The market is waiting on some key pieces of data today and for the most part, backfilling the last two days' price action. Equities and commodities are looking the most positive so I am expecting a bigger move today in those sectors.
The yen is once again the weakest currency that we follow even after the Japanese Leading Indicators data came in better than expected. The flows out of the risk-sensitive yen could be based on the geopolitical situations to the east of Europe rather than a reflection on what is happening in Japan.
The tensions at the Russian border appear to be easing as Ukrainian President Zelensky says he is prepared to take necessary steps to end the conflict in the east of Ukraine. At the same time, the Kazakhstan President says the peacekeeping mission led by the Russians is completed and a withdrawal will begin in two days. This is a positive set of outcomes as Russia, NATO, and the West talk in Geneva this week. News out of the Kremlin was more cautious though as the statement says that it was too early to draw any conclusions from the first round of discussions.
The EURUSD is up higher at the London open but remains in a very tight range ahead of the speech from European Central Bank President Lagarde this morning, and Fed Chair Powell’s testimony this afternoon.
Oil has snapped back higher after a two-day decline that nearly tested the $80 price level in Brent. I am now waiting to see if we get above the swing high and then try for a test of the $85 price level. US crude stockpiles are expected to drop by around 2 million barrels in the week ending January 7th, a seventh straight week of decline.
The UK FTSE100 is also pushing back into recent highs following some good news from retailers. UK shoppers spent £7.1bln at supermarkets in the two days to December 24th, 2021. Marks and Spencer were the big winner with a +9.4% sales increase, whereas Tesco and Sainsbury’s dropped -0.1% and -4.2% respectively.
The GBPUSD has now breached the descending trendline and could be on its way to the 1.3800 level that was the pivot during the summer of 2021. A close above the daily 200 EMA and the resistance level of 1.3700 is the next real test of the bull’s fortitude.
Retail traders on the ActivTrader platform are extremely bearish as 71% of them try and short Cable. The remaining shorts who didn’t get their stops tripped above the 200 EMA will probably get squeezed all the way to 1.38500 so I am expecting an acceleration higher after a test of the 1.3700 level.