The Stoxx600 and FTSE250 once again hit new record highs yesterday, with the FTSE100 index closing at its highest level in a month, as cautious optimism in Europe outweighed concerns over rising delta variant illnesses in Asia and the US.
EUR/USD near March lows. Is the peak in US CPI inflation behind us?
It seems that rising bond yields are starting to act as a brake on the Nasdaq index, which ended the day on the downside, ahead of key inflation data. U.S. 10-year bond yields rose for five days in a row, closing at their highest level in four weeks, while U.S. two-year bond yields hit three-week highs.
While the Nasdaq fell, the Dow and S&P500 closed at record levels, following the Senate’s passage of a new infrastructure bill.
Ahead of today’s U.S. CPI data release, stock markets in Europe may open positive after a pretty good session in Asia.
In the latest June CPI, headline inflation posted another big increase to 5.4% and core prices rose to 4.5% – the highest level since 1991. Much of the change was driven by rising used car prices, which rose 10.5%.
We also saw a 1.5% rise in energy prices, while food and rent inflation advanced faster than expected. PPI prices posted a strong increase in June, which could be repeated in today’s July CPI, despite an expected slight decline.
The U.S. PCE price index for June reversed, with prices falling slightly, a sign that inflationary pressures may have peaked.
The Fed may continue to claim that the continued rise in prices is temporary, but given where the increases are occurring, if the June reading is lower than the July reading, officials may change their mind on that. For now, investors are buying this temporary narrative due to the resilience of the labor market.
July’s CPI is expected to fall from 5.4% to 5.3%, with core prices returning to 4.3%, but if recent trends in PPI changes are any indication, we can expect a further rise in the index, and with it a move in US 10-year yields towards 1.40%.
EURUSD – closed on support from March lows at 1.1704, a drop below 1.1700 will open up prospects for a move towards November lows at 1.1603. Resistance appears near 1.1830.
GBPUSD – remains below 1.3870, and a fall below 1.3800 supports a return to the area of 1.3720, only a rise above 1.3880 will signal potential growth in the area of 1.4000.
EURGBP – continues to fall, recording a new 18-month low at 0.8450 with the potential to go down to 0.8280. The stabilization of this currency pair can take place after the return above 0.8510.
USDJPY – the breakdown of the resistance posed by 110.70 gives a chance to move towards the July maximums at 111.65. The important level for the movement of this currency pair may be 109.80.
FTSE100 – is likely to open 9 points higher at 7170 level.
DAX – is expected to open 6 points higher, at the level of 15776.
CAC40 – possible to open 4 points higher, at the level of 6824.
CMC Markets Market Sentiment:
Germany 30 – negative sentiment prevails among holders of open positions in CFDs on the German DAX index, although sentiment around the index has improved slightly. Yesterday evening, short positions accounted for 89% of the value, today it is 82% (a decrease of 7 percentage points). Short positions are held by 73% of clients active in this market, 2 percentage points less than yesterday
CMC USD Index – sentiment around the dollar is getting better day by day. On the USD index, which represents the strength of the dollar against eight major currencies (EUR, JPY, GBP, AUD, CAD, CHF, CNH and SGD), long positions are held by 83% of clients and account for 52% of the value of all open positions.
Ethereum – the good run on Ethereum continues and the sentiment remains extremely bullish. Long positions on CFDs on this second most popular cryptocurrency are still in the vast majority – 87% of clients active on this instrument hold them and they account for 84% of the value of all positions.
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