Category: Indexes

  • NY Session Tactical Brief – Friday, 29 May

    Regime: Mixed, with VIX at 16.29 reflecting contained risk, but rising US 10Y yield at 4.439% suggesting real-rate concerns.

    Today’s market themes:

    • Dominant: Real-rate repricing as inflation proves stickier than expected, driving USD strength and pressuring risk assets.
    • Secondary: Geopolitical tensions (Iran) and its impact on oil supply.

    The setup: Markets are pricing in a more hawkish Fed, underpinned by resilient economic data and persistent inflation. Short equities, targeting a dip in S&P 500 to 7500, with a stop loss at 7600. Risk is a dovish surprise from BoE Gov Bailey’s speech or weaker-than-expected Canadian GDP.

    Watch list (native time per event):

    • 08:29 CET EUR: German Prelim CPI m/m (forecast 0.1%, prior 0.6%)
    • 09:20 London GBP: BOE Gov Bailey Speaks
    • 08:30 ET CAD: GDP m/m (forecast 0.1%, prior 0.2%)

    Bias by asset:

    • DXY:
      • Direction: Bullish.
      • Domestic (US): Hawkish Fed rhetoric, resilient data, rising yields.
      • Cross: Global risk aversion, EUR/USD weakness.
      • Levels: Support 98.90, Resistance 99.20.
    • EUR/USD:
      • Direction: Bearish.
      • Domestic (EU): ECB’s mild easing bias, weaker growth data.
      • Cross: DXY strength, widening US-DE 10Y spread.
      • Levels: Support 1.1620, Resistance 1.1660.
    • GBP/USD (Cable):
      • Direction: Bearish.
      • Domestic (UK): BoE dovish tilt, potential service CPI weakness.
      • Cross: DXY strength, negative US-UK 10Y spread.
      • Levels: Support 1.3400, Resistance 1.3460.
    • USD/JPY:
      • Direction: Bullish.
      • Domestic (JP): BoJ slow normalization, intervention unlikely near-term.
      • Cross: Rising US 10Y, DXY strength, risk-on mood.
      • Levels: Support 159.00, Resistance 159.50.
    • USD/CAD (Loonie):
      • Direction: Bullish.
      • Domestic (CA): Weaker GDP, sensitivity to oil price moves.
      • Cross: DXY strength, widening US-CA 10Y spread.
      • Levels: Support 1.3780, Resistance 1.3840.
    • AUD/USD (Aussie):
      • Direction: Neutral.
      • Domestic (AU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength, China growth uncertainty.
      • Levels: Support 0.7150, Resistance 0.7180.
    • NZD/USD (Kiwi):
      • Direction: Neutral.
      • Domestic (NZ): RBNZ rate hike expectations, dairy price watch.
      • Cross: DXY strength, risk sentiment.
      • Levels: Support 0.5930, Resistance 0.5985.
    • USD/CHF (Swissy):
      • Direction: Bullish.
      • Domestic (CH): SNB easing bias, low Swiss yields.
      • Cross: DXY strength, diminishing safe-haven appeal.
      • Levels: Support 0.7800, Resistance 0.7850.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): Neutral.
      • Domestic: Relative CB stance + yields: EUR/GBP BoE more hawkish, EUR/JPY BoJ less hawkish, GBP/JPY both dovish.
      • Cross: DXY, risk sentiment influences cross-of-crosses dynamics.
      • Levels: Monitor each cross’s intra-day range.
    • XAU (Gold):
      • Direction: Bearish.
      • Domestic (asset-specific): Rising real yields, muted breakevens.
      • Cross: DXY strength, risk-off reducing demand.
      • Levels: Support 4500, Resistance 4580.
    • XAG (Silver):
      • Direction: Bearish.
      • Domestic (asset-specific): Subdued industrial demand, weak gold.
      • Cross: DXY strength, risk aversion hurting industrial metals.
      • Levels: Support 7500, Resistance 7700.
    • WTI / Brent:
      • Direction: Bearish.
      • Domestic (asset-specific): Potential US-Iran agreement easing supply risks.
      • Cross: DXY strength, risk-off sentiment.
      • Levels: WTI Support 86.50, Resistance 89.00.
    • Copper:
      • Direction: Bearish.
      • Domestic (asset-specific): China growth concerns, LME inventory levels.
      • Cross: DXY strength, global growth proxy weakening.
      • Levels: Support 635, Resistance 645.
    • SPX:
      • Direction: Bearish.
      • Domestic (US): Rising yields, earnings concerns.
      • Cross: VIX stabilizing, but fragile; global risk tone negative.
      • Levels: Futures support 7570, Cash resistance 7570.
    • NDX:
      • Direction: Bearish.
      • Domestic (US): Rising real yields, mega-cap vulnerability.
      • Cross: Rates-sensitivity, VIX uncertainty.
      • Levels: Support 30200, Resistance 30400.
    • US30 (Dow):
      • Direction: Neutral.
      • Domestic (US): Mixed earnings, cyclical sensitivity.
      • Cross: Bond-yield reaction, less sensitive than tech.
      • Levels: Support 50700, Resistance 50900.
    • UK100 (FTSE):
      • Direction: Neutral.
      • Domestic (UK): Sterling strength capping gains.
      • Cross: Global risk-off offset by weaker GBP.
      • Levels: Support 23300, Resistance 23550.
    • DAX:
      • Direction: Bearish.
      • Domestic (DE): Bund yields rising, weak EU data.
      • Cross: US tech weakness, DXY strength adding pressure.
      • Levels: Support 25000, Resistance 25200.
    • Nikkei:
      • Direction: Neutral.
      • Domestic (JP): JPY weakness supportive short-term, BoJ uncertainty.
      • Cross: US tech correlation, overall risk sentiment.
      • Levels: Support 65000, Resistance 66500.
    • BTC:
      • Direction: Bearish.
      • Domestic (asset-specific): Weak ETF flows, elevated funding rates.
      • Cross: DXY strength, risk aversion hitting crypto assets.
      • Levels: Support 73000, Resistance 74000.

