What are we looking at today:
- Market sentiment is tentatively positive: Indices are rebounding after a negative session yesterday. However, the USD is once more ticking higher. Commodities are mixed.
- Oil price breakout: The price is consolidating early today. Holding above $120 for an extended period would be very worrying for consumers.
- More Fed speakers: there are four more speakers today. Keep an eye out for Neel Kashkari, who is considered the most dovish of the FOMC members. He is not a voter in 2022 but could certainly be a gauge of the baseline of thought on the FOMC.
- Data trading: Flash PMIs are key for the calendar. With declines expected across countries, any lower than forecast data will put negative pressure on currencies, also being negative for risk appetite.
Overview
As Treasury yields begin to move back higher again, the USD is strengthening once more. The driver of this is the continued hawkish comments from Fed speakers. Increasingly it seems that members are calling for accelerated hikes and a +50 basis points hike (+0.50%) is ever more likely. There are four more Fed speakers due today.
In major markets, the trends are for a USD positive bias across forex majors. Commodities are consolidating early today, with the recent sharp run higher on oil just seeing a pause for now. Indices have been choppy in recent sessions, but are finding a degree of support early today. With the outperformance of the DAX in Europe and NASDAQ on Wall Street, this move looks to be fairly risk positive too.
The economic calendar is focused on the flash PMIs today. These give an almost up to date indication of the progress of growth for the major economic sectors in major economies. The survey data is expected to show a big decline in March but traders will be on the lookout for negative surprises.
Today's news
Sentiment is mixed: Higher yields and a USD positive move tend to have been risk-negative recently, but equity markets are fighting back with DAX and NASDAQ performing well.
Treasury yields are back higher again: Yields have rebounded this morning after yesterday’s mild declines. This is helping to support USD.
Russia/Ukraine war latest: The US is set to apply more sanctions. There are also extraordinary G7 and NATO meetings due today to discuss what more can be done.
Oil price is consolidating: After Brent Crude rallied +5% yesterday, there is a pause today. Support around $120/$122 will be an important gauge now.
Australian flash PMIs miss expectations: Both flash manufacturing and services missed expectations despite improving slightly in March. The composite is now 57.1 (up from 56.6 in February).
Eurozone flash PMIs come in slightly higher than expected: Services and Manufacturing surveys do not fall as much as forecast. The March Eurozone flash Composite PMI is 54.5 (down from 55.5 in February)
Cryptocurrency builds support: Bitcoin has been gradually trending back higher over the past couple of weeks. Back above $42,500 is an improving development, but the key resistance remains between $44,500/$45,800.
More Fed speakers today: Fed speakers have been increasingly hawkish recently, with several calling for more aggressive +50bps hikes at coming meetings. Waller (permanent voter, very hawkish) speaks at 1310GMT; Evans (non-voter in 2022, dovish) speaks at 1350GMT; Bostic (non-voter in 2022, hawkish) speaking at 1500GMT). Neel Kashkari (non-voter in 2022, dovish) is also set to speak today.
Economic Data:
- UK Flash PMIs (at 0930GMT) – Manufacturing is expected to drop to 56.7 in March (from 58.0 in February). Services are expected to drop to 58.0 (from 60.5). This means the Composite is expected to drop to 57.8 (from 59.9).
- US Durable Goods orders (at 1230GMT) – Ex-transport (core) durables are expected to grow by +0.6% in February (+0.7% in January)
- US Flash PMIs (at 1345GMT) – Manufacturing is expected to fall slightly to 56.8 in March (from 57.3 in February). Services are expected to drop to 56.0 (from 56.5). This would pull the Composite down to 55.4 (from 55.9).
Major market outlook
Broad outlook: There is an odd mix of sentiment today. Higher yields and a stronger USD, coming at the same time as indices are rebounding. Commodities are mixed.
Forex: USD is outperforming again across major forex.
- EUR/USD has traded with a negative bias in recent days following the failure around the 1.1120 key resistance area and continued trading under the six-week downtrend. Negative pressure is mounting on 1.0960 and a downside break opens 1.0900 for a potential retest of the 1.0805 key low. The outlook improves above 1.1045.
- GBP/USD has retreated sharply as GBP weakened in the wake of UK inflation and the UK Government’s Spring Statement (a budget). A retest of an 8-day recovery trend is being seen, whilst Cable is also failing below the 1.3185/1.3210 breakout support. This is very disappointing for recovery and pressure towards 1.3090/1.3120 is growing. The initial resistance is at 1.3215.
- AUD/USD has broken decisively above 0.7440 for a five-month high but is on the retreat this morning. How the bulls react to the breakout support now between 0.7360/0.7440 will be a key factor for the near to medium-term outlook. Technically, we see weakness as a chance to buy for continued recovery, as long as this support band holds. Initial resistance is at 0.7505 before the next key resistance at 0.7555.
Commodities: Precious metals remain in their mini consolidation ranges. Oil is consolidating the breakout.
- Gold has been consolidating sideways between $1895/$1950, for now, six days. The daily RSI continues to hover around 50, meaning there is a mixed near term outlook. The 4-four chart shows the RSI between 40/60 so we are watching for moves outside this range for potential signals. For now, though we are neutral. Initial support at $1910.
- Silver has been more choppy than gold but is also in a consolidation between $24.45/$25.53. With the RSI around 50 on the daily chart, there is a ranging feel to silver. The market has again slipped back early today and is all but mid-range and we wait for more decisive signals.
- Brent Crude oil broke out above $120/$122 resistance yesterday and is now consolidating the break, using $120 as a basis of support this morning. Continuing higher the market will be looking towards the next key resistance around $133.60/$135.30.
Indices: Markets are edging back higher this morning after yesterday’s selling pressure.
- S&P 500 futures pulled back slightly yesterday but the important breakout support around 4418 remains intact. The pick up from 4444 this morning is encouraging, however, resistance is now in place at 4515. Reaction to support around 4418 will be a key gauge in the coming days.
- DAX has remained supported above the 14,100 breakout, and a consolidation is forming. The bulls need to break through 14,560/14,585 to re-open moves towards the key 14,800 resistance area. Losing 13,999 support would now be disappointing for the bulls.
- FTSE 100 pulled back yesterday and is now consolidating an impressive run higher. The risk of an unwinding move is growing with the potential for profit-taking. We are watching the support at 7405 for near term positions, along with the RSI on the four-hour chart falling below 50 for indication of a faltering trend. Resistance is at 7519 initially, with 7559 more considerable.
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