What are we looking at
- USD is gaining ground again: Higher US yields are helping the USD to outperform, especially versus the JPY.
- Indices fall back again: The recent indecisive phase of trading continued as yesterday’s gains are being unwound again this morning.
- Data trading: It is only Q1 Eurozone GDP today, but with no revision expected, it is unlikely to be a day to enthuse data traders.
Overview
Markets remain stuck in a cycle of indecision. Daily swings in risk appetite are leaving markets oscillating higher and lower. However, bond yields are creeping higher again and this is driving a risk positive USD. Although, for now, this is within the scope of consolidation patterns on several of the major forex pairs, there is a decisive move higher on USD/JPY which is around 20-year highs. The prospect of some kind of verbal intervention from the Bank of Japan is ever-increasing, but as yet, nothing is forthcoming and the pair moves ever higher.
However, we see the consolidation patterns on major forex, also reflected on the charts of precious metals. Furthermore, the lack of conviction for trending moves is also seen in major equity markets too. Wall Street continues to show intraday swings higher and lower over the past week or so. With support and resistance lines increasingly firming, the importance of the next break grows more significant.
Once more we are in for another quiet day on the economic calendar. The only data of note comes with the final reading of Q1 Eurozone GDP. With the data expected to be unrevised from the 2nd reading, the reaction may be limited, barring any surprises.
Today's news
Market sentiment falters again: As yields tick higher and the USD has strengthened, there is a risk of negative bias hitting indices. NASDAQ futures are underperforming, whilst cryptocurrencies are also lower.
Treasury yields tick higher: Although yields fell into the close last night, there is an early tick higher again today with the US 10 year yield back above 3.00%.
Japan's final GDP revised higher: Consensus had been expecting a slight downward revision from the previous reading. Actual data was revised higher to -0.1% (from -0.2% previously).
USD/JPY hits a 20 year high: The JPY underperformance remains stark against major forex, whilst the USD is gaining ground. The move above 133 increases the expectation of some kind of verbal intervention from the Bank of Japan. However, as yet, nothing.
Reserve Bank of India hikes by 50bps: Consensus expectation was for a +40 basis points hike, but the RBI went for a +50bps hike to 4.90%. Inflation has increased “above tolerance levels”.
Cryptocurrency swings continue: Intraday swings continue, with yesterday’s swing higher into the close being undone early today. Bitcoin is currently -3% and slipping back towards $30,000.
Economic Data:
- Eurozone GDP - final (1000BST) – Consensus is expecting the 3rd reading of Q1 GDP to be unrevised at +0.3% (Q4 2021 GDP was +0.3%)
Major markets outlook
Broad outlook: Forex is USD positive, whilst this weighs on precious metals and indices early on.
Forex: USD is outperforming with JPY and NZD, which are once again the underperformers.
- EUR/USD is drifting slightly lower but essentially trades around the middle of what is a 2-week trading range between 1.0625/1.0780. With momentum settling into a neutral configuration (RSI almost bang on 50) these will be the key levels to watch in the days ahead (the ECB meeting and US inflation will be key).
- GBP/USD has been choppy with intraday swings, but the market is holding in what is broadly a trading range of the past 3 weeks between support at 1.2430 and resistance at 1.2665. This is though coming under the resistance of a near 4-month downtrend, so the reaction to this in the coming sessions will be an important gauge. Initial resistance is at 1.2600.
- AUD/USD The Aussie eventually ticked higher yesterday after the RBA rate hike, but the support of a 3-week uptrend has been breached. With the market back lower again today, the upside momentum is faltering and the market is at risk of forming a consolidation. Support at 0.7140 will be an important gauge now, with resistance forming around 0.7280.
Commodities: Precious metals are increasingly range bound, whilst oil is positioning for a test of the March high.
- Gold has turned into a choppy range play on a near term basis. Falling over at $1874 on Friday has left the price in a near 3-week range above $1828 support. RSI momentum is also reflecting this uncertainty, but struggling under 50 might lean towards a mild negative bias. We look for a break above $1874 or below $1828 for direction.
- Silver has also developed into a choppy range play in recent weeks. Support is holding around $21.28/$21.43 whilst moves into the $22.25/$22.50 area continue to falter. With RSI momentum unwinding back towards 50 this looks to be an important next move for the market. We look for a break of either $21.28 for downside or $22.50 for upside direction.
- Brent Crude oil has been forming higher lows and higher highs to develop into a 4-week uptrend channel. The market continues to find buyers into weakness and is again putting pressure on the $124.40 resistance of the key March high. Support at $120.50 will be an initial gauge today whilst a move below $118.25 would see positive momentum lost again. Positive daily momentum on the RSI points towards an upside break.
Indices: Wall Street is increasingly in a consolidation range, whilst European markets are at risk of losing upside momentum.
- S&P 500 futures continue to use the support of the pivot at 4100 as a basis of support in recent sessions. However, the positive momentum of the recovery has waned and the market is ranging between 4071/4201. A positive candle yesterday has eased immediate breakdown risk, but the market has slipped over again this morning. This is a market waiting for a catalyst.
- German DAX has looked positive with the formation of higher lows and higher highs as the recovery has continued. However, the positive momentum is just beginning to ease off and the 4-week uptrend is again being tested this morning. The concern is that this is coming under the massive resistance band at 14,800/15,000. Initial support is at 14,435.
- FTSE 100 has lost the upside momentum of the recovery. This is just as the resistance band of several old key highs from 2022 between 7624/7695 is a barrier in the past week. Momentum retains a slight positive bias but also suggests that upside is a struggle. The near term importance of support at 7518 is growing.
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.