    Positioning watch: JPY is crowded short (4th percentile), and AUD is crowded long (98th percentile). A hawkish surprise from the BoJ or disappointing China data could trigger a painful squeeze.

    The pain trade: A surprisingly dovish BOE and weak US data, fueling a rapid unwinding of USD longs and a squeeze of crowded JPY shorts.

  • S&P 500 Treads Water Ahead of Key Data – Friday, 29 May

    Where we are: S&P 500 futures are currently trading at 7588.25, virtually unchanged on the day. The overnight range has been tight, between 7573.25 and 7595.75. This level is just below yesterday’s cash close of 7563.60, suggesting a slight consolidation after a strong run.

    What’s driving it: The underlying US macro picture remains supportive, with the 10Y real yield continuing to drift lower to 2.09%, a tailwind for risk assets. However, the market is awaiting fresh catalysts, with no major US data releases scheduled before the New York open. The DXY is slightly firmer at 99.01, providing a modest headwind, while the 10Y yield is mirroring this with a slight uptick to 4.439%.

    • Dell’s impressive AI server revenue growth of 757% has fueled positive sentiment, evident in the pre-market surge of its stock, underscoring the ongoing AI-driven market narrative.
    • Speculator positioning in the S&P 500 remains modestly short, with net non-commercial contracts at -134,906. This relatively neutral stance (60th percentile) suggests limited squeeze potential in either direction.
    • WTI Crude remains under pressure after recent geopolitical news, still sitting below $100, alleviating some inflation concerns and supporting risk sentiment.

    NY session focus: All eyes will be on the sustainability of the AI rally and any fresh developments regarding the US-Iran discussions around Strait of Hormuz vessel flows. Watch for reactions around 7600, a key psychological level for the S&P 500. A break above this level could trigger further upside, while a failure to hold 7570 could invite a test of the lower end of the overnight range. The working trade remains long AI names and beneficiaries. The pain trade is a sudden hawkish shift in Fed rhetoric that spooks the bond market.

  • Nasdaq 100 Calm Before the Storm – Friday, 29 May

    Where we are: Nasdaq futures are currently trading at 30320.50, down -0.03% and holding within a tight range of 30216.50-30370.50 established overnight. The cash Nasdaq 100 closed yesterday at 26917.47. We’re effectively flat heading into the US open, digesting yesterday’s gains and awaiting fresh catalysts.

    What’s driving it: The domestic picture is one of measured calm. US 10-year yields are steady at 4.439%, and the 2-year is holding at 4.023%. Despite the relative quiet in yields, falling real yields are providing a tailwind for gold and indirectly supporting risk assets. The market is still pricing in a dovish reaction function from the Fed, and the positioning in Nasdaq futures suggests any positive earnings or AI news will be aggressively bought, triggering a potential squeeze, especially with net non-commercial positioning still showing a crowded short stance at the 4th percentile.

    • The 2s10s spread has widened to 0.46%, suggesting a slight easing of recession fears.
    • Speculator positioning in Nasdaq 100 futures remains net short, at the 4th percentile, highlighting a squeeze risk on any positive catalyst.
    • Dan Ives’ comments, predicting the Nasdaq to top 30,000 by 2027 due to AI, are fueling bullish sentiment in the tech sector.

