After the knee jerk reaction to the comments from some of the board members of the FOMC the US dollar made its way back down below the $90 price level. Risk-On markets were generally higher at the London close after some upbeat jobs data and diminished inflation worries.
The US initial jobless claims data is looking likely to keep trending lower with the US economy opening up. This week’s data shows that the advance figure for seasonally adjusted initial claims was 444,000, which is 34,000 down from the previous week’s revised level. These levels for initial claims are the lowest since March 14, 2020, when it was 256,000. More importantly is that the 4-week average is also trending significantly lower week-on-week.
Looking at the daily chart of the Dow Jones Industrial Average at the London close I am not yet convinced that this is a turnaround Thursday for the index, unless we can close this US session at the highs of the day. Currently price has run up to the wick low pf the May 17th which was an indecision candle and part of the swing high and for me the most logical place to get short for anyone who thinks these markets need to correct further below.
In confluence the Nasdaq turned today at the psychological level of 13,500 on the futures, having seen inventory long into the start of the futures open. The close yesterday to the futures open, shows a gap in prices which could get filled before any meaningful push higher. The takeaway is that this bear move may not be over yet and the Gap and Trap trade maybe in play.
With the US dollar continuing lower in its larger downtrend, the fib extension tool has the next measured move lower around $87.90, which would clear out any orders set at the beginning of 2021 and also the swing lows of 2018.
This would be bullish for the commodity space, the Antipodean currencies and the likes of GBPUSD and EURUSD. The single currency has traded 90% of the way back up through yesterday’s price range while cable has started trading all the way back up to yesterdays opening prices. The Eurozone and the UK both reported better than expected data today, with EZ construction output growing to a 21-year high and the UK factory orders above levels not seen since December 2017.
Tomorrow is a relatively busy day in the markets, with the Australian Flash PMI’s kicking off the overnight session, with UK retail sales reporting before the London open.
Later in the morning we receive Flash PMI data from the UK, Germany and the EU, with the US session starting with Markit Flash PMI data for May too.