Euro Still Holding Support at 1.1335 – 1.1300

The Euro is trading lower against the U.S. Dollar on Thursday after giving back earlier gains. Traders seemed to shrug-off the Euro Zone December inflation report that confirmed a record 5.0 rate amid an energy surge.

The choppy trade the last two days suggests investors may already be preparing for next week’s U.S. Federal Reserve meeting. At this meeting, policymakers are expected to lay out their plans for ending quantitative easing and implementing their first rate hike.

At 13:06 GMT, the EUR/USD is trading 1.1337, down 0.0007 or -0.06%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.44, up $0.30 or +0.28%.

Euro Zone consumer prices jumped at a record high pace in December, the EU’s statistics agency confirmed Thursday, boosted by a surge in energy prices and supply chain bottlenecks as the economy recovers from pandemic lockdowns.

The European Union’s statistics office Eurostat said consumer prices in the 19 countries sharing the Euro rose 0.4% month-on-month in December for a 5.0% year-on-year jump, the same as the initial estimate published on January 7.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on January 14.

A trade through 1.1272 will change the main trend to down. A move through 1.1483 will negate the closing price reversal top and signal a resumption of the uptrend.

The short-term range is 1.1186 to 1.1483. The EUR/USD is currently testing its retracement zone at 1.1335 to 1.1300.

The minor range is 1.1483 to 1.1315. Its 50% level at 1.1399 is the nearest resistance.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. It stopped the rally at 1.1483.

Near-Term Outlook

The near-term direction of the EUR/USD is likely to be determined by trader reaction to 1.1335 and 1.1300.

Bullish Scenario

A sustained move over 1.1335 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into 1.1399.

Bearish Scenario

A sustained move under 1.1335 will be the first sign of weakness. Taking out 1.1300, however, could trigger a quick break into the main bottom at 1.1272.

A move through 1.1272 will change the main trend to down. This could trigger a further break into a pair of main bottoms at 1.1235 and 1.1222.

For a look at all of today’s economic events, check out our economic calendar.

NASDAQ Posting Early Rebound after Confirming Correction

March E-mini NASDAQ-100 Index futures are trading higher shortly before Thursday’s cash market opening. Early in the session, the tech-weighted index dipped further into correction territory but rebounded enough to turn higher after China announced across the board rate cuts. Asian equity markets also turned higher on the news with the tech sector leading the charge.

At 11:31 GMT, March E-mini NASDAQ-100 Index futures are at 15168.00, up 134.50 or +0.89%. On Wednesday, the Invesco QQQ Trust Series 1 ETF (QQQ) settled at $366.52, down $4.03 or -1.09%.

On Wednesday, the NASDAQ Composite ended down 10.7% from its November 19 closing record high, as stocks sold off into the market close. A correction is confirmed when an index closes 10% or more below its record closing level.

The NASDAQ’s last correction was in early 2021, when the tech-heavy index fell more than 10% from February 12 to March 8. It was the fourth time in the two years since the coronavirus pandemic shook global markets that the index has found itself in a correction.

Daily March E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 14993.75 will signal a resumption of the downtrend. A move through 16009.25 will change the main trend to up.

The minor trend is also down. A trade through 15653.25 will change the minor trend to up. This will shift momentum to the upside.

The main range is 14366.75 to 16768.00. The index is currently trading on the weak side of its retracement zone at 15284.00 to 15567.50, making it resistance.

The short-term range is 16659.50 to 14993.75. Its retracement zone at 15826.75 to 16023.25 is additional resistance.

Daily Swing Chart Technical Forecast

The direction of the March E-mini NASDAQ-100 Index on Thursday is likely to be determined by trader reaction to 15033.50.

Bullish Scenario

A sustained move over 15033.50 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of 15284.00.

Watch for sellers on the first test of 15284.00. However, overcoming this level could trigger an acceleration to the upside with 15567.50 the next likely target.

Bearish Scenario

A sustained move under 15033.50 will signal the presence of sellers. Taking out 14993.75 will indicate the selling pressure is getting stronger. This could trigger an acceleration to the downside with 14587.25 and 14366.75 the next major targets.

Side Notes

A close over 15033.50 will form a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Supported by Robust Jobs Data, China Rate Cuts

The Australian Dollar is trading better, but off its high on Thursday after getting an earlier lift from a set of robust employment reports that reinforced trader bets on an early rise in interest rates. The news is helping to push short-term bond yields higher, which is underpinning the Aussie.

At 10:23 GMT, the AUD/USD is trading .7240, up 0.0027 or +0.38%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $71.68, up $0.46 or +0.65%.

In domestic economic news, data showed a solid 66,800 rise in jobs in December, pushing the unemployment rate down to its lowest since mid-2008 at 4.2%.

The news drove the market well ahead of the RBA which has insisted that no hike was likely in 2022. The latest data shows financial futures traders are pricing in around a 70% chance of a first rate hike in the 0.1% cash rate by May, with June showing a done deal.

The Aussie’s gains were also driven by the news that China had cut lending rates for corporate and household loans, while lowering a mortgage reference rate for the first time in nearly two years.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7314 will signal a resumption of the uptrend. A move through .7170 will change the main trend to down.