    NY session focus: All eyes will be on the US data slate with the 08:30 ET prints looming large. A beat on core PCE could reignite inflation fears and pressure tech, while a miss could fuel further upside. Watch the 30,400 level on the upside; failure to hold 30,200 opens the door to a test of 30,000. The Dell trade is clearly working. The pain trade is a hawkish surprise pushing yields higher, triggering a sharp Nasdaq selloff.

  • Dow Jones Set for Further Gains – Friday, 29 May

    Where we are: Dow futures are currently trading at 50860, up 110 points or 0.22% on the day. The cash Dow closed yesterday at 50669, and the futures have traded in a range of 50704-50904 so far today. This suggests a positive open in New York, potentially pushing the Dow to fresh record highs.

    What’s driving it: Despite slight weakness in S&P 500 and Nasdaq futures, the Dow continues to find support, likely driven by strength in financial and consumer defensive sectors. The underlying strength in the US economy, as reflected in recent Costco sales data indicating strong gasoline demand, continues to underpin the market. Furthermore, while US 10Y yields are slightly higher at 4.439, the 2s10s spread remains positive at 0.46%, suggesting a less inverted yield curve and potentially easing recession fears. We see a supportive environment for continued gains in the Dow.

    • Costco’s same-store sales rising 9.8% during its third quarter points to robust consumer spending.
    • Net non-commercial positioning is moderately short at -10,765 contracts, suggesting room for further upside as shorts cover.
    • The VIX is down to 16.29, reflecting decreased market volatility and increased investor confidence.

    NY session focus: Focus for the New York session will be on monitoring the performance of key Dow components and any further developments regarding US-Iran relations, especially given its potential impact on oil prices and inflation. Keep an eye on the 10-year yield; a break above 4.50% could dampen enthusiasm. Initial resistance is at the intraday high of 50904. The trade that’s working is long Dow, short Nasdaq. The trade that’s at risk is short Dow given the overall positive momentum. The pain trade is a sudden risk-off move sparked by geopolitical jitters or a hawkish Fed surprise.

  • FTSE 100 Outperforms on Gilts and M&A Chatter – Friday, 29 May

    Where we are: The FTSE 100 is currently trading at 23469, up 142 points or 0.61% on the day, trading in a range of 23327 to 23552. This puts it well above yesterday’s New York close, driven by a continued bid tone in early European trading. The index is testing the upper end of its recent range, with resistance around 23550.

    What’s driving it: UK yields are drifting lower, with the 2-year down 3bp at 4.219% and the 10-year down 2bp at 4.803%. This is providing a tailwind for equities. The recent drop in CPI, with the headline figure falling to 2.8%, is giving the market confidence that the Bank of England may be closer to easing. Later today, all eyes will be on the comments from BOE Governor Bailey at 09:20 London time, where any hints of dovishness could further fuel the rally. While the DXY is slightly firmer at 99.01, the primary driver here remains domestic.

    • UK CPI printed well below prior levels, indicating easing inflationary pressure.
    • The UK 2s10s curve remains steep at +58bp, reflecting market expectations for future rate cuts.
    • M&A speculation is swirling around several FTSE 100 constituents, adding to the positive sentiment.

    NY session focus: The US session will likely focus on how the FTSE reacts to the US data stream next week, but today will likely be a continuation of the current trend. Watch for any signs of profit-taking as the index approaches the 23600 level. Key levels to watch are 23350 as initial support and 23550 as resistance. The trade is long UK equities against a backdrop of falling yields and dovish BoE expectations. The risk is a hawkish surprise from Governor Bailey, which would likely trigger a sharp pullback. The pain trade is a breakout above 23600, forcing shorts to cover and exacerbating the rally.

  • Nikkei 225 Surges on Strong Domestic Data – Friday, 29 May

    Snapshot: The Nikkei 225 is up 1.79% to 66330, driven by strong domestic retail sales and industrial production data released overnight. This positive momentum is further supported by a weaker Yen as JGB yields remain relatively stable, with the 2Y at 1.364% and the 10Y at 2.655%.

    • Watch for resistance around the day’s high of 66505.
    • Risk: A sharp reversal in US yields could trigger profit-taking in Nikkei.

    Bias into NY: We expect the Nikkei to hold onto gains, underpinned by domestic economic strength; a break above 66505 would open the door to further upside. DXY strength could cap further gains.

  • DAX Holding Gains as Eurozone Inflation Eases – Friday, 29 May

    Snapshot: The DAX is trading at 25105, down -0.15% on the session, despite easing Eurozone HICP figures at 2%. Focus remains on German CPI data due at 08:29 CET. We are also monitoring any escalation in Middle East tensions, which could trigger a risk-off move.

