wall Street has eased off and markets are looking increasingly in consolidation. US futures are a shade higher with mixed moves on European indices this morning.
- Commodities settle down: Precious metals rebounded well yesterday but are more contained this morning. Oil has sold off sharply in recent days but has managed to find support early today.
- Data traders: On a quiet day for the calendar, USD traders might get something from any surprises in the US Weekly Jobless Claims. EUR traders will also be watching the speech from ECB President Lagarde.
There is an increasingly settled feel to major markets. The strong moves of early this week have eased off. USD has strengthened as US yields ticked higher, weighing on broad sentiment. However, traders seem to now be increasingly looking ahead to what could be a tumultuous period next week. With US CPI, the Fed, the ECB, and a raft of other tier-one data releases to prepare for, the next couple of days could be the calm before the storm. There is also a notable lack of market-moving catalysts. Perhaps something might come out of the speech by ECB President Lagarde today, but with the Fed in its blackout period and a lack of tier-one data, traders look to be keeping their powder dry.
It is a quiet Thursday for the economic calendar. The only data of note comes with the US Weekly Jobless Claims. Claims have been tracking higher in recent weeks. Although they were lower than forecast last week, claims are expected to move higher again.
Market sentiment is settled: There is very little direction on major forex or commodities. Indices are also lacking direction.
Treasury yields are a shade higher: Yields fell into the close last night (helping to weaken the USD) but are settled this morning.
ECB President Lagarde speaks today: EUR traders be on alert as the ECB President Christine Lagarde is speaking at 12:00 GMT.
Cryptocurrencies flatten: There is little direction on cryptos this morning. Bitcoin is flat at $16830, with Ethereum also flat at $1232.
- US Weekly Jobless Claims – (at 13:30 GMT). Claims are expected to rise back higher to 230,000 (from 225,000 in the previous week).
Major markets outlook
Broad outlook: Markets are settled with little decisive direction.
Forex: There is almost no serious direction on major forex. The NZD is a very mild outperformer, with JPY slipping slightly.
- EUR/USD has pulled back from 1.0595 but is finding support in the initial support at 1.0430/1.0495 band. Momentum remains strongly configured with the RSI above 60. We would prefer to use supported weakness as a chance to buy. The market has picked up from 1.0442 and this is encouraging, but there could be some huge volatility next week. A higher low above 1.0290 would be important.
- GBP/USD is looking to form another higher low at 1.2105 as the market has picked up in the past 24 hours. Holding on to the one-month uptrend is also encouraging. The daily RSI is holding on to the high 50s to sustain positive momentum. For now, the outlook remains positive and near-term supported weakness looks to be a chance to buy, however, we are mindful of the huge risk events that lie ahead in the next week. A breakdown below 1.1900 would turn the market corrective again. A breakout above resistance at 1.2343 would open the upside.
- AUD/USD has slightly struggled for upside traction but forming a positive candle to leave the support at 0.6668 is encouraging. However, the daily RSI is still showing a few signs of rolling over, so needs to be watched (a move below 50 would be a big warning now). The run of higher lows means that 0.6642 is an important support now. As long as 0.6642 holds, the outlook can still be positive. Resistance is now initially at 0.6745 with 0.6850 key.
Commodities: Precious metals are cautiously forming support after Monday’s near-term corrective signals. Oil has broken down.
- Gold has reacted well to the bearish engulfing candle earlier in the week. Two consecutive positive closes with a bullish candle yesterday are encouraging for the support at $1764/$1765. 5. This has allowed the daily RSI to hold up well now around 60. We would still be watching the initial support around $1764 to be a gauge of correction. Furthermore, if the RSI also falls below 50 this would be a decisive reversal signal corrective signal. Resistance is strengthening between $1798/$1810.
- Silver has reacted well and has been building support after the bearish engulfing candle earlier in the week. A rebound from $22.02 has encouragingly moved back above the old $22.51 breakout. Holding this would sustain the improvement and bring a retest of $23.52 back into play. A close below $22.00 support would suggest a deeper unwind towards $21.67 initially.
- Brent Crude oil has accelerated lower in recent days, posting another decisively strong bearish candle yesterday. The next support is around $77.00 but then not until $69.50. Notably, the daily RSI is back below 30, around where previous technical rallies have taken hold. However, we see near-term rallies as a chance to sell. Breaking the old support band of $81.40/$83.55 means that this now becomes an area of overhead supply to limit any near-term rebounds.
Indices: US futures are consolidating around important support, whilst the recovery trends have been decisively broken on European indices.
- S&P 500 futures have closed lower for five sessions in a row now, but the move has begun to settle down slightly today. This comes amid a test of the crucial pivot band support at 3912/3935. If there is a close below 3912 it would be a key corrective signal as the recovery would have topped out. For now, the support is holding with the consolidation. The support is tentatively holding this morning. Initial resistance is 3987/4015.
- German DAX has faltered at the crucial resistance band between 14700/14800 and has now broken the recovery uptrend. With the negative divergence on the RSI leading the market lower, there is a growing risk of a correction. The initial support at 14322 has been broken but if there is a move below 14125 it would cap a three-week topping pattern. The RSI moving below 50 would be confirmation of growing corrective momentum. Yesterday’s failure at 14375 is adding to mounting downside pressure. Reaction to 14125 will be key.
- FTSE 100 has closed with another negative candle and has now turned decisively lower. The break below initial support at 7515/7520 has formed a small top pattern and there is initial resistance now between 7520/7555. . The daily RSI has turned sharply lower and the four-hour RSI reflects a market being sold into strength on a near-term basis. The next important support to gauge reaction is at 7426/7437.
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