The minor range is .7314 to .7170. The AUD/USD is currently straddling its 50% level at .7242.

The main range is .7556 to .6993. Its retracement zone at .7275 to .7341 is resistance. This zone stopped the buying on January 13 at .7314. It is controlling the near-term direction of the Forex pair.

The short-term range is .6993 to .7314. Its retracement zone at .7153 to .7116 is support.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD into the close on Thursday is likely to be determined by trader reaction to .7242.

Bullish Scenario

A sustained move over .7242 will indicate the presence of buyers. If this move can create enough upside momentum then look for a test of the main 50% level at .7275.

Sellers could come in on the first test of .7275, but overtaking this level could extend the rally into .7314, followed by .7341.

Bearish Scenario

A sustained move under .7242 will indicate the presence of sellers. This could lead to a test of .7213, followed by .7170.

Taking out .7170 will change the main trend to down, but buyers could return if .7153 – .7116 is tested.

For a look at all of today’s economic events, check out our economic calendar.

WTI Crude Dips after API Miss; EIA Report on Tap

U.S. West Texas Intermediate crude oil futures are edging lower on Thursday as investors booked profits ahead of today’s U.S. Energy Information Administration (EIA) weekly inventories report. Nonetheless, the market remains well supported by strong demand and short-term disruptions.

At 08:57 GMT, March WTI crude oil futures are trading $85.19, down $0.61 or -0.71%. On Wednesday, the United States Oil Fund ETF (USO) settled at $61.08, up $0.11 or +0.18%.

Traders are bracing for a potentially volatile session on Thursday due to the EIA report and the expiration of the February futures contract.

Bullish traders may have been encouraged to take profits after the American Petroleum Institute (API) report showed the crude oil inventory build for the week-ending January 14 came in lower than expected. The report came in at 1.404 million barrels versus a 1.367 million barrel pre-report estimate.

The API also reported a build in gasoline inventories for the third week in a row. The number came in at 3.463 million barrels for the week-ending January 14, on top of the previous week’s 10.86 million barrel build.

Distillate stocks, however, saw a decrease in inventory of 1.179 million barrels for the week, after last week’s 3.035 million barrel increase.

Today’s EIA report, due to be released at 15:30 GMT, is expected to show that crude oil inventories fell by 2.1 million barrels.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $86.79 will signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The minor trend is also up. A trade through $77.34 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is $77.34 to $76.79. Its 50% level at $82.07 is the nearest support level.

The second minor range is $74.01 to $86.79. Its pivot price at $80.40 is additional support.

Daily Swing Chart Technical Analysis

The direction of the March WTI crude oil market on Thursday is likely to be determined by trader reaction to $85.76.

Bearish Scenario

A sustained move under $85.76 will indicate the presence of sellers. If this move creates enough short-term momentum then look for the selling to extend into the first pivot at $82.07.

Bullish Scenario

A sustained move over $85.76 will signal the presence of buyers. If this move generates enough upside momentum then look for a rally into $86.79.

Taking out $86.79 will indicate the buying is getting stronger with the multi-year high at $88.18 the next likely target.

For a look at all of today’s economic events, check out our economic calendar.

E-Mini Dow Rebounds Overnight after China Cuts Key Rates

March E-mini Dow Jones Industrial Average futures are edging higher Thursday after recovering from earlier weakness as China cut its key lending rates. The news fueled a rally in the Asian stock markets with Hong Kong’s Hang Seng index jumping 3% as property and tech stocks rebounded. This move encouraged U.S. short-sellers to cover their positions.

At 05:07 GMT, March E-mini Dow Jones Industrial Average futures are trading 35091, up 181 or +0.52%.

On Wednesday, the Dow fell for a fourth day in a row as investors continued to react to a spike in 10-year Treasury note yields to a two-year high of 1.90%. It started the year at about 1.5%.

In stock related news, Boeing Co lost 3.52%. Caterpillar Inc was off by 3.10% and American Express Co fell 2.88%.

In economic data, investors are expecting numbers on jobless claims and existing home sales Thursday.

Daily March E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 3858 will signal a resumption of the downtrend. A move through 36390 will change the main trend to up.

The main range is 33000 to 36832. The E-mini Dow is currently testing its retracement zone at 35046 to 34625. This zone is controlling the near-term direction of the market.

The minor range is 36390 to 34858. Its 50% level at 35624 is the first upside target and potential resistance.

The short-term range is 36832 to 34858. Its retracement zone at 35845 to 36078. Is the last potential resistance before the 36390 main top.

Daily Swing Chart Technical Forecast

The direction of the March E-mini Dow Jones Industrial Average futures contract on Thursday is likely to be determined by trader reaction to 34910.

Bullish Scenario

A sustained move over 34910 will indicate the presence of buyers. The first upside target is 35046.

If taking out 35046 generates enough upside momentum then look for the rally to possibly extend into the 35624 pivot over the short-run.

Bearish Scenario

A sustained move under 34910 will signal the presence of sellers. Taking out 34858 will indicate the selling is getting stronger. This could trigger a further break into 34625, followed by 34547.

The main bottom at 34547 is a potential trigger point for an acceleration to the downside with 33860 the next likely downside target price.