    • Watch Bund yields: any further downside in 2Y Schatz (now 2.550%) could support DAX upside.
    • Geopolitical headlines out of the Middle East still remain a key risk.

    Bias into NY: Neutral, but leaning cautiously bullish, as eurozone inflation coming inline supports gains, assuming the German CPI print aligns. Watch for initial resistance around the day’s high of 25201.

  • NY Session Tactical Brief – Thursday, 28 May

    Regime: Risk-off, driven by rising Mideast tensions and a flight to safety, reflected in falling US yields and a VIX above 17.

    Today’s market themes:

    • Oil supply scare: Geopolitical risks in the Black Sea and Middle East fuel concerns over energy supply, boosting crude prices.
    • Core PCE watch: Markets brace for key US inflation data, which could dictate the Fed’s near-term policy path.
    • Crowded shorts at risk: GBP, JPY and Nasdaq are crowded short based on the CFTC positioning.

    The setup: Rising geopolitical risks are pushing investors into safe-haven assets, weakening equities and boosting oil. Focus is on the 08:30 ET Core PCE print. A surprise to the upside could trigger a risk-off move, whereas a downside surprise could trigger a rally. US 10Y is at 4.479%.

    Watch list (native time per event):

    • 14:00 NZT NZD: Annual Budget Release (Medium)
    • 08:30 ET USD: Core PCE Price Index m/m (High) forecast 0.3%, prior 0.3%
    • 08:30 ET USD: Prelim GDP q/q (High) forecast 2.0%, prior 0.7%

    Bias by asset:

    STRICT SILO RULE: For every non-USD asset, the Domestic line MUST contain only domestic content (home central bank / domestic data / domestic yield / domestic political-fiscal driver). USD, DXY, Fed, US yields, and risk regime go in the Cross line — never in Domestic. If no fresh domestic catalyst exists, write “No fresh domestic catalyst — sensitive to US response” in Domestic. For commodities, Domestic = real-yields / supply / inventories / flows. For BTC, Domestic = funding / ETF flow / on-chain.

