A look at the day ahead in U.S. and global markets from Mike Dolan
World markets wobbled on Tuesday, with benchmark bond yields and volatility gauges jumping to their highest in almost four weeks, as more evidence of the stoic U.S. consumer alongside runaway tech stocks leaves the Federal Reserve with a conundrum.
Back to square one after failing to hold below 1.0839:
EURUSD last 1.0853, now close to unchanged on the day but below the day high at 1.0860.
Now that 1.0850 has exerted its magnetic pull, it will ultimately set the tone.
1.0850, besides being a Power of “50” level, is also the midpoint of 1.0805-96
USDX 4 HOUR CHART – EURUSD PROXY DAY
A look across major currencies shows most trading close to unchanged vs. the dollar except EURUSD, which is down just 0.11% after bouncing off its intra-day low.
This suggests it has been a EUR more than a USD move today and this is reflected in a firmer USDX, where EURUSD represents 57.6% of the index.
XAUUSD 4 HOUR CHART – HELD BELOW RESISTANCE
I noted yesterday that 2370 was a key resistance level and the pause below it has seen the downside tested.
This has seen a minor trendline nicked but 2338 would need to be broken to put the 2325 low in play.
Otherwise, look fro 2350 to set the intra-day tone.
EURUSD 4-HOUR CHART – UNDERPERFORMER
EURUSD has been the underperformer so far today, losing both cs. the dollar and on its crosses (e.g. eurgbp, eurjpy)_
Attention has now shifted to the bottom of the current 1.0805-95 range, a reversal of what was seen at this time yesterday.
To keep it exposed. the break of 1.0839 needs to hold although 1.0850 will likely set its intra-day tone.
USDJPY DAILY CHART – What’s the Nervous Zone?
USDJPY extended its high through 157.19, leaving it as initial support although expect bids below the market.
Move-up should put MoF/BoJ on intervention alert but it would be like pissing in the wind if US bond yields remain firm.
With that said, 157.99 is the last line of defense ahead of the 160.16 high so a level that the BoJ would not like to be broken. This would make 157.50-00 a nervous zone if it should trade.
While the move in the US 10-year Treasury bond yield above 4.50% has seen the forex market react (with a bit of a delay), the key yield is one set around the start of May at 4.69%. This leaves room on the upside in terms of yield should 4.50% become the new floor.
In any case, this article shows you
There has been a disconnect across markets today, including the internal components vs. spot and not only in currencies. Options/forwards/other are not liking UsdJpy but futures are down Yen with the yield rising. Net result is a cap on yield and range so there would usually be a lack of urgency to continue driving UsdJpy through Asia much.
Today was a good example of a market trying to trade the old episode (dollar down) when a new one has begun. (dollar up).
This is why I look at the forex market as trading in episodes rather than trends.
US 10-YEAR TREASURY DAILY CHART (CFD)
You can see by this chart why the 4.50%ish area is important as it coincides with the low price for the month (higher yields = lower price and vice versa).
So keep an eye on US yields and whether the FX market starts to correlate (e.g. higher yields, firmer USD).
More upset millennials who thought they would “fix” the world and prove to older people they are smarter. The Meme-Crypto Normie is a dead duck due to being hacked and was annihilated by 90% loss, while the hacker is demanding ransom. Crypto “assets” have been touted since day 1 as being “impervious to fraud” by enthusiasts.
Monedge has maintained that Crypto has a long way to go before being viable as it is the most sought vehicle for mob money and other criminal activity. Give it a year or so.
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