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Market Wrap
Today was a tale of two session for the US dollar. The London traders bid the US dollar index higher, all the way up to 90.430 and the US PCE data.
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Then as soon as the US futures markets opened up the DXY sold off back to the London opening price and morning session lows. A couple of things have therefor happened, anyone who got long on the breakout of the swing high which formed on the 19th of May, is now a trapped long and will no doubt sell their position which increases the likelihood we test the lower bounds of May’s range. Anyone who was short and had trailed their stops down the daily swing highs, got stopped out and has seen their old directional bias get confirmed. Question is will they have FOMO and jump back in? The overall winners have got to be the market makers who collect the bids and asks and revert back to the $90 level flat.
The market analysts now have a real ticking clock scenario, as the US PCE Inflation data came in hotter than expected. How many months will the Federal Reserve allow this to happen? Especially with Initial Jobless Claims looking better for the employment part of the Feds two-part mandate.
US wholesale and retail inventories came in worse than expected in the advance data reading for April. US personal income was heavily down from the previous reading but not as bad as expectations. Economists now look to see if the removal of government direct stimulus will have a material effect on personal consumption and expenditure.
The good news out of the US was really around the Chicago PMI, which has reached levels not seen for 4 decades. There are signs of supply constraints, but the demand is increasing business activity. If the supply chains can get back to normal business activity will increase and the US economy will benefit.
The US trade balance also decreased towards -85,000 as exports increased at a slightly higher pace than the imports. This is US dollar bullish if that trend were to continue but that would imply March was the peak in trade balance deficit.
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The USDJPY stalled at the 110.00 big round number level where a couple of billion options are due to expire today. The breakout remains strong but as I said in this morning’s video, conservative traders will likely wait for a retest of the trend line and then expect the continuation higher and will use the recent swing lows to mitigate risk.
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EURUSD traders received a golden ticket to get long as the price action rejected the daily 20 ema and with the US dollar likely to stay around the $90 level, good news out of Europe or a more Hawkish sentiment from the ECB could keep the weekly price action in the single currency bullish. This mornings European Union economic surveys were all better than expected, as Eurozone consumer confidence continues to improve.
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Gold continues higher and the daily chart is forming a bullish consolidation pattern. When you see a bullish impulsive move higher and then a short period of consolidation in a bull trend, the next move is likely to be a breakout higher and a continuation of the bullish impulsive moves.
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The US Nasdaq 100 is attempting a late rally into the end of the month, this week’s price action saw a decent rejection of the 20 period ema and is likely to close above the highs of a couple of weeks ago and into the first week’s price range. This coming Monday is a bank holiday, and the thin market could allow the price to drift higher, but we could just as easily see a rip into tonight’s close and then flat price action on Monday, on diminished volume.
The resulting chart pattern would be similar to the Gold, where an impulsive move higher, was followed by a short period of consolidation, with the likelihood of further expansion to the upside becoming a higher probability.