    • DXY:
      • Direction: Neutral to slightly lower.
      • Domestic (US): Fed policy dependent on PCE; US yields are key.
      • Cross: Risk-off flows provide some support; but geopolitical tension is negative.
      • Levels: Support at 99.11, resistance at 99.50.
    • EUR/USD:
      • Direction: Neutral.
      • Domestic (EU): Lagarde’s commentary; Bund yields stable; watching sovereign spreads.
      • Cross: DXY weakness offsetting risk-off; US-DE 10Y spread supportive.
      • Levels: Resistance at 1.1640, support near 1.1585.
    • GBP/USD (Cable):
      • Direction: Neutral to bearish.
      • Domestic (UK): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength limiting upside; risk-off sentiment hurts Cable.
      • Levels: Resistance at 1.3430, support at 1.3370.
    • USD/JPY:
      • Direction: Neutral to bullish.
      • Domestic (JP): Intervention risk remains high; JGB yields capped by BoJ.
      • Cross: US 10Y still above 4.45%; DXY support; risk-off may trigger unwinds.
      • Levels: Support at 159.30, resistance near 159.65.
    • USD/CAD (Loonie):
      • Direction: Neutral to bullish.
      • Domestic (CA): WTI price support; BoC likely on hold in June.
      • Cross: DXY strength; US-CA 10Y spread holds.
      • Levels: Support around 1.3835, resistance near 1.3870.
    • AUD/USD (Aussie):
      • Direction: Bearish.
      • Domestic (AU): RBA likely to pause; iron ore volatility.
      • Cross: DXY strength; China growth concerns.
      • Levels: Resistance at 0.7145, support around 0.7100.
    • NZD/USD (Kiwi):
      • Direction: Neutral.
      • Domestic (NZ): Annual budget release; RBNZ expectations muted.
      • Cross: DXY strength limiting upside; risk-off sentiment weighs.
      • Levels: Resistance near 0.5910, support around 0.5865.
    • USD/CHF (Swissy):
      • Direction: Bullish.
      • Domestic (CH): SNB easing bias; Swiss yields suppressed.
      • Cross: Safe-haven demand into USD; DXY strength.
      • Levels: Support at 0.7865, resistance near 0.7900.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Neutral; EUR/JPY: Bearish; GBP/JPY: Bearish.
      • Domestic: ECB vs BoE, BoJ; relative yields.
      • Cross: DXY impact on each leg; risk-off impacting JPY crosses.
      • Levels: Monitor range breaks from current levels.
    • XAU (Gold):
      • Direction: Bullish.
      • Domestic (asset-specific): Falling real yields supporting; breakevens stable.
      • Cross: Risk-off flows; DXY.
      • Levels: Support near 4400, resistance at 4490.
    • XAG (Silver):
      • Direction: Neutral.
      • Domestic (asset-specific): Industrial demand, Gold-Silver ratio monitoring.
      • Cross: DXY and risk appetite dictate direction.
      • Levels: Support near 7200, resistance at 7500.
    • WTI / Brent:
      • Direction: Bullish.
      • Domestic (asset-specific): Supply concerns, OPEC policy, EIA data.
      • Cross: Risk-off bid; DXY.
      • Levels: Monitor for breakouts above $93.00 and $96.00 respectively.
    • Copper:
      • Direction: Neutral.
      • Domestic (asset-specific): China demand, LME stock levels, supply side constraints.
      • Cross: Global growth concerns.
      • Levels: Support near $624.00, resistance near $636.00.
    • SPX:
      • Direction: Bearish.
      • Domestic (US): Fed policy / US yield reaction; earnings season ongoing.
      • Cross: VIX spikes on geopolitical concern; risk-off tone prevails.
      • Levels: S&P fut: resistance at 7557, support at 7505.
    • NDX:
      • Direction: Bearish.
      • Domestic (US): Mega-cap earnings; real yield sensitivity on long-duration assets.
      • Cross: Rates sensitivity and elevated VIX.
      • Levels: Resistance at 30135, support near 29765.
    • US30 (Dow):
      • Direction: Bearish.
      • Domestic (US): Cyclical tone; yield movements influencing industrial/financial sectors.
      • Cross: Bond yield reaction.
      • Levels: Resistance at 50819, support at 50576.
    • UK100 (FTSE):
      • Direction: Bearish.
      • Domestic (UK): Sterling weakness; Gilt yield reactions.
      • Cross: Global risk; US market sentiment dampening performance.
      • Levels: Resistance near 23390, support around 23190.
    • DAX:
      • Direction: Bearish.
      • Domestic (DE): Bund yields; ECB rhetoric; IFO / ZEW.
      • Cross: US tech weakness impacting; DXY.
      • Levels: Resistance at 25175, support at 24995.
    • Nikkei:
      • Direction: Bearish.
      • Domestic (JP): JPY moves, JGB yields, BoJ comments influencing sentiment.
      • Cross: US tech pressure impacting; overall risk tone.
      • Levels: Resistance near 65165, support around 63880.
    • BTC:
      • Direction: Bearish.
      • Domestic (asset-specific): Funding rates, ETF flows, and on-chain data under pressure.
      • Cross: DXY is supportive but broader risk-off pulls it down.
      • Levels: Resistance near 74500, support around 72500.

    Positioning watch: CFTC data shows crowded shorts in GBP, JPY and Nasdaq and crowded longs in AUD, Copper and Bitcoin. Any positive surprise from economic data (especially the US PCE) or easing of geopolitical tensions could trigger a short squeeze in GBP, JPY and Nasdaq.

    The pain trade: A weaker-than-expected Core PCE print would trigger a relief rally in risk assets, squeezing shorts in GBP, JPY and Nasdaq, and pressuring the DXY and pushing real-rates lower.

  • S&P 500 Drifts Lower Ahead of Key Data – Thursday, 28 May

    Where we are: S&P 500 futures are currently trading at 7536.25, down 18.50 points or -0.24% on the day, sitting near the bottom of their overnight range of 7506.25-7557.50. This is below yesterday’s cash close of 7520.40 but still within yesterday’s cash range of 7499.70-7530.70. The index appears to be consolidating after the recent run-up, lacking a clear catalyst for further upside.

    What’s driving it: The market is in a holding pattern ahead of the 08:30 ET data dump, with traders likely hesitant to commit to a strong direction. The Fed’s Cook and Jefferson speeches offered little new information, leaving the focus squarely on the incoming economic data. A steeper-than-forecast GDP print may push the index lower, whilst a hotter Core PCE m/m might signal a larger than anticipated rate hike. Despite a modestly short speculative positioning in S&P 500 futures, any unexpectedly hawkish data is likely to accelerate the sell-off, triggering a short squeeze on the other side of the trade.

    • The US 10Y yield is at 4.479%, down 2.2bp on the day, indicating some flight to safety.
    • The 10Y Breakeven Inflation rate ticked down to 2.39% yesterday, reflecting waning inflation expectations.
    • Commodity prices remain elevated, with WTI crude at $112.25, potentially adding to inflationary pressures despite the slightly declining break-evens.

