A little more volatility in asset markets coming through as US equities struggle for direction on the near term with continued weakness on lead cyclical indexes like the Russel, Transports & Financials. Key resistances are holding for the moment, although the Nasdaq just about scoring a marginal new high by a point or so. If wider price resistances cant be breached near term we look likely to see some more near term weakness in US equities.
The key US$ top question is likely to get some resolution shortly with more weakness in the euro pushing her back downwards towards her near term key support at 1.051 as 1.07 has been breached. She needs to put in a higher high here if this trend is going to sustain. Macro news flow today we had some bad inflation data for the euro that looks likely to extend this basing process a while longer yet. The Dollar basket bull may have another leg yet given how weak the euro inflation came through. The unresolved US$ (and now euro zone inflation) issue plays into all commodity longs and so some more weakness in the coming weeks looks likely for the inverse (and correlated inflation) plays eg gold. We need a careful eye to the US inflation expectations ie TIPS. If US inflation expectations slip here alongside euro inflation slipping the gold case will see less support (as will the US financials case).
Euro equities on the other hand look well supported technically with fairly strong euro growth, low inflation and now more euro weakness.
Here the comprehensive report from the Swiss team:
And here Fitzpatrick with his technical view :
On the eurusd worthy to note:
“The pivot in 1999 that we turned off was 1.0912. That started a move lower that saw EURUSD down to 0.8230 less than 2 years later.”
For my own book i remain as i was in recent weeks with fully funded equity positions in major markets. I’m very neutral across currencies as i’m unclear of direction for the moment. I’m under weight industrial commodities though over weight precious metals due to rising (until today’s euro inflation data) global inflation expectations. Ive scored new record account highs again in the last few days (measured in euros ie the euro weakness supportive).
We have some cross winds here in the near term it seems. Ill try and post some more reports in the coming days.
All the best
Rich