For a look at all of today’s economic events, check out our economic calendar.

April Gold Pops Resistance Zone with $1882.50 Next Target

Gold futures are edging lower after hitting its highest level since November 22 earlier in the session. Putting a cap on the market on Thursday are slightly higher Treasury yields and a firm U.S. Dollar. Volume is light and the range is tight after prices jumped the most in three months on Wednesday on a weaker dollar and increased safe-haven demand.

At 05:53 GMT, April Comex gold futures are trading $1841.80, down $3.70 or -0.20%.

Although the widely expected Federal Reserve interest rate increase in March is threatening to keep a lid on gold prices, the focus for gold speculators seems to be on the Russia-Ukraine situation, which is something the Fed can’t control.

Gold prices seemed to have received a boost on Wednesday when U.S. President Joe Biden, citing simmering tensions between the West and Russia, predicted Moscow would make a move into neighboring Ukraine, although Russian officials have denied this. Meanwhile, according to reports, the Russian army has massed some 100,000 troops near Ukraine’s borders.

Daily April Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the overnight high at $1846.60 will signal a resumption of the uptrend. A move through $1783.80 will change the main trend to down.

The minor trend is also up. A trade through $1807.20 will change the minor trend to down. This will shift momentum to the downside.

The short-term range is $1882.50 to $1755.40. Gold is currently trading on the strong side of its retracement zone at $1833.90 to $1819.00, making this area support.

The main range is $1682.40 to $1882.50. Its retracement zone at $1782.50 to $1758.80 is the major support controlling the longer-term direction of the market.

Daily Swing Chart Technical Forecast

The direction of the April Comex gold futures contract on Thursday is likely to be determined by trader reaction to the retracement zone at $1833.90 to $1819.00.

Bullish Scenario

A sustained move over $1833.90 will indicate the buying is getting stronger. This could even trigger an acceleration to the upside since the daily chart indicates there is not actual resistance until the November 16 main top at $1882.50. This is followed by the two-year 50% level at $1899.80.

Bearish Scenario

A sustained move under $1833.90 will be the first sign of weakness, but taking out $1819.00 could indicate the selling pressure is getting stronger.

Side Notes

Thursday’s marks the eighth day up from the last main bottom on January 7.This puts the market inside the window of time for a potentially bearish closing price reversal top. This chart pattern may not change the trend, but if confirmed, it could lead to the start of a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Rangebound Ahead of Next Week’s Fed Decisions

The Dollar/Yen is trading mixed early Thursday as investors continue to assess the potential impact of the widely expected Federal Reserve interest rate increase in March on the spread between U.S. Government bond yields and Japanese Government bond yields. Fundamental data aside, it’s the interest rate differential that drive the price action.

At 03:31 GMT, the USD/JPY is trading 114.318, up 0.004 or +0.00%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $82.15, up $0.26 or +0.32%.

Wednesday Recap:  Yields and the Fed’s Next Move

The U.S. Dollar slid against the Japanese Yen on Wednesday, with U.S. Treasury yields retreating as well after hitting roughly two-year peaks on 2-year and 10-year notes, but the greenback remains well-supported as investors prepared for the widely telegraphed rate hike at the Fed meeting in March.

U.S. 10-year Treasury yields touched a new two-year high of 1.902% on Wednesday, but was down 4 basis points at 1.8271%.

The Fed will meet next week and will likely provide clarity and details on the end of quantitative easing (QE), possibly in March. The U.S. central bank could also signal it will raise interest rates in March as well, right after ending QE.

Fed funds futures have fully priced in a rate hike in March and four in all for 2022.

Dollar Reacts to US Homebuilding Data

The greenback trimmed losses after data showed U.S. homebuilding unexpectedly increased in December amid unseasonably mild weather. Housing starts rose 1.4% to a seasonally adjusted annual rate of 1.702 million units last month.

U.S. homebuilding rose to a nine-month high in December amid a surge in multi-family housing projects, but soaring prices for materials after the government nearly doubled duties on imported Canadian softwood lumber could hamper activity later this year, Reuters reported.

The report from the Commerce Department on Wednesday also showed the housing construction backlog surged to a record high last month, underscoring the challenges builders are facing from supply strains, including labor shortages. Completions tumbled as well. Rising mortgage rates could also restrain homebuilding.

Housing starts rose 1.4% to a seasonally adjusted annual rate of 1.702 million units last month, the highest level since March. Economists polled by Reuters had forecast starts falling to a rate of 1.650 million units.

Japan’s December Exports Grew Faster than Expected

Japan’s exports rose faster than expected in December to mark the 10th straight month of year-on-year growth, data showed on Thursday, as supply bottlenecks continued to ease toward the end of 2021.

Exports increased 17.5% in December from a year earlier, Ministry of Finance data showed, compared with a 16.0% gain expected by economists in a Reuters poll and following a 20.5% increase in the previous month.

Imports by value surged 41.1% on higher raw material costs and a weak yen, compared with expectations of a rise of 42.8% and growth of 43.8% in November.

This led to a trade deficit of 582.4 billion Japanese Yen ($5.09 billion) in December, compared with expectations for a gap of 784.1 billion Yen. November’s trade deficit totaled 955.6 billion Yen.

