Regime: Mixed — VIX holding near 18.40 amid rising US real yields, capping risk appetite.
Today’s market themes:
- Real-rate repricing: Fed nomination vote and PPI data set to dictate the pace of the climb, pressuring gold and growth stocks.
- Iran War Impact: Ongoing supply disruptions and inventory depletion boosting oil prices, triggering inventory concerns.
- Crowded FX positions: Extreme positioning in AUD, NZD, JPY and GBP presents squeeze risks on data surprises.
The setup: Rising real yields are the dominant force. Focus is on US PPI and the Fed nomination vote today to further define the Fed’s path. Watch for a continued bid in US yields to pressure equities and gold, with DXY bid into the European open. Key is whether 10Y TIPS break 2.00%.
Watch list (native time per event):
- 08:30 ET USD: Core PPI m/m (forecast 0.3%, prior 0.1%)
- 08:30 ET USD: PPI m/m (forecast 0.5%, prior 0.5%)
- 14:30 ET USD: Fed Chair Nomination Vote (forecast Pass, prior —)
Bias by asset:
- DXY:
- Direction: Bullish
- Domestic (US): Strong US data supports hawkish Fed, boosting USD.
- Cross: Risk-off flows and rising US yields underpin the dollar.
- Levels: Support 117.80, Resistance 118.50.
- EUR/USD:
- Direction: Bearish
- Domestic (EU): Eurozone growth concerns and relatively dovish ECB weigh on EUR.
- Cross: Stronger USD and widening US-DE yield spread pressure EUR/USD.
- Levels: Support 1.0760, Resistance 1.0820.
- GBP/USD (Cable):
- Direction: Bearish
- Domestic (UK): BoE easing expectations, pressured by persistent inflation, weigh on the Pound.
- Cross: Stronger USD and widening US-UK yield spread pressure Cable.
- Levels: Support 1.2460, Resistance 1.2520.
- USD/JPY:
- Direction: Bullish
- Domestic (JP): BoJ still dovish relative to Fed; intervention risk lingers.
- Cross: Higher US yields drive USD/JPY higher despite intervention risks.
- Levels: Support 157.75, Resistance 158.50.
- USD/CAD (Loonie):
- Direction: Bullish
- Domestic (CA): WTI price volatility offsets CAD strength from BoC rate cuts.
- Cross: USD strength and widening US-CA yield spreads favor upside.
- Levels: Support 1.3650, Resistance 1.3700.
- AUD/USD (Aussie):
- Direction: Bearish
- Domestic (AU): RBA easing expectations and weak CPI growth weigh on AUD.
- Cross: Stronger USD and risk-off sentiment hurt the Aussie.
- Levels: Support 0.7175, Resistance 0.7225.
- NZD/USD (Kiwi):
- Direction: Bearish
- Domestic (NZ): RBNZ dovishness and concerns about domestic demand hurt the Kiwi.
- Cross: Stronger USD and risk-off sentiment weigh on NZD/USD.
- Levels: Support 0.5900, Resistance 0.5950.
- USD/CHF (Swissy):
- Direction: Bullish
- Domestic (CH): SNB intervention unlikely; Swiss yields remain low.
- Cross: Risk-off flows less supportive with strong USD driving gains.
- Levels: Support 0.7800, Resistance 0.7850.
- EUR/GBP, EUR/JPY, GBP/JPY:
- Direction (per cross): EUR/GBP: Neutral, EUR/JPY: Bullish, GBP/JPY: Bullish
- Domestic: Relative CB stance — BoE slightly more hawkish than ECB. BoJ lags both.
- Cross: DXY strength benefiting JPY crosses, risk tone dictates flows.
- Levels: EUR/GBP: 0.8510-0.8560, EUR/JPY: 169.00-170.00, GBP/JPY: 192.80-193.80
- XAU (Gold):
- Direction: Bearish
- Domestic (asset-specific): Rising real yields are a significant headwind.
- Cross: Stronger USD and risk-off environment further pressure Gold.
- Levels: Support $4,675, Resistance $4,725.
- XAG (Silver):
- Direction: Bearish
- Domestic (asset-specific): Industrial demand is soft, Gold/Silver ratio rising.
- Cross: Stronger USD and risk-off environment weigh on Silver.
- Levels: Support $29.00, Resistance $29.50.
- WTI / Brent:
- Direction: Bullish
- Domestic (asset-specific): IEA reports record draw in global oil inventories due to Iran War.
- Cross: Risk sentiment generally supportive, but DXY strength a cap.
- Levels: WTI Support $101.00, Resistance $103.00.
- Copper:
- Direction: Bearish
- Domestic (asset-specific): China growth concerns resurface, LME stocks remain high.
- Cross: Global growth worries and DXY strength pressure Copper.
- Levels: Support $5.00, Resistance $5.10.
- SPX:
- Direction: Bearish
- Domestic (US): Higher yields weigh on valuations, focus on earnings.
- Cross: VIX spikes indicate potential for further downside risk.
- Levels: Futures support 5200, resistance 5250 (cash: key levels to use).
- NDX:
- Direction: Bearish
- Domestic (US): Mega-cap tech vulnerable to higher real yields.
- Cross: High rate sensitivity amplifies downside in risk-off environment.
- Levels: Support 19,500, Resistance 19,700.
- US30 (Dow):
- Direction: Bearish
- Domestic (US): Cyclical sector earnings sensitive to rising yields.
- Cross: Bond yield reaction to data key driver of Dow performance.
- Levels: Support 39,000, Resistance 39,500.
- UK100 (FTSE):
- Direction: Neutral
- Domestic (UK): Sterling strength offsetting positive global risk sentiment.
- Cross: Global risk appetite supports, but US tone a key determinant.
- Levels: Support 8350, Resistance 8400.
- DAX:
- Direction: Neutral
- Domestic (DE): Bund yields stable; focus on EU sentiment indicators.
- Cross: US tech performance influences DAX, DXY strength is a cap.
- Levels: Support 24,000, Resistance 24,100.
- Nikkei:
- Direction: Neutral
- Domestic (JP): JPY weakness supports, BoJ policy stance is key.
- Cross: US tech performance and risk-on sentiment drive Nikkei.
- Levels: Support 63,000, Resistance 63,500.
- BTC:
- Direction: Bearish
- Domestic (asset-specific): Funding rates remain elevated, ETF flows slowing.
- Cross: DXY strength and risk-off sentiment hurt Bitcoin. Nasdaq correlation matters.
- Levels: Support $62,000, Resistance $63,000.
Positioning watch: CFTC data shows crowded longs in AUD, Copper, and Bitcoin (above 80th percentile), vulnerable to a squeeze on any downside surprises. Crowded shorts in GBP, JPY and NZD present an upside risk.
The pain trade: A surprise dovish tilt from the Fed on the nomination vote or a much weaker-than-expected PPI print would trigger a short squeeze in crowded USD shorts and boost risk assets, especially the crowded AUD/USD longs.