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Midday Update
The markets digest central bankers’ policy direction as inflation remains a hot topic amidst escalating tension between Russia and other global players regarding its aggression toward Ukraine. The Fed continues to emphasize a tightening policy direction and the minutes scheduled for release later in the New York session will have a clear message on the Fed balance sheet. The US Treasury secretary, Janet Yellen will be testifying before the house at 10 AM.
USDCHF extended gains by +0.36% for the 4th day straight ahead of the much-anticipated Fed minutes meeting. The Dollar remains resilient as markets price in a possibility of a more aggressive outlook in the near-term and room for upside gains is possible if bulls breach the 0.9830 immediate high, targeting the 1-year high at 0.9467 resistance.
USDCAD was up +0.05% early European session after pulling away from a 5-months low at 1.2450 on Tuesday as Fed bets on hikes strengthened. Upside gains remain capped by 1.2560 in the near term and rising oil prices continue to underpin the pair in the near term. Investors will pay attention to crude oil inventories and oil executives’ testimony before the house later during the New York session.
The EURUSD rallied by +0.11 from a 3-week low post-ECB speakers’ projection on Eurozone inflation concerns. The EURUSD reclaimed 1.0900 early European session although the rally remains underpinned by Fed data and the renewed sanctions on Russia on Wednesday. The pair faces a near-term resistance at 1.0963 if bulls manage to trade above 1.0927, the daily high, while a failure to break above that immediate high may see the EURUSD trade lower in the near term.
The European equities market opened lower during the European session as inflation worries and sanctions on Russia weighed down investors’ moods. The CAC40 plunged down by -1.23% trading below a 2-weeks low at 6528.00 as equities markets gave in gains in the new term. Bears may target 6400 previous support turned resistance as risk-off sentiments weigh down the markets.
The DAX extended losses by -1.50% as the price seeks to fill in a price action gap between 14200 and 13920. FTSE maintained a divergence with other benchmarks by maintaining +0.03% at 7600 high. A failure to break above that near-term high may cause selling pressure in the near term.
The US Equities markets retreated from multi-session highs as US Treasury yields rallied post hawkish tone from FOMC member Brainard’s speech on Tuesday. The Nasdaq futures were down -1.50% premarket open, breaching the monthly low at 14730 and a possibility to drop towards 14400 near-term support.
The S&P 500 futures were down -0.94% after breaking near-term support at 4512.00 as the trend turns bearish in the near term. Key areas to watch are 4450.00 and 4400 barriers to the downside. The DJIA futures index was down -0.72% pre-bell and a break below a 34530 weekly low reinforced bearish momentum towards 34271.00 support.
The US 10-year treasury yields soared +3.39% on Wednesday ahead of the Fed meeting minutes as investors price in a more aggressive policy cycle. The benchmark 10-year Treasury yield made a fresh high breaking above 2.63%, April 2019 high, and room for upside movement may target 3.266%.
