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Market Update
Markets are notably quiet and trading ranges are narrow this morning as China and Japan stock markets are off for the Lunar New Year. The main market moving event so far this morning has been a phone call between President Joe Biden and President Xi of China.
The main take away is that President Biden is trying to strike a neutral line with China, as both sides reportedly discussed better trade, unfair economic practices, Taiwan, Hong Kong, and an overall improvement in relations.
According to sources familiar with the conversation hopes were expressed for a more constructive relationship in the future between the United States and China. China sensitive stocks in the US may receive a boost on this slightly positive news later today.
In terms of the market focus, European traders are set to digest the speech from Federal Reserve Chair yesterday. Chair Powell stuck to script as widely expected, and generally gave tame and ultimately dovish commentary towards the US economy.
Yesterday’s weak +0.1 US Consumer Price Index inflation reading has well and truly taken market concerns about rising inflation off-the-table, meaning that the stimulus and QE trades are very much back in focus.
The recent bearish reversal in the US dollar index shows no signs of stopping on Thursday. The index is trading around the lows of the week and looks poised for further losses against a broad basket of currencies.
In terms of big levels to watch today, the 1.2180 level is a major upside level for the EURUSD pair if bulls can gain traction above 1.2130, while 1.4000 remains a realistic target for the GBPUSD pair. The USDJPY pair could target 103.80 if weakness persists below the 104.50 level.
The 0.8870 level is a key support area to watch for the USDCHF pair, while the 1.2700 level remains a major pivot point for the USDCAD pair. Looking at the antipodean currencies, the NZDUSD pair could surge if bulls gain traction above 0.7240, while the 0.7730 level is an important gateway level for the AUDUSD pair.
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Aside from digesting the events of yesterday, EU traders will be awaiting news on former ECB President, and his foray into Italian politics. The euro and ITA40 could receive a boost of Draghi is voted in today.
Taking the flip side of that trade, the euro and ITA40 could take a nose-dive if the Five-star movement rejects Draghi. There is no exact time for the announcement, so the market reaction could be sudden.
Weekly jobs data will undoubtedly be the main event during the United States session. The recent trend has been to the downside, so watch out for some slight relief for the buck if jobless claims continue to tick down.
Gas storage data from the EIA will also be released later today from the United States. This is likely to be a market mover for Natural Gas traders. The recent bad weather in the United States is also a big deal for energy traders right now.
