Regime: Mixed, as lower European equity indices and higher Brent prices offset positive sentiment from Bitcoin and US tech futures; VIX at 18.02.
Today’s market themes:
- BoC policy decision and press conference: Expect hawkish guidance from Macklem as inflation remains stubbornly high.
- Hormuz Strait disruption fears support Oil: Geopolitical risks weigh as Brent hits one-month highs near $109/bbl.
- USD awaits Fed decision: Dollar consolidating gains ahead of anticipated steady rates.
The setup: Oil supply fears are currently the dominant driver, pushing Brent to $109. Focus now shifts to how the Fed will address these commodity price pressures at its upcoming meeting, particularly given continued indications that USD is “crowded long”. Rate decision + Powell presser could spur volatility. Watch for a DXY breakout if Powell speaks hawkishly or a sharp reversal if the Fed pivots dovishly on the recent inflation data.
Watch list (native time per event):
- 11:30 AEST AUD CPI m/m (forecast 1.3%, prior 0.0%)
- 09:45 ET CAD BOC Rate Statement (forecast 2.25%, prior 2.25%)
- 14:00 ET USD Federal Funds Rate (forecast 3.75%, prior 3.75%)
Bias by asset:
- DXY:
- Direction: Neutral, awaiting Fed guidance.
- Domestic (US): Fed policy decision, US data releases, US yield curve.
- Cross: Risk sentiment, FX cross flows ahead of tech earnings.
- Levels: Support 98.40, resistance 98.80.
- EUR/USD:
- Direction: Bearish, pressured by DXY strength.
- Domestic (EU): Sticky Spanish inflation / peripheral spreads.
- Cross: DXY strength, US-DE 10Y spread favoring USD, risk aversion.
- Levels: Support 1.1690, resistance 1.1730.
- GBP/USD (Cable):
- Direction: Neutral.
- Domestic (UK): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength, US-UK 10Y spread, risk-off flows.
- Levels: Support 1.3490, resistance 1.3530.
- USD/JPY:
- Direction: Bullish, eyeing 160.
- Domestic (JP): BoJ dovishness, intervention risk, JGB yields.
- Cross: Rising US 10Y yield, DXY strength, risk-on flows.
- Levels: Support 159.50, resistance 160.00.
- USD/CAD (Loonie):
- Direction: Neutral.
- Domestic (CA): Hawkish BoC needed to push higher.
- Cross: DXY strength, US-CA 10Y spread.
- Levels: Support 1.3670, resistance 1.3700.
- AUD/USD (Aussie):
- Direction: Bearish, after mixed CPI data.
- Domestic (AU): Mixed CPI response, RBA watch.
- Cross: DXY strength, US-AU 10Y spread, China growth concerns.
- Levels: Support 0.7150, resistance 0.7200.
- NZD/USD (Kiwi):
- Direction: Bearish, pressed by the RBNZ’s easing bias.
- Domestic (NZ): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength, US-NZ 10Y spread, risk-off flows.
- Levels: Support 0.5850, resistance 0.5900.
- USD/CHF (Swissy):
- Direction: Bullish, supported by the SNB’s easing bias.
- Domestic (CH): No fresh domestic catalyst — sensitive to US response.
- Cross: DXY strength, safe-haven outflows from CHF.
- Levels: Support 0.7880, resistance 0.7910.
- EUR/GBP, EUR/JPY, GBP/JPY:
- Direction (per cross): Neutral.
- Domestic: Relative BoE and ECB stance, relative yields.
- Cross: DXY strength, risk sentiment.
- Levels: Monitor key support and resistance.
- XAU (Gold):
- Direction: Bearish, pressured by real yields.
- Domestic (asset-specific): Rising real yields pressuring gold.
- Cross: DXY strength, risk aversion.
- Levels: Support 4550, resistance 4630.
- XAG (Silver):
- Direction: Bearish, impacted by industrial demand.
- Domestic (asset-specific): Demand mixed and impacted by real yields.
- Cross: DXY strength, risk aversion.
- Levels: Support 7180, resistance 7380.
- WTI / Brent:
- Direction: Bullish, supply disruption fears.
- Domestic (asset-specific): Geopolitical factors driving surge.
- Cross: Weaker DXY could add fuel to rally, risk on.
- Levels: WTI support 100.00, Brent support 105.00.
- Copper:
- Direction: Neutral, but China key.
- Domestic (asset-specific): Eyes on China growth, LME stock levels.
- Cross: Global growth sentiment.
- Levels: Support 595, resistance 603.
- SPX:
- Direction: Sideways, waiting on Fed and earnings.
- Domestic (US): Eyes on earnings and Fed stance.
- Cross: VIX regime, global macro.
- Levels: Futures support 7160, resistance 7190.
- NDX:
- Direction: Neutral, focused on mega-cap earnings.
- Domestic (US): Earnings and AI optimism.
- Cross: Rates sensitive, watching VIX.
- Levels: Support 27190, resistance 27320.
- US30 (Dow):
- Direction: Neutral, industrials in focus.
- Domestic (US): Earnings focus and overall US data.
- Cross: Bond yield reaction.
- Levels: Support 49200, resistance 49420.
- UK100 (FTSE):
- Direction: Bearish, underperforming on Sterling strength.
- Domestic (UK): Sterling and Gilt yields.
- Cross: Global sentiment.
- Levels: Support 22280, resistance 22450.
- DAX:
- Direction: Bearish, dragged by German yields.
- Domestic (DE): German yields and data.
- Cross: US tech and risk.
- Levels: Support 23900, resistance 24100.
- Nikkei:
- Direction: Bearish, after BoJ inaction.
- Domestic (JP): JPY levels and JGB yields.
- Cross: US tech, risk.
- Levels: Support 59700, resistance 60650.
- BTC:
- Direction: Bullish, trending higher.
- Domestic (asset-specific): ETF flows supportive.
- Cross: Risk-on environment.
- Levels: Support 76000, resistance 78000.
Positioning watch: USD and AUD are crowded longs, while JPY and NZD are crowded shorts. A dovish Fed surprise or positive Japanese data could trigger significant short squeezes in the JPY and NZD.
The pain trade: A dovish hold from the Fed, coupled with commentary suggesting openness to rate cuts later this year, would trigger a sharp DXY sell-off and a rally in risk assets, catching crowded USD longs off guard.