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Forex heatmap indicates lower equities and commodities today

Even though the data out already this week has been important, the shadow of the US non-farm payrolls has been evident as the markets whipsaw on each data point. With the US equities trading higher into the jobs number for the week, it will be interesting to see if they can hold onto these gains, or whether they add to the monthly declines from the start of the year.

Morning Brief

The German DAX Head & Shoulders pattern keeps building as today's price action trades below yesterday's lows. The German benchmark index is bucking the early morning trend as most major indices are above their opening price at the London open. German economic data has come in better than expected but in most cases below the previous readings. German Industrial Orders month-on-month (MoM) came in at 2.8% above the expectations of 0.5% but under the previously revised lower 3.6%. German 5-year yields have risen to 0% for the first time since 2018 as the market still priced in the hawkish tone after yesterday's rate decision from the ECB. Eurozone construction PMI for January beat the previous reading and printed a decent 56.6, as did the German construction PMI for January as it came in higher than previous and printed a solid 54.4.

The EURUSD's rip higher yesterday as ECB President Lagarde gave her press conference has left a volume void and imbalance from the 1.1300 price level. I am interested to see if the bulls take their profits and closeout ahead of today's NFP or if they feel the US jobs data will be so bad that the US dollar continues to correct lower.

Today's focus will be centered around the US non-farm payrolls and wage data. After ADP earlier this week and the stock market volatility during earnings season, we can only deduce that the forex heatmap is indicating a bad start and possibly end to today's proceedings. The heatmap has clearly started off risk-off, so I am expecting commodities and equities to trade lower today.

In the overnight session, the USDJPY tested Wednesday's highs and found it to be solid support. With a daily swing high just above, I am interested to see if we can clear the week's opening price and trade above the 115.80 into the close today, which to me sets up a bullish continuation next week. Failure to get above 115.25 and we could have found significant resistance and new selling pressure.

This morning we are expecting the UK Markit/CIPS Construction PMI for January to come in at 54.3 and unchanged. Below 50 would be a confirmation of a contraction. This however is unlikely as the sector has leveled out around 55 for the last 6 months. It would be good to see the figure beat expectations and go some way to reversing the slow grinding descent from the highs last year.

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