Midday Market Update: US Inflation data in focus

As the Friday afternoon slump settles in, traders are grappling with a mixed bag of signals across major asset classes. Technical indicators flash conflicting messages, while fundamental news throws curveballs into the mix. The tug-of-war between policymakers and current market expectations weighs on market sentiment ahead of US Inflation data.

The Euro-dollar pair recovered yesterday’s losses by +0.25% as bulls gained optimism ahead of US inflation data. Despite a further slide in GfK German Consumer climate to -29.7 vs -24.5 expected, the EURUSD rallied after slightly sweeping below the 1.08205 low, and to the upside, bulls are capped by the 1.0900 level. The technical structure of the EURUSD suggests bearish pressure, but the European Central Bank’s hawkish tilt could offer some support.

The DXY (USD index) was down by -24.5% as bulls retreated slightly from recent highs, currently around 103.694. The rise in Initial Jobless claims to 214K vs 200K expected weighed down the dollar. Moreover, a slow growth in GDP remains a major headwind for dollar bulls. A break below 103.00 could signal further weakness and bears could expect the dollar to close a price action gap between the 102.740 and 102.613 ranges.

The GBPJPY was up +0.26% following negative Japanese Inflation data. The CPI came in at 1.6% vs 2.1% previously underpinning the neutral policy stance of the BoJ. The pound sterling shows some resilience, inching towards the 188.937 level after bouncing off the 187.20 support. A break above the near-term resistance could open the way for the 195.74 level, 1 August 2014.

The tech-heavy US100 index was steady at +0.16% after experiencing a near-term pullback after a disappointing Intel forecast. The index is currently trading between the 17666 high and the 17351.2 low. However, a break below the near-term low could reinforce prospects of an intermediate-term retracement. The upcoming earnings season for tech giants could be a major catalyst, with Microsoft and Alphabet on the docket next week.

The Dow (US30) seems relatively stable compared to its tech counterpart, hovering around 38000 level. The US30 was up +0.06% and if bulls manage to hold above that level, the 38110 high could be the next handle in the near term. Economic data releases like PCE inflation early New York session could influence sentiment.

The S&P500 (US500) was slightly up by +0.05% holding to gains for the 5^th day straight following surprise US GDP data. On the upside, bulls are capped by the 4900 level, while on the downside 4871 remains a critical level.

European equities continued to enjoy parabolic gains to the close of the week following vague ECB guidance. The FTSE100 was up +1.00% after closing above the 7539 resistance level on Thursday marking 7 days of gains. Bulls are challenged by the 7766.3 level.

The French index (CAC40) soared by +1.28% as bulls flirt with the 7651.6 high and a break above that level could open the index to experiencing unchartered territory as LVMH boosts European equities.

The DAX finds itself in a precarious zone around the 16966.51 level, a 2024 high. A break above that level could see the index headed for the 17000 level an all-time high for the index. Dax was up +0.34% adding to a 3-day of gains.

Commodities plunged to the close of the week ahead of US key inflation data. US Oil (USWTI) was down –0.58 % after breaching above a 2-month high at 76.22 level and holding above that level could open the way for bulls to extend targets towards the 79.74 level. UKOIL sank by -1.10% trading back below the 81.57 level, a December High. Key levels to watch out for are the 80.00 support level and 84.57 level. Technical indicators point towards further upside, but concerns about global demand amid economic slowdown could cap gains.