Short-Term Outlook

Despite the short-term setback, the USD/JPY is expected to remain well-supported as we advance through 2022. The current price action suggests traders are taking profits and lightening up ahead of next week’s Federal Reserve monetary policy decisions.

Traders could also be looking for guidance, which could come next week when the Fed is likely to explain when it will end quantitative easing and when it will make its first rate hike. The timetable on future rate hikes could also be released.

For a look at all of today’s economic events, check out our economic calendar.

Aussie Firms as Jobless Rate Dive Encourages Rate Hike Bets

The Australian Dollar is bouncing higher for a second session early Thursday, helped by a weaker U.S. Dollar and positive domestic labor market data.

The Aussie rose on Wednesday after the U.S. Dollar weakened, with U.S. Treasury yields retreating as well after hitting roughly two-year peaks on 2-year and 10-year notes. Nonetheless, the greenback remains well-supported as investors prepared for a widely expected interest rate increase in March.

U.S. 10-year Treasury yields touched a new two-year high of 1.902% on Wednesday, but was last down 4 basis points at 1.8271%.

At 02:37 GMT, the AUD/USD is trading .7234, up 0.0022 or +0.30%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $71.68, up $0.46 or +0.65%.

Australia Jobless Number Plunges to 14 Year Low as Case Builds for Rate Hike

Australian employment raced ahead in December as the jobless rate fell to its lowest point since 2008, showing strength that should help the economy weather the current surge in coronavirus cases across the country, Reuters reported.

Data from the Australian Bureau of Statistics (ABS) on Thursday showed employment jumped 64,800 in December, topping market forecasts of a 43,300 rise and adding to November’s record jump of 366,000.

The unemployment rate fell to 4.2%, from 4.6% in November, the lowest reading since August 2008, when the jobless rate bottomed out at 4%. The ABS noted that to find a result under 4% you needed to go back to the 1970s.

Short-Term Outlook: Focus on Possible RBA Rate Hike

Investors reacted to the robust jobs report by pushing the AUD/USD up to .7257 on wagers of an early rate increase from the Reserve Bank of Australia (RBA), which has been seeking to drive unemployment to 4% or lower to lift wage growth after years of sub-par gains.

Official data on wages for the fourth quarter are not out until February 23 and may not show much of a pick-up given the inertia baked into the pay system in Australia.

The last measure of wages showed growth of just 2.2% a year. This is the key reason the RBA has argued that interest rates will not need to rise from their record low of 0.1% until 2023. However, financial market traders are wagering a tightening will come a lot sooner, perhaps as early as May given the persistence of global inflationary pressures.

Meanwhile, data on Australian consumer prices for the December quarter is due next week and some economists are predicting core inflation could jump to its highest since 2009 at 2.5%, adding greatly to the case for an early rise in rates.

For a look at all of today’s economic events, check out our economic calendar.

Euro Trying to Build Support Base at 1.1335 – 1.1300

The Euro is edging higher at the mid-session as the U.S. Dollar weakened after U.S. Treasury yields reversed an earlier rise. The 10-year U.S. Treasury yield hit 1.9% on Wednesday, its highest point since December 2019, after retreating.

The yield on the benchmark 10-year Treasury note moved nearly 2 basis points lower to 1.85% at around 16:00 GMT, after hitting 1.904% earlier. The yield on the 30-year Treasury bond fell 1 basis point to 2.174%.

At 16:55 GMT, the EUR/USD is trading 1.1343, up 0.0016 or +0.14%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $105.46, up $0.32 or +0.30%.

Overseas, the European Central Bank (ECB) is currently behind on its normalization path, compared to the Fed and the Bank of England, but surging inflation and wider moves in the global bond market have now helped to push yields above zero.

In the U.S., homebuilding increased to a nine-month high in December amid a surge in multi-family housing projects, but soaring prices for materials after the government  nearly doubled duties on imported Canadian softwood lumber could hamper activity.

Housing starts rose 1.4% to a seasonally adjusted annual rate of 1.702 million units last month, the highest level since March.

The volatile multi-family housing segment accounted for the rise in homebuilding last month, with starts for buildings with five units or more surging 13.7% to a rate of 524,000 units.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on January 14.

A trade through 1.1272 will change the main trend to down. A move through 1.1483 will signal a resumption of the uptrend.

The short-term range is 1.1186 to 1.1483. Its retracement zone at 1.1335 to 1.1300 is support. This zone stopped the selling on Tuesday at 1.1315.

The minor range is 1.1272 to 1.1483. Its 50% level at 1.1377 is potential resistance.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. This zone stopped the buying at 1.1483 on January 14.

Short-Term Outlook

The short-term direction of the EUR/USD is likely to be determined by trader reaction to 1.1335 and 1.1300.

Look for the upside bias to resume on a sustained move over 1.1335. Meanwhile, the downside momentum is likely to continue on a sustained move under 1.1300.

For a look at all of today’s economic events, check out our economic calendar.

Nat Gas Bulls Waiting for Confirmation of Early Feb Cold

Natural gas futures are inching lower early Wednesday despite reports calling for colder near-term weather patterns, liquefied natural gas (LNG) export strength and expectations for increased storage draws against the potential for warmer weather in February.

