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Market Wrap
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The S&P500 is currently down -0.42% for the day but has dropped -5.56% over the last week and is down -10.84% over the last month. Using our trend following strategy that was outlined on the YouTube channel the latest signal on an H4 chart came ahead of the US non-farm payrolls figure and has yielded a potential Risk Reward Ratio of 1:4 as of today. That aside, there is very little chance of a sustained rally as the US fiscal flows still show that the US Treasury are taxing more US dollars out of the system than they are spending into it. Any rally is basically short covering at this stage. Only 26% of the 500 companies within the index are trading above their 200-period moving average, so there is no reason to buy this index, other than the fact of the ABC move outlined earlier this week has completed with a close at 3922. If this is not an ABC correction and there is more downside to come, the next target will be 3482.
Today’s US economic data showed a big monthly drop in PPI, which shows that inflationary pressures on prices could be slowing, which is what the Fed need to happen. Fed Chair Powell’s press conference was all about how the Fed intends to stabiles prices and this is a big step towards doing that. Unfortunately for the Americans, more people are now having to claim unemployment benefits as not only did this week’s number come in higher than expectations, but there was also a higher revision for last weeks too.
Slowing inflationary pressures as seen in the rate of change in monthly CPI and PPI increases has set the US benchmark yields on a lower path from the recent highs. It is not only the US though, UK and German yields also dropped but at a greater magnitude. This put pressure on the pound and the euro against the US dollar.
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Following on from last week’s key data points and this week’s US CPI/PPI the GBPUSD has failed to get back into the range that formed ahead of the US NFP and in fact bounced off the range to push lower today. UK GDP was disappointing this morning and we’re waiting on PM Johnson to decide on the Northern Ireland protocol.
The forex heatmap shows the strength in the yen remained through the entire London session and that the euro became the weakest of the major currencies.
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The news out of Russia/Ukraine today was around the flows of gas after Gazprom said EuRoPol Gaz was banned from making deals which meant Gazprom was unable to use the pipeline for gas transportation. This means no gas through the Yamal-Europe gas pipeline for the foreseeable future. The decline in the euro was also a key factor in pushing the US dollar index higher as it now reaches for the $105.00 level. This latest move in the US dollar index now means we have reached the weekly fib extension 3.618 ($104.725) and on our way to the last weekly fib extension of 4.236 ($107.320), which if this should play out will continue to put pressure on the EURUSD as it moves towards parity.
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