    NY session focus: All eyes will be on the 08:30 ET data release, specifically the Core PCE Price Index, Prelim GDP, and Unemployment Claims. A combination of strong growth and sticky inflation could spook the market, potentially pushing the S&P 500 down towards the 7500 level. Conversely, weaker-than-expected data could provide a boost, targeting the overnight high of 7557.50. The trade at risk is a complacent long position expecting continued easy gains; the working trade is a nimble two-way book. The pain trade would be a Goldilocks scenario – strong growth alongside moderating inflation – triggering a sharp rally.

  • Nasdaq 100 Faces Headwinds Ahead of Key Data – Thursday, 28 May

    Where we are: Nasdaq futures are currently trading at 30027.50, down 0.28% after ranging between 29766.75 and 30135.75 overnight. The cash Nasdaq 100 closed yesterday at 26674.73 and is likely to open weaker, with futures below the overnight high. Key support lies around the 29750 level in futures, while resistance is around 30150.

    What’s driving it: US yields are softening slightly this morning, with the 10-year at 4.479%, down 2.2bp. This, in turn, is lending very modest support, but the overall tone is cautious ahead of a crucial data dump at 08:30 ET. Focus will be on Core PCE, Prelim GDP, and Unemployment Claims; any surprises here could trigger a sharp move, given the market’s sensitivity to inflation and growth data. Further weighing on sentiment are continued concerns over AI sustainability after hawkish comments from FOMC members, a factor amplified by upward PCE price pressures.

    • Jefferson spoke overnight on global economic developments.
    • The 2s10s spread is at 0.48%, but has flattened slightly over the past 24 hours, a sign that the market may be thinking about rates remaining higher for longer.
    • Speculator positioning in Nasdaq 100 futures is crowded short at the 4th percentile with net non-commercial contracts at -1,420, a squeeze risk on a positive surprise.

    NY session focus: Today’s session will hinge on the 08:30 ET data releases. Strong PCE or GDP prints would likely pressure Nasdaq, pushing yields higher and potentially triggering a short squeeze given the crowded positioning. Conversely, weaker data could fuel a rally. Keep an eye on the DXY, currently at 99.13; further dollar weakness could provide some support. The trade that’s working is fading rallies into resistance near 30150, while the trade at risk is chasing breakouts without confirmation from the data. The pain trade for Nasdaq is a surprisingly hawkish inflation number combined with robust GDP, forcing a rapid repricing of Fed expectations.

  • Dow Bulls Ready for GDP Test – Thursday, 28 May

    Where we are: The Dow Jones futures are currently trading at 50659, down 151 points or 0.30% on the day, after a relatively tight overnight range of 50576-50819. This is slightly below yesterday’s cash close of 50644, which itself gained 157 points on the day. The futures market is currently holding above the 50500 level, but showing signs of vulnerability pre-market.

    What’s driving it: The market’s cautious tone ahead of the 08:30 ET US data dump is the primary driver. Specifically, the core PCE and prelim GDP figures are front and center, as the market tries to gauge the Fed’s likely path. We’ve seen a notable easing in yields across the curve, with the 10Y at 4.479% and the 2Y at 4.049%, as the market continues to digest recent Fed commentary and lower expectations for aggressive rate hikes. Lower real yields are giving gold a tailwind, and equity markets are also benefitting.

    • The US 10Y yield is down 2.2bp on the day at 4.479%, extending its recent decline, reflecting easing inflation concerns.
    • Net non-commercial Dow positioning is moderately short at -10,765 contracts, but increased 7,203 w/w.
    • Jefferson spoke overnight, but his remarks regarding the US economy and global developments were not market moving.

    NY session focus: All eyes are on the 08:30 ET data trifecta: Core PCE, Prelim GDP, and Unemployment Claims. A beat on GDP combined with sticky PCE could reignite inflation fears and send yields higher, weighing on the Dow. Conversely, a soft GDP print alongside a benign PCE could fuel dovish expectations and provide a boost. Key levels to watch are 50500 as initial support and 50800 as resistance. The trade at risk is shorting the Dow, particularly if the data comes in dovish. The pain trade would be a hot GDP and PCE print, triggering a significant sell-off and forcing shorts to cover.

  • FTSE Faces Gravity as Rate Cut Hopes Fade – Thursday, 28 May

    Where we are: The FTSE 100 is currently trading at 23254, down 139 points or 0.59% on the day. The index is trading near the lower end of its intraday range of 23193-23393, showing some weakness. This decline follows an eight-session winning streak, and it’s underperforming its European peers as well as US futures which are trading in the red but to a lesser extent. A break below 23200 could open the door for a test of the lower end of the range.