Meanwhile, Natural Gas Intelligence (NGI) reported that spot gas prices pulled back sharply in the volatile Northeast amid a spate of moderate weather to start the week.

At 09:52 GMT, March natural gas futures are trading $4.205, down $0.023 or -0.57%.

NatGasWeather’s Short-Term Outlook

According to NatGasWeather, models showed mild conditions would push across the country through Wednesday. However, heating demand “is still on track to spike late this week as an Arctic blast sweeps across the Midwest and East with areas of snow” and subzero temperatures.

This is to be “aided by lows of 20s and 30s into portions of the southern United States. A reinforcing Arctic shot is expected January 24-27 to keep strong national demand going” and when “the pattern remains plenty cold enough to impress.”

Output Remains Below December Levels

NGI wrote that output was estimated at around 94 Bcf on Tuesday, about 2 Bcf/d below December levels, and the coming winter chill in the South could force further production interruptions – after an early January bout of brutal cold forced production curtailments.

Early Peek at Thursday’s EIA Weekly Storage Report

Thursday’s U.S. Energy Information Administration (EIA) weekly storage report is expected to reveal the steepest pull of the winter season to date.

NGI estimated a withdrawal of 195 Bcf for the week ended January 14. That would compare with an actual pull of 179 Bcf a year earlier and a five-year average of 167 Bcf.

Last week, the EIA reported a pull of 179 Bcf natural gas from underground inventories for the week-ended January 7. The draw decreased inventories to 3,016 Bcf, leaving stocks below the year-earlier level of 3,215 Bcf but above the five-year average of 2,944 Bcf.

Daily March Natural Gas

Short-Term Outlook

It “appears that this January will wind up the coldest January since 2014,” Bespoke Weather Services said. “The main question now is whether or not the colder pattern hangs on into February,” the firm added.

The sideways price action on the chart suggests traders still aren’t sure about the 11-15 day forecast. Once they get confirmation either way, March natural gas futures traders will make their next move.

The market is currently trading inside a long-term retracement zone at $4.378 to $3.964.

Look for a downside bias on a sustained move under $3.964. The 50% level at $4.378 is a potential trigger point for an acceleration to the upside.

Holding between $3.964 and $4.378 will indicate investor indecision and impending volatility.

For a look at all of today’s economic events, check out our economic calendar.

Gold Bounce Suggests Yield Surge May Be Overcooked

Gold futures are inching higher early Wednesday after plunging to their lowest level in a week the previous session. Prices are being supported by a slightly weakly U.S. Dollar but capped by another rise in U.S. Treasury yields.

Expectations of an aggressive series of rate hikes by the U.S. Federal Reserve have pulled benchmark Treasury yields higher and reduced the appeal of non-yielding bullion, which is viewed as a hedge against inflation.

However, the Fed will face a problem with investors if it moves too quickly on its rate hikes. Raising rates too fast may telegraph the Fed sees major problems in corralling inflation and this could actually be bullish for gold if it drives the U.S. Dollar sharply lower.

At 08:14 GMT, February Comex gold futures are trading $1815.00, up $3.40 or +0.19%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $169.39, down $0.28 or -0.17%.

Treasury Yields Continue to Rise

The 10-year U.S. Treasury yield jumped to its highest point in two years early Wednesday, hovering around 1.893%. The yield on the 30-year Treasury bond is at 2.209 after climbing 7.7 basis points the previous session. Meanwhile, the 2-year rate – which reflects short-term insurance rate expectations – topped 1% for the first time in two years, is trading at 1.061 early Wednesday.

The movement in Treasury yields indicates that investors are preparing for the possibility of more aggressive tightening by the Federal Reserve.

Last week, Fed Chair Jerome Powell told the U.S. Senate that he expected to see a series of interest rate hikes this year, along with a pullback in other pandemic economic support measures.

Philadelphia Fed President Patrick Harker told CNBC last week that the central bank could raise rates three or four times this year. He noted that inflation is “more persistent than we thought a while ago.”

US Dollar Inching Lower Against Peers

Perhaps providing a little support for gold early Wednesday is the slight weakness in the U.S. Dollar. But the price action isn’t strong enough to determine if this move represents the early stages of an intraday trend.

We could get more information later today at 13:30 GMT with the release of the U.S. Building Permits and Housing Starts reports. They could reveal the early impact of the threat of higher interest rates on the housing market. This could be the source of volatility in the gold market along with the movement in the U.S. equity markets.

Short-Term Outlook

Fed officials have gone into a no-comment ‘blackout” period ahead of the next central bank meeting on January 25-26. So traders are on their own.

Although I firmly believe the Fed is on top of the inflation situation, something tells me that the market doesn’t which may be why we’re seeing the rapid surge in yields. I guess they remember the Fed was wrong about inflation being “transitory” so they are taking no chances.

However, there is always the possibility the Fed will move too quickly, which could send a signal to gold bulls that inflation is getting out of control, or there are problems with the economy.

For a look at all of today’s economic events, check out our economic calendar.

