Regime: Risk-on, supported by easing global inflation expectations as indicated by lower US 10Y yields and firm equities futures.
Today’s market themes:
- ISM Day: US ISM Manufacturing PMI key for near-term Fed rate path signals.
- USD strength: DXY gains traction amid mixed global growth outlook, impacting emerging market stocks.
- Oil price volatility: Geopolitical tensions and supply concerns continue to underpin oil prices.
The setup: ISM Manufacturing PMI at 10:00 ET will be crucial in determining the near-term Fed outlook. A print above 53.3 could fuel further DXY gains and pressure risk assets, while a miss could see yields dip and equity futures rally. Watch US 10Y around 4.45%.
Watch list (native time per event):
- 10:00 ET USD: ISM Manufacturing PMI (forecast 53.3, prior 52.7)
- 10:00 ET USD: ISM Manufacturing Prices (forecast 85.3, prior 84.6)
- 20:30 ET USD: FOMC Member Powell Speaks
Bias by asset:
- DXY:
- Direction: Higher.
- Domestic (US): ISM data crucial; Fed rhetoric leaning hawkish.
- Cross: Risk-off flows supportive; EUR/GBP weakness adds to momentum.
- Levels: Resistance 99.20, Support 98.80.
- EUR/USD:
- Direction: Lower.
- Domestic (EU): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength weighs; US-DE 10Y widening pressures.
- Levels: Resistance 1.1670, Support 1.1630.
- GBP/USD (Cable):
- Direction: Neutral to slightly lower.
- Domestic (UK): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength a headwind; US-UK 10Y supportive.
- Levels: Resistance 1.3480, Support 1.3440.
- USD/JPY:
- Direction: Higher.
- Domestic (JP): BoJ still slow to tighten; intervention risks persist.
- Cross: US 10Y driving force; DXY strength adds to upward pressure.
- Levels: Resistance 159.75, Support 159.20.
- USD/CAD (Loonie):
- Direction: Higher.
- Domestic (CA): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength dominating; US-CA 10Y favors USD upside.
- Levels: Resistance 1.3850, Support 1.3790.
- AUD/USD (Aussie):
- Direction: Lower.
- Domestic (AU): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength; China growth concerns remain.
- Levels: Resistance 0.7190, Support 0.7150.
- NZD/USD (Kiwi):
- Direction: Lower.
- Domestic (NZ): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength; risk-off sentiment hurting commodity currencies.
- Levels: Resistance 0.5990, Support 0.5940.
- USD/CHF (Swissy):
- Direction: Higher.
- Domestic (CH): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength; safe-haven demand muted.
- Levels: Resistance 0.7870, Support 0.7820.
- EUR/GBP, EUR/JPY, GBP/JPY:
- Direction (per cross): Mixed, relative CB stance drives direction.
- Domestic: ECB vs BoE/BoJ expectations key for cross-pair movements.
- Cross: Overall DXY strength; risk impacting JPY leg most.
- Levels: Monitor key levels on a case-by-case basis.
- XAU (Gold):
- Direction: Lower.
- Domestic (asset-specific): Real yields rising limits upside.
- Cross: DXY strength a major headwind.
- Levels: Resistance 4580, Support 4520.
- XAG (Silver):
- Direction: Mixed.
- Domestic (asset-specific): Industrial demand supportive, but volatile.
- Cross: DXY strength weighs; risk appetite fluctuates.
- Levels: Resistance 7660, Support 7420.
- WTI / Brent:
- Direction: Higher.
- Domestic (asset-specific): Geopolitical tensions support; supply concerns.
- Cross: DXY strength can limit some upside.
- Levels: WTI Resistance 91.50, Support 88.50.
- Copper:
- Direction: Higher.
- Domestic (asset-specific): China demand concerns still linger despite recent gains.
- Cross: Dollar strength may temper upside for now.
- Levels: Resistance 660, Support 640.
- SPX:
- Direction: Sideways to slightly higher.
- Domestic (US): Data-dependent Fed outlook influences direction.
- Cross: Risk sentiment driving force; watch VIX reaction.
- Levels: Futures resistance 7630, cash support 7570.
- NDX:
- Direction: Sideways.
- Domestic (US): Earnings season winding down, focus on macro.
- Cross: Higher rates sensitivity; VIX affecting valuations.
- Levels: Resistance 30600, Support 30350.
- US30 (Dow):
- Direction: Sideways to slightly higher.
- Domestic (US): Cyclical sectors showing resilience.
- Cross: Bond yield direction drives sentiment.
- Levels: Resistance 51400, Support 50700.
- UK100 (FTSE):
- Direction: Lower.
- Domestic (UK): Sterling weakness supportive, but overall global risk weighs.
- Cross: Heavily affected by general mood across US/global markets.
- Levels: Resistance 23450, Support 23300.
- DAX:
- Direction: Sideways.
- Domestic (DE): No fresh domestic catalyst — sensitive to US response.
- Cross: US tech sector; DXY driving some investor sentiment.
- Levels: Resistance 25350, Support 25100.
- Nikkei:
- Direction: Sideways to slightly higher.
- Domestic (JP): Consolidation around record highs.
- Cross: US tech; overall risk appetite important for sentiment.
- Levels: Resistance 67300, Support 66200.
- BTC:
- Direction: Sideways to slightly lower.
- Domestic (asset-specific): ETF flows influence price.
- Cross: Heavily linked to DXY; sensitive to tech direction.
- Levels: Resistance 74100, Support 71800.
Positioning watch: USD is crowded long at 81st percentile, and JPY remains crowded short (0th percentile) presenting squeeze risks on any dovish pivot from the Fed or a BoJ hawkish surprise. Copper and BTC are crowded long as well, both at 94th, suggesting downside risks on weaker data.
The pain trade: A weaker-than-expected ISM, combined with Powell hinting at openness to rate cuts, would trigger a sharp rally in bonds and equities, squeezing USD longs and JPY shorts simultaneously.