Quiet ahead of potential CPI volatility

BY Janne Muta

|May 9, 2023

After a strong rally on Friday due to the jobs report, US equity indices finished the day almost unchanged on Monday. There was no significant shift in the narrative around the Fed pivot, banking troubles or the softening economy as everyone waits for the US CPI release (on Wednesday). The S&P 500 was lifted by strong performances in major tech companies, particularly Meta and Alphabet, leading to a 1.3% gain, driven by communication services firms. Megacap tech firms have been driving the stock market's gains this year, outperforming the broader index.

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The 10 yr treasury yield moved up from 3.441% to 3.511% and the price of gold (+0.23%) followed a little higher too. Commodity currencies kept moving higher with the oil price. Both AUD (+0.42%) and NZD (+0.80%) are fairly oversold relative to the recent range while USD gained slightly against the CAD after the USDCAD pair had fallen near to a major support level.

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USDCAD is oversold after the sharp move lower that followed the breaking of the 1.3522. The downside is probably quite limited now with the market trading near to a major support level (1.3300) A decisive break above 1.3387 would imply a move to 1.3440 and then possibly to 1.3520 on extension. Below 1.3300, the market could move to 1.3260.

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AUDUSD is oversold in the daily timeframe chart. The market has rallied to levels (0.6805) where supply has been overwhelming the demand since early March this year. Therefore, the immediate upside is probably limited. The market is trading in a range and therefore, range trading strategies are more likely to work in AUDUSD until the market has broken out of the range (0.6563 - 0.6805). The nearest key support area is at 0.6706 - 0.6717.

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Verizon (.VZ.N) has been creating a bottoming formation above 36.15 since the stock broke out of a bearish trend channel. The market retraced back to levels it traded at the time of a minor (positive) earnings surprise. Now it seems that the stock is gaining some strength again and is bullish above 37.14. Above the level, look for a move to 38.30 and then possibly to 39.50 on extension. Below 37.14, we might see a move to 36.60.

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Johnson & Johnson (.JNJ.N) is bullish above 161.22. Above the level, look for a move to 164.50. Below the level, the market is likely to test the 159.80 support again. The stock has just recently announced a decent earnings report (a 7% positive earnings surprise) which is likely to provide institutional support for the stock.

The Next Main Risk Events

  • USD CPI & Core CPI
  • CHF SNB Chairman Jordan Speaks
  • USD 10-y Bond Auction
  • GBP BOE Monetary Policy Report
  • GBP MPC Official Bank Rate Votes
  • GBP Monetary Policy Summary
  • GBP Official Bank Rate
  • GBP BOE Gov Bailey Speaks
  • USD Core PPI
  • USD Unemployment Claims
  • USD FOMC Member Waller Speaks
  • USD 30-y Bond Auction
  • NZD Inflation Expectations q/q
  • GBP Prelim GDP
  • USD Prelim UoM Consumer Sentiment
  • USD Prelim UoM Inflation Expectations

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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