Geopolitical Troubles, Outage Adds to Oil Supply Concerns

Supply issues continue to drive U.S. West Texas Intermediate and international-benchmark Brent crude oil futures higher early Wednesday. Ahead of the opening, prices were underpinned by an already tight supply outlook amid troubling geopolitical issues in Russia and the United Arab Emirates (UAE). The markets gapped higher on the opening earlier today as traders responded to an outage on a pipeline from Iraq to Turkey.

At 07:23 GMT, March WTI crude oil futures are trading $85.31, up $0.48 or +0.57% and the March Brent crude oil futures contract is at $87.91, up $0.40 or +0.46%. On Tuesday, the United States Oil Fund ETF (USO) settled at $60.99, up $1.02 or +1.70%.

Prices Setting Up to Challenge $100

U.S. WTI and Brent crude oil futures appear to be poised to challenge $100 per barrel sometime this year, with or without the current supply issues. This is because there is a sizable supply deficit and the impact of the Omicron coronavirus variant on demand is far smaller than predicted.

This notion is supported by analysts at Goldman Sachs who said on Tuesday supply remains in a “surprisingly large deficit”.

Analysts also wrote that the hit to demand from Omicron will likely be offset by gas-to-oil substitution, increased supply distributions, OPEC+ shortfalls, and disappointing production in Brazil and Norway.

Goldman analysts said global oil demand is seen rising 3.5 million barrels per day (bpd) year-on-year in 2022, with fourth-quarter demand reaching 101.6 million bpd.

Goldman expects QECD inventories to fall to their lowest level since 2000 by summer, and OPEC+ spare capacity to decline to historically low levels, given the lack of drilling in core-OPEC and Russia struggling to ramp up production.

“We expect the increase in OPEC+ production to fall even further short of quotas in 2022, with an only 2.5 million bpd increase in production expected from the next nine hikes.”

Furthermore, higher prices will allow OPEC to fall behind its monthly ramp up path slightly in order to preserve spare capacity, with the acceleration in shale production growth providing necessary inventory buffer, Goldman added.

Daily Forecast

Concerns over Russia, the world’s second-largest oil producer, and the UAE, OPEC’s third-largest producer, are adding to the supply fears. The outage in Turkey is just the cherry on top of an already bullish situation.

Crude oil is shaping up to be bullish over the long-run because demand is on pace to outstrip supply.

Prices are expected to be bullish over the short-run because the issues facing Russia, UAE and Turkey could cause an immediate drop in supply if their situations aren’t rectified quickly.

I just want to emphasize that WTI and Brent don’t need the current issues to get to $100 per barrel. Prices will get there sooner if these problems become major issues, but given the supply/demand time table, they are likely to reach this critical level during the second half of the year.

For a look at all of today’s economic events, check out our economic calendar.

Dollar/Yen Lower Amid Global Stock Market Weakness

The Dollar/Yen is under pressure early Wednesday as investors moved money into the safe-haven Japanese Yen amid a global equity market sell-off. Traders are shrugging off the surge in U.S. Treasury yields that tends to drive up demand for the U.S. Dollar.

At 05:21 GMT, the USD/JPY is trading 114.304, down 0.282 or -0.25%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.88, down $0.27 or -0.32%.

Tuesday Recap

The USD/JPY rose to a one-week high on Tuesday following a jump in benchmark U.S. Treasury yields. The Japanese Yen steadied after initially sliding as the Bank of Japan said it would stick to its ultra-loose monetary policy.

The U.S. Federal Reserve meets next week and likely will signal that it will raise rates in March for the first time since the start of the coronavirus pandemic. The Fed funds have priced in four rate hikes in 2022.

As investors prepared for the possibility of the Fed being more hawkish than expected, Treasury yields jumped, with two-year yields – which track short-term rate expectations – crossing 1% for the first time since February 2020. The U.S. 10-year yield hit a two-year peak close to 1.890% overnight.

Safe-Haven Buying Boosts Demand for Yen Early Wednesday

Asia-Pacific markets fell on Wednesday following an overnight sell-off on Wall Street. The move may have spooked investors enough to seek protection in the Japanese Yen. This type of price action could pressure U.S. Treasury yields if investors decide to buy government bonds for protection.

The Nikkei 225 in Japan dropped 2.22%, while the Topix was lower by 2.33%. South Korean shares also tumbled:  the KOSPI gave up earlier gains and fell 0.65% and the KOSDAQ was down 0.83%.

Hong Kong’s Hang Seng Index traded near flat while the tech-focused Hang Seng Tech Index fell 0.14%.

Chinese mainland shares struggled for gains:  The Shenzhen component was down 1.6% while the Shanghai Composite fell 0.29%.

In Australia, the ASX 200 dropped 0.9% as most sectors traded lower. The heavily weighted financials subindex declined 1.37% as the country’s major bank names sold off.

In the U.S. on Tuesday, the Dow Jones Industrial Average lost more than 540 points after Goldman Sachs shares sold off as the investment bank missed analysts’ expectations for earnings. The S&P 500 as well as the NASDAQ Composite, which comprises technology stocks sensitive to interest rates, also declined sharply.