    What’s driving it: UK inflation data released last month showed a significant drop in CPI, but the unemployment rate ticked up slightly. While the easing inflation boosted gilt yields, softening them slightly, the unemployment data creates a less clear outlook and keeps the BOE in a holding pattern. This lack of clear direction is weighing on the FTSE, particularly as other global markets remain volatile. The 2s10s curve remains positive at +58bp, signalling markets may not be pricing in rate cuts as aggressively.

    • UK CPI YoY fell -0.50% to 2.8%, a substantial drop, but likely still above the BoE’s comfort level.
    • UK Unemployment ticked up +0.10% to 5%, a possible indicator of a slowing economy that the BoE will be tracking closely.
    • The FTSE is underperforming European peers despite a weaker DXY, suggesting domestic headwinds are at play more than USD strength.

    NY session focus: All eyes will be on the US data prints that are due at 08:30 ET. Given the current risk-off tone, a strong number would likely lead to further selling pressure on the FTSE as US yields climb and the DXY finds its footing. Key levels to watch are 23193 to the downside and 23300 for any short covering rallies. The trade that’s working is shorting miners and utilities, following the weakness seen in the EU session. The trade that’s at risk is chasing the dip in energy names, as crude prices remain elevated. The pain trade here would be a sudden risk-on move driven by dovish Fed commentary, squeezing shorts and pushing the FTSE back above 23400.

  • Nikkei 225 Pares Gains as JGB Yields Fall – Thursday, 28 May

    Snapshot: The Nikkei 225 is currently trading at 64693, down 0.21% on the day, pressured by a pullback in technology shares. A decline in JGB yields, with the 2Y down 3bp to 1.356% and the 10Y down 2bp to 2.701%, is weighing on sentiment.

    • Watch for the reaction to today’s Tokyo Core CPI y/y print at 08:30 JST, which is expected to remain unchanged at 1.5%.
    • Continued weakness in tech, as highlighted by overnight wire reports regarding optical tech squeezes, could accelerate declines.

    Bias into NY: Expect continued consolidation in the Nikkei, potentially testing the lower end of today’s range around 63881, unless the Tokyo CPI significantly surprises; broader risk sentiment, as reflected in US futures which are currently down, will likely reinforce the cautious mood.

  • DAX Faces Pressure Amid ECB Commentary – Thursday, 28 May

    Snapshot: The DAX is currently trading at 25045, down 0.17% on the day, driven primarily by caution following recent ECB commentary and ahead of further remarks from President Lagarde at 09:10 CET. Declining German yields are failing to provide a significant offset to the overall risk-off tone.

    • Watch for potential support around the 24996 intraday low.
    • Geopolitical tensions remain a key risk, with headlines potentially amplifying market moves in the NY session.

    Bias into NY: Expect continued downward pressure on the DAX, potentially testing lower support levels, as traders digest Lagarde’s remarks and assess the impact of rising geopolitical risks. The weakness in US futures is compounding the cautious domestic sentiment.

  • NY Session Tactical Brief – Wednesday, 27 May

    Regime: Mixed. VIX sits at 16.59, while US 2Y yields are edging higher and the DXY hovers around 98.95, signaling risk-off sentiment battling positive momentum.

    Today’s market themes:

    • Strait of Hormuz tension eases: Oil prices plummet on reports of progress restoring shipping through the Strait, impacting commodity currencies.
    • Australian CPI miss: Cooler-than-expected Australian inflation data pressure the AUD, raising RBA policy questions.
    • RBNZ telegraphs tightening: The Reserve Bank of New Zealand holds steady but signals future rate hikes, boosting the Kiwi.

    The setup: Oil’s sharp drop after Iran’s signal about Strait of Hormuz shipping is cascading through markets. Watch CAD and commodity FX for further weakness if oil sustains its losses. A break below $87.80 in WTI could trigger a further sell-off.

    Watch list (native time per event):

    • 11:30 AEST AUD: CPI y/y (forecast 4.4%, prior 4.6%)
    • 14:00 NZT NZD: Official Cash Rate (forecast 2.25%, prior 2.25%)
    • 09:00 JST JPY: BOJ Gov Ueda Speaks

    Bias by asset:

