Today is the first day of the trading week when some relevant economic data is due. Up until now, financial markets moved back on last Friday’s NFP report. Because the report was weaker than expected, or much weaker than expected, as many voices claim, the dollar is on its knees as it is sold across the board.
As such, the U.S. equity markets continue their march higher. The Dow Jones in the United States closed at all-time highs, once again, and the futures point to a higher opening too. The prospect of further stimulus still fuels the stock-buying frenzy and that has ripple effects on the financial markets around the world.
In Europe, Dax hovers around the 14,000 level while FTSE100 in the United Kingdom appears to suffer from the strength seen in the British Pound.
Commodities still trade with a bid tone, led by oil and a recovering in the price of gold. However, gold still hesitates at resistance, so I guess the rest of the week will tell us if it has enough strength to overcome it.
Today we have the inflation data in the United States as the main economic release of the day. The Consumer Price Index or the CPI is expected to come out at 0.2%, the Core release, as that is one that matters for the Fed. It is still very low, but if Europe tells us something, then we might see inflation surprising to the upside today.
Yet, regardless of the CPI, the market may still focus on the stocks’ evolution and on the speech given by Jerome Powell, the Fed’s chair, later in the day.
Markets to Watch
FTSE100, EURJPY and GBPUSD – the markets in focus today.
The FTSE100 index is not following the strength seen in the United States stock market. This may have several reasons, such as the extensive lockdown in the country or the strength in the local currency, the British pound. The market appears to form a head and shoulders pattern, with the price currently struggling at the neckline of the pattern.
The EURJPY is one of the most important cross parts of the FX dashboard. As the chart above shows, it has consolidated in a triangular pattern lately, a pattern that may act both as a continuation and a reversal. Both bulls and bears have something to trade here, with the condition to wait for the market to break and close either above, or below the triangle’s edges. The measured move for such a pattern is the longest segment projected from the breakout point.
One of the most impressive rallies of the last months happened on the GBPUSD pair. It is not sure if this is due to the GBP strengthening or the USD weakness, but it does not really matter. What matters is that cable, as it is also called, has the magical 1.40 level in sight, providing it remains inside the rising channel.
Winners and Losers
USD is the main loser of the week, without a doubt, and the main winners remain the U.S. equities. Eyes on the Fed’s Powell speech later in the day today, as well as on the CPI release, that may change things for the rest of the week.