Daily Forecast

At 13:30 GMT, the U.S. will release reports on Building Permits and Housing Starts. These reports are important because they are the first to come out after the Fed informed the world of its aggressive hawkish intentions to raise interest rates.

Traders will be keeping an eye on U.S. Treasury yields and the stock market.

The USD/JPY could bounce back if the stock market stabilizes, but if equities continue to plummet then we could see more movement into the safe-haven Japanese Yen on Wednesday.

For a look at all of today’s economic events, check out our economic calendar.

Surging US Treasury Yields Putting the Heat on Aussie, Kiwi

The Australian and New Zealand Dollars are trading mixed early Wednesday after posting a steep loss the previous session. The weakness was fueled by soaring U.S. Treasury yields that made the U.S. Dollar a more attractive asset and downbeat domestic data that put a question mark over expectations for strong economic recoveries this year.

At 04:16 GMT, the AUD/USD is trading .7185, down 0.0001 or -0.01% and the NZD/USD is at .6783, up 0.0013 or +0.18%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $71.20, down $0.38 or -0.53%.

Benchmark 10-year Treasury Yields Hit 2-Year High, Sitting Just Under 1.900%.

The U.S. Dollar was underpinned against its Australian and New Zealand counterparts on Tuesday as the benchmark U.S. 10-year Treasury yield jumped to its highest point in two years, hovering around 1.883% late in the session.

The move, which comes after a market holiday in the U.S. Monday, indicates that investors are preparing for the possibility of more aggressive tightening by the Federal Reserve.

New Zealand Business Outlook and Demand Weakens in Q4

New Zealand business confidence and demand dropped in the fourth quarter of last year as the COVID-19 outbreak dragged on, a private think tank said on Tuesday.

A net 28.0% of firms surveyed expected general business conditions to deteriorate compared with 11% pessimism in the previous quarter, the New Zealand Institute of Economic Research’s (NZIER) quarterly survey of business opinion (QSBO) showed.

On a seasonally adjusted basis, 34% expected business conditions to worsen, versus 11.0% pessimism recorded in the previous period. The survey’s measure of capacity utilization dipped to 89.5%, from the previous quarter’s 96.1%.

Australian Consumers Shell-Shocked as Omicron Hits Spending, Growth

Australian consumer confidence took a battering last week as an explosion in coronavirus cases triggered self-imposed lockdowns, squashing spending and blowing holes in supply chains.

A survey from ANZ out on Tuesday showed its measure of consumer sentiment slid 7.6% last week to its lowest since October 2020, lower even than during the Delta variant surge when much of the country was officially locked down.

Short-Term Outlook

Inflation pressures in New Zealand are accelerating, suggesting a continued tightening of monetary policy by the central bank. The Reserve Bank (RBNZ) raised interest rates for the second straight month in November to keep surging consumer prices in check and warned of more hikes.

In Australia, investors are wagering the Reserve Bank (RBA) will have to follow the Fed and the RBNZ and raise rates, even though policy makers have long argued that any move was unlikely this year.

Futures imply a 77% chance the RBA will lift rates to 0.25% as early as May, and hike no less than five times this year to 1.25%.

The key will be consumer price figures for the December quarter due next week where some analysts are tipping another outsized rise in core inflation.

For a look at all of today’s economic events, check out our economic calendar.

Goldman Weakness Sends Dow Toward 35066 – 34649 Target Zone

March E-mini Dow Jones Industrial Average futures fell sharply Tuesday as government bond yields hit COVID-era highs and after Goldman Sachs reported disappointing earnings.

Treasury yields posted strong gains after the cash market was closed Monday due to the Martin Luther King Jr. holiday. The closely watched 2-year yield broke above 1% for the first time since February 2020, the month before the pandemic declaration that sent the U.S. economy into recession. The 2-year Treasury is seen as a gauge of where the Federal Reserve will set short-term borrowing rates.

At 22:00 GMT, March E-mini Dow Jones Industrial Average futures are trading 35296, down 500 or -1.40%.

In stock related news, Goldman Sachs shares dropped nearly 7% on Tuesday after the bank missed analysts’ expectations for its fourth-quarter earnings. Goldman’s operating expenses surged 23% on increased pay for Wall Street employees.

Daily March E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through Tuesday’s low at 35135 will signal a resumption of the downtrend. The next main bottom is 34547.

A trade through 36390 will change the main trend to up. This is highly unlikely but due to the prolonged move down in terms of price and time, the market remains vulnerable to a closing price reversal bottom.

The main range is 33300 to 36832. Its retracement zone at 35066 to 34649 is the primary downside target area. This zone is controlling the near-term direction of the market. We could see a technical bounce on the first test of this area.

The new short-term range is 36832 to 35135. If there is a short-covering rally then its retracement zone at 35984 to 36184 will become the primary upside target.

Short-Term Outlook

The direction of the March E-mini Dow Jones Industrial Average early Wednesday is likely to be determined by trader reaction to 35296.

Bearish Scenario

A sustained move under 35296 will indicate the presence of sellers. This should lead to a quick test of 35135, followed by 35066.

Look for a technical bounce on the first test of 35066, but if it fails then look for the selling to possibly accelerate toward the Fibonacci level at 34649.

