The forex market heatmap is signaling a sideways market for the London session, which should be expected before such an important Tier-1 data point later today. The market is going to focus its attention mainly on the FOMC and continued supply chain disruptions due to the coronavirus.
I find it is always best to start with the forex heatmap as it lets me know the current mood of the market. Yesterday was obviously a down day and for me, the move into the yen indicated that first. Today the commodity pairs NZD and CAD are at odds with each other and the USD is getting a bid. Yen and Swissy are mixed so it is not clear in terms of the trader's intentions this morning.
US 10 Year yields are holding up against yesterday’s lows and they will probably remain here until the FOMC meeting conclusion today. The market is talking about a possible tapering of Mortgage-Backed Securities which will be seen as Hawkish moves by the Fed. The US housing market has been overheating since the start of the pandemic as people moved out of the cities into larger homes, in less densely populated areas. There have also been supplying shocks and prices of Lumber had increased to record highs, putting pressure on housebuilders and inflating house prices. The Fed has also kept interest rates at record lows and has been removing MBS to the tune of $40billion a month which analysts say is adding to the housing price increase. The initial reaction to tapering will most probably be a move into the US dollar and out of equities. But until we get the statement and press conference I would recommend sitting on the side-lines, considering where to fade a reactionary move or what else could be signaling a bigger downtrend.
The FTSE is trading at the day’s opening price and should get a bid into the US session. Companies are reporting good revenues within the earnings reports but with the caveat that there are still supply chain bottlenecks that are causing concern. Barclays have quadrupled their profits and have reinstated their dividend, so I am glad I wrote about that earlier this week as a good investment idea.
The Nationwide House Price Index for the UK housing market is lower today as house prices cool post the full tax break deadline.
Annual house price growth in the UK eased to 10.5% in July from a 17-year high of 13.4% in the previous month.
The GBPUSD has found some resistance at a descending trend line, but the reality is the move into the US dollar this morning is capping Cable's advance. It closed above the daily 50 exponential moving average which is a really bullish sign but failed to take out the balance area highs to the left on the chart. Another big push is needed if we’re to test those sitting orders at 1.4000 or above.
Last night some big US companies delivered great earnings beating market expectations. Google, Apple, Microsoft, and AMD along with Starbucks all reported that supply chains would be a concern and could affect the rest of the year's bottom line. In the tech industry, the semiconductor supply chain is the weakest link.
Once again, the 20, 50, and 200 exponential moving averages have been a great indicator of not just the daily momentum of the US indices but also where dynamic support could come into play. Yesterday’s down move ahead of the aftermarket earnings reports paused at the daily 20-period ema and could have given the side-lined investors an opportunity to get involved.
Later on today we have the FOMC meeting rate and monetary policy decision. Followed by the important press conference. This will be the market's focus today and probably give the rest of the week/month a trading direction. Before that, there will be CPI inflation data out of Canada and the EIA weekly oil inventory data. Today’s earnings include Boeing, Ford, Facebook, Pfizer, and Paypal.