What we are looking for
- USD slips despite signs of renewing strength: An early drop back this morning has been seen. But there were signs at the end of last week of the USD regaining upward momentum after the stream of hawkish Fed speakers and strong payrolls report.
- Indices moving back higher: After falling on Friday in the wake of the hawkish implications of the payrolls report (and Fed speakers) Indices have found support to tick higher this morning. Can this continue?
- Precious metals faltering: The gold recovery is being tested following Friday’s payrolls.
- Data trading: With no major economic data it is a quiet day ahead for data traders.
Overview
There seems to have been another shift in market positioning, especially for the USD. Hawkish FOMC speakers have been falling over themselves to talk down the prospect of rate cuts in 2023. Add in the strong Nonfarm Payrolls report on Friday and the building blocks for higher yields and a stronger USD are being laid.
There has been an early dip in Treasury yields on Monday, with the USD slipping back. A move back higher on indices is also counter to the trend of positioning for a more hawkish Fed. With US CPI inflation on Wednesday, we could see a more decisive trend defining move in the coming days.
The economic calendar is fairly bare today with no major economic data due.
Today’s news
Market sentiment has picked up again: Having been hit on Friday by the hawkish implications of the payrolls report, risk appetite has rebounded on Monday.
Treasury yields have eased slightly: An early pullback following a strong move higher on Friday.
FOMC hawks continue to argue their case: Bowman (permanent voter, hawkish) has argued for the consideration of 75bps at coming meetings. Daly (not a voter until 2024, leans dovish) has said that the Fed is “far from done yet”
Cryptocurrencies start the week well: After consolidating in recent days, crypto has picked up again on Monday. Bitcoin is over +3.5% higher and is trading around $23,750.
Economic Data:
- No major economic data is due. Here's what else to watch out for this week.
Major markets outlook
Broad outlook: A nervous end to last week following the very strong payrolls report. However, sentiment is looking more positive today. Can this last though?
Forex: USD was strong into the close on Friday but has dropped back this morning. Risk-positive positioning is helping AUD and NZD perform strongly.
- EUR/USD continues to fluctuate in a 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. Losing the important higher low support at 1.0095 would re-open parity again. A close above 1.0295 opens 1.0350.
- GBP/USD fell sharply on Friday to break the support at 1.2060. A new negative trend is threatening. Despite a tick higher early today, a run of lower highs is developing, whilst a move back below 1.2000 would suggest renewing corrective momentum. Initial resistance is 1.2210 and then 1.2293.
- AUD/USD just held the support at 0.6875/0.6910 and has ticked strongly higher this morning. However, moves are frequently swinging around now the recovery trend has been broken. The market is starting to look more ranging between 0.6870/0.7045. Breaking either would subsequently define the outlook over the near to medium term basis.
Commodities: Gold is holding the breakout, but silver is hitting resistance. Oil is looking to recover a downside break.
- Gold fell back on the payrolls report and is now testing a near three-week recovery uptrend. This comes as resistance at $1795 adds to the overhead supply around $1805. A closing break of the uptrend would begin to put pressure on the higher low support at $1754 again. The daily RSI holding above 50 would suggest the recovery outlook remains on track.
- Silver continues to fluctuate under the overhead supply resistance at $20.45/$20.60. Candlesticks have been rather choppy in recent sessions and the next move becomes important. Holding the near-term breakout support at $19.48 and keeping the daily RSI above 50 is still positive for recovery. However, consistent bull failures under $20.45/$20.60 resistance may increase the potential for a new bout of selling.
- Brent Crude oil is struggling to get back above the old $98/$100 band of support now. There is still room for a near-term technical rally, but the longer the market struggles with resistance between $100/$102.50 the more negative pressure will continue to grow. Tests of the next support at $95/$96 could then be seen.
Indices: Wall Street is consolidating following recent gains as key resistance is being tested. This is a similar picture in Europe too.
- S&P 500 futures fell in the wake of the Nonfarm Payrolls report. However, a tick higher on Monday is once more positioning for a test of 4170/4200. The recovery trend remains intact and with momentum remaining strong this suggests buying into weakness continues. The importance of support at 4080 is growing. Above 4201 opens 4305 initially.
- German DAX continues to run higher along a four-week uptrend as a basis of support, despite this being tested in recent sessions. The market is ticking higher again today and the resistance band between 13665/13735 is again being tested. With RSI momentum solidly strong into the 60s, we look to buy into near-term weakness. Initial support is at 13550 with the higher low at 13330 now key support. A continued move higher would open 14250/14300.
- FTSE 100 is holding the breakout above 7370 and is slowly building higher along a two-week uptrend. A close above 7490 would open the way once more for moves towards 7650. There is still a positive bias with the RSI now moving into the 60s which suggests weakness is a chance to buy. There is good support in the band 7335/7370.
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.
