The US CPI data was more or less as expected, but the market is taking a more dovish view (I don’t really see greatness in the data, but the market is cheering). Earnings from financialalso came in better which is helping the stock market. Yields are down sharply which is also a big driver. The 10 year yield is now down -11.5 basis points or 4.675% after reaching 4.809% this week. The two year yield is down -8.9 basis points.
In premarket trading for US stocks, futures implying:
- S&P index up 83 points
- NASDAQ index up 340 points
Looking at some of the major currency pairs:
EURUSD: The EURUSD moved higher and extended briefly above the 38.2% retracement of the move down from the December high to the January low. That retracement level comes in at 1.03494. The high price reached 1.03538. The current price is trading at 1.0335. If the price for the EURUSD is to continue its run to the upside, getting and staying above the 38.2% retracement is requirement. Absent that, and it’s just a plain-vanilla correction in what has been a more bearish market trend.
USDJPY: The USDJPY moved further lower and away from it’s a cluster of moving averages between 157.45 and 157.74 (see blue and green lines) after the US CPI data (more bearish). The new lows in the pair extended into a lower swing area of what has been a larger up and down trading range (see red box below). That lower swing area comes between 155.94 and 156.22. The price is trading at new session lows as I type at 156.13. If the sellers are to push further, getting outside of the red box (below 155.94) is now needed.
Conversely, dip buyers could uses area as a buying opportunity with a stop below the aforementioned level at 155.94. Big test for the sellers and buyers in the USDJPY
GBPUSD:Before the CPI, the GBPUSD was trading above and below its 100 hour moving average at 1.22199. The price has now moved above the 38.2% retracement of the January trading range at 1.22808. So far the price is holding support against that level keeping the buyers in play. However, there is work to do with the 200 hour moving average at 1.2332 and the 50% of the January trading range at 1.2337 still key targets to get to and through to show more bullish corrective strength.
