Open Account Trading Carries Risk
Analysis

Fed wants to observe the impact

  • Fed to ease off a bit
  • Stocks rallied on Friday
  • T-Bond market sold off pushing yields higher and weakening gold

Money flowed out of bonds and into stocks on Friday. The proximity of a key support level in Dow Jones Industrial Average brought in short covering and speculative buying. As a result of this risk-on move yields moved higher which in turn has softened the bids in gold. The market has created a bearish wedge which could be an early sign of trend reversal. Let’s see if the bulls remain committed to the market. The Fed is expected hike rates only 0.25% in the next two meetings as the Fed officials are signalling they are now more likely to ease the policy to estimate the impact of the hawkish rate hikes we saw last year.

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DJH40123

DJ finished the week strong

DJ finished the week stronger than it started and rallied above the 33 227 threshold level on Friday. The close was higher than Thursday’s high and in this context (the 32 800 support is relatively close) this is a bullish indication.

The market stays bullish if the green team is capable of providing further proof that they are committed to the market and keep on taking bids. The 33 227 is the nearest key support level so above the level I’m interested in long trades. Below 33 227 the market could trade down to 32 850.

NASH80123

Nasdaq bullish above 11 250

NAS rallied to 11 600 and is therefore now bullish above the 11 250 level. The next hurdle the bulls have to overcome is the 11 690 swing high from last week. A strong penetration of the level would indicate a move to 11 950 would be in the cards. A failure to maintain the momentum and a close below the 11 250 threshold level would open the way down to 11 100.

UK100 H80123

FTSE could benefit from China’s reopening

UK 100 – created a higher daily low on Friday and stays bullish above 7720. Below the level, the market probably trades down to 7680 (the 2022 high). As I said on Friday, FTSE trades near the ATH level (7875). The mining-heavy index is likely to benefit when China’s reopening starts to create growth and boost commodity prices.

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XAUUSDH80123

Bearish wedge in gold

Gold is wedging as it lost some momentum last week but remains in an uptrend until the 1896 level is broken decisively. Below the level, the market could trade down to 1866 or so. If the institutions transfer money from bonds to stocks gold bids might soften. On Friday we saw stocks trading higher and bonds lower. This lifted yields and dampened the mood among the gold bulls a bit. Let’s keep on following these dynamics to better estimate what the institutions are doing.

EURUSDH40123

EURUSD trading near the bull channel high

EURUSD was finally able to break out of a range the market has been bound in recently. This took the market to levels near the bull channel high. The risk for a correction has therefore increased but EURUSD remains in an uptrend above 1.0766. Below the level, the market could trade down to 1.0710 or so.

The Next Main Risk Events

  • EUR ECB President Lagarde Speaks
  • EUR French Flash Manufacturing PMI
  • EUR French Flash Services PMI
  • EUR German Flash Manufacturing PMI
  • EUR German Flash Services PMI
  • GBP Flash Manufacturing PMI
  • GBP Flash Services PMI
  • USD Flash Services PMI
  • USD Flash Manufacturing PMI
  • USD Richmond Manufacturing Index
  • NZD CPI
  • AUD CPI
  • EUR German IFO Business Climate
  • CAD BOC Monetary Policy Report
  • CAD BOC Rate Statement
  • CAD Overnight Rate
  • CAD BOC Press Conference
  • USD Advance GDP 
  • USD Core Durable Goods Orders
  • USD Durable Goods Orders 
  • USD Unemployment Claims
  • USD New Home Sales
  • USD Core PCE Price Index
  • USD Pending Home Sales
  • USD Revised UoM Consumer Sentiment

For more information and details see the TIOmarkets economic calendar.  

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

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