    • DXY:
      • Direction: Sideways.
      • Domestic (US): Fed signaling mixed / inflation expectations remain sticky.
      • Cross: Oil impact / safe-haven demand ebb and flow.
      • Levels: Support 98.80 / Resistance 99.20.
    • EUR/USD:
      • Direction: Neutral.
      • Domestic (EU): ECB hawks vs doves battle / Bund yields rangebound.
      • Cross: DXY weakness offset by risk-off flow / US-DE 10Y widening.
      • Levels: Support 1.1630 / Resistance 1.1680.
    • GBP/USD (Cable):
      • Direction: Bearish.
      • Domestic (UK): BoE cut expectations building / Gilt yields under pressure.
      • Cross: DXY strength cap / US-UK 10Y divergence.
      • Levels: Support 1.3400 / Resistance 1.3480.
    • USD/JPY:
      • Direction: Bullish, but watch intervention.
      • Domestic (JP): BoJ cautious / Ueda verbal intervention / JGB constrained.
      • Cross: US 10Y supportive / risk-on flow offset by intervention threat.
      • Levels: Support 159.00 / Resistance 159.50.
    • USD/CAD (Loonie):
      • Direction: Bullish.
      • Domestic (CA): BoC dovish / CAD vulnerable to oil rout.
      • Cross: DXY strength / US-CA 10Y supportive.
      • Levels: Support 1.3800 / Resistance 1.3850.
    • AUD/USD (Aussie):
      • Direction: Bearish.
      • Domestic (AU): Weak CPI raises RBA pause risk.
      • Cross: DXY strength / US-AU 10Y negative spread / China uncertainty.
      • Levels: Support 0.7100 / Resistance 0.7180.
    • NZD/USD (Kiwi):
      • Direction: Bullish.
      • Domestic (NZ): RBNZ hawkish signal / OCR supports.
      • Cross: DXY strength offset by domestic policy tailwind.
      • Levels: Support 0.5850 / Resistance 0.5920.
    • USD/CHF (Swissy):
      • Direction: Bullish.
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength / safe-haven fading.
      • Levels: Support 0.7820 / Resistance 0.7880.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): Mixed.
      • Domestic: Relative BoE/ECB/BoJ stance driving flows.
      • Cross: DXY chop / risk sentiment mixed.
      • Levels: Monitor individual charts for key levels.
    • XAU (Gold):
      • Direction: Bearish.
      • Domestic (asset-specific): Rising real yields hurt gold / CB demand slows.
      • Cross: DXY strength / reduced safe-haven bid.
      • Levels: Support 4450 / Resistance 4500.
    • XAG (Silver):
      • Direction: Bearish.
      • Domestic (asset-specific): Industrial demand concerns / Gold underperformance.
      • Cross: DXY strength / risk aversion fading.
      • Levels: Support 7350 / Resistance 7500.
    • WTI / Brent:
      • Direction: Bearish.
      • Domestic (asset-specific): Strait of Hormuz progress weighs / EIA build risk.
      • Cross: DXY strength headwind / global growth worries.
      • Levels: WTI Support $87.50 / Resistance $90.00.
    • Copper:
      • Direction: Bearish.
      • Domestic (asset-specific): China growth concerns / LME inventories rise.
      • Cross: DXY impact / global growth proxy weakens.
      • Levels: Support 630 / Resistance 640.
    • SPX:
      • Direction: Sideways.
      • Domestic (US): Earnings season tapering / Fed watch / yield sensitivity.
      • Cross: VIX stable / global growth concerns offsetting.
      • Levels: Futures support 7530 / resistance 7570.
    • NDX:
      • Direction: Sideways.
      • Domestic (US): Mega-cap results mixed / real yield pressure building.
      • Cross: Higher rates sensitivity / VIX benign.
      • Levels: Support 30000 / Resistance 30400.
    • US30 (Dow):
      • Direction: Sideways.
      • Domestic (US): Cyclical earnings mixed / bond yields a factor.
      • Cross: Sentiment dependent on yields / relative valuation.
      • Levels: Support 50500 / Resistance 50800.
    • UK100 (FTSE):
      • Direction: Bullish.
      • Domestic (UK): Sterling weakness helps / commodity strength supports.
      • Cross: Global risk on / US data impact.
      • Levels: Support 23300 / Resistance 23550.
    • DAX:
      • Direction: Neutral.
      • Domestic (DE): No fresh domestic catalyst — sensitive to US response.
      • Cross: US tech influence / DXY impact / risk tone.
      • Levels: Support 25200 / Resistance 25400.
    • Nikkei:
      • Direction: Bearish.
      • Domestic (JP): JPY intervention risk / profit-taking after rally.
      • Cross: US tech / risk off.
      • Levels: Support 64500 / Resistance 65500.
    • BTC:
      • Direction: Sideways.
      • Domestic (asset-specific): ETF flows slowing / funding rates elevated.
      • Cross: DXY impact / risk correlated.
      • Levels: Support $75000 / Resistance $76000.

    Positioning watch: CFTC data shows crowded short positions in GBP and JPY, suggesting squeeze risk if data surprises positively. AUD and Copper are crowded longs, vulnerable to disappointment.

    The pain trade: A strong US data print today, particularly on inflation, would force a repricing of Fed expectations, hammering bonds and risk assets as the DXY surges.