Quiet ahead of potential CPI volatility

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.

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.

USDCAD

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.

AUDUSD

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.

VZ

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.

JNJ

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 PPI
• USD Unemployment Claims
• USD FOMC Member Waller Speaks
• USD 30-y Bond Auction
• NZD Inflation Expectations q/q
• GBP GDP
• 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
TIOmarkets

DISCLAIMER: TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.

Janne Muta

Related Posts

Analysis

Stocks lower on rate hike concerns

Stocks traded lower yesterday as concerns about the economy and potential Fed rate hikes weighed on investor sentiment. Nasdaq, Dow, FTSE and DAX all traded lower. The increase in job opening...

Analysis

China’s recovery is losing steam

China's manufacturing Purchasing Managers' Index (PMI) fell to a five-month low of 48.8, pressuring commodities and commodity currencies in the Asian session today. Yesterday the US equity ma...

Analysis

Biden, McCarthy need bipartisan support

Investor sentiment in the US has been positive when it comes to AI stocks. There’s also some optimism over a potential debt ceiling agreement, which could lead to the suspension of the debt l...

Analysis

Strong investor interest in AI-related stocks

The US equities gained on Friday as investors kept on pouring money into the big tech names with the hope of those stocks gaining on AI-frenzy. The DJIA (Dow Jones Industrial Average) increas...