Bullish Scenario

A sustained move over 35296 will signal the presence of buyers. The first upside target is 35518. Overcoming this level could trigger a further rally into 35984 – 36184.

For a look at all of today’s economic events, check out our economic calendar.

Gold Rebounds into $1817.50 on Early Rate Hike Chatter

Gold futures are down late in the session on Tuesday but off its low. The market is being pressured by higher U.S. Treasury yields and a stronger U.S. Dollar. Meanwhile, investors are turning their attention to next week’s Federal Reserve policy meeting for more signals on its rate hike timeline.

At 19:05 GMT, February Comex gold is trading $1814.60, down $1.90 or -0.10%. The SPDR Gold Shares ETF (GLD) is at $169.54, down $0.13 or -0.08%.

Benchmark 10-year U.S. Treasury yields touched a two-year peak, while the dollar hit a six-day high earlier in the session, making gold expensive for overseas buyers.

Daily February Comex Gold

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1833.00 will change the main trend to up. A move through $1781.30 will reaffirm the downtrend.

The minor trend is also down. It changed to down earlier today when sellers took out the minor bottom at $1811.80, shifting momentum back to the downside.

The short-term range is $1881.90 to $1753.00. Its retracement zone at $1817.50 to $1832.70 is resistance. This zone stopped rallies on January 3 and January 14.

The minor range is $1781.30 to $1829.30. Its retracement zone at $1805.30 to $1799.60 is support. It stopped the selling at $1804.70 earlier today. Additional minor support is a pivot at $1793.00.

The major long-term support is $1781.00 to $1757.10. Gold prices could collapse if this area is ever taken out with strong selling volume.

Daily Swing Chart Technical Forecast

The direction into the close on Tuesday is likely to be determined by trader reaction to $1817.50.

Bearish Scenario

A sustained move under $1817.50 will indicate the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the minor pivot at $1805.30 to $1799.60.

Bullish Scenario

A sustained move over $1817.50 will signal the presence of buyers. If this creates enough upside momentum then look for a possible retest of $1829.30 to $1833.00.

Since the main trend is down, sellers are likely to come in on a test of the resistance cluster. However, overcoming $1833.00 could trigger an acceleration to the upside.

Side Notes

Basically, $1817.50 to $1832.70 is the major resistance and $1781.00 to $1757.10 is the major support. Traders could hold gold in a range between these zones until next Wednesday’s Fed announcements.

If the Fed announces a surprise rate hike then look for heightened volatility. Gold prices could break initially, but then could turnaround and rally. Higher rates will be bearish for gold, but an early rate hike would send a signal that the threat to the economy by rising inflation is worse than previously expected.

For a look at all of today’s economic events, check out our economic calendar.

WTI Crude Facing Little Resistance Until $88.18

U.S. West Texas Intermediate crude oil futures are edging higher on Tuesday on possible supply distribution problems after attacks in the Mideast Gulf added to an already tight supply outlook. The market is also being supported by an easing of concerns over Omicron after some reports hinted the outbreak in the United States may have peaked.

At 13:14 GMT, March WTI crude oil futures are trading $84.67, up $1.37 or +1.64%. On Friday, the United States Oil Fund ETF (USO) settled at $59.96, up $1.69 or +2.90%.

Supply concerns have risen this week after Yemen’s Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition.

After launching drone and missile strikes which set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to “respond to these terrorist attacks”.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $85.16 will signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The minor trend is also up. A trade through $77.34 will change the minor trend to down. This will shift momentum to the downside.

The minor range is $77.34 to $85.16. Its 50% level or pivot at $81.25 is the nearest support.

The second minor range is $74.01 to $85.16. Its 50% level at $79.59 is additional support.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil futures contract on Tuesday will be determined by trader reaction to $83.30.

Bullish Scenario

A sustained move over $83.30 will indicate the presence of buyers. Taking out $85.16 will indicate the buying is getting stronger. If this move creates enough upside momentum then look for a possible surge into $88.18.

Bearish Scenario

A sustained move under $83.30 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the first pivot at $81.25.

Side Notes

A close under $83.30 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.

Euro May Have Enough Downside Momentum to Reach 1.1335

The Euro is trading lower on Tuesday, pressured by a stronger U.S. Dollar and rising U.S. Treasury yields as investors were positioning themselves for higher interest rates in the United States. The rise in U.S. Treasury yields pushed the Euro to a four-day low.

At 12:32 GMT, the EUR/USD is trading 1.1389, down 0.0017 or -0.15%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $106.08, down $0.34 or -0.32%.

The U.S. Federal Reserve meets next week. It is expected to raise rates in March, for the first time since the start of the coronavirus pandemic, and investors are pricing in four rate hikes in 2022.

As investors braced for the possibility of the Fed being more hawkish than expected, U.S. Treasury yields jumped on Tuesday, with two-year yields (which track short-term rate expectations) crossing 1% for the first time since February, 2020.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum has been trending lower since the formation of the closing price reversal top on January 14.

Taking out 1.1483 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 1.1272.

The minor range is 1.1272 to 1.1483. Its 50% level at 1.1377 is the next downside target. It’s also potential support and a trigger point for an acceleration to the downside.

The short-term range is 1.1186 to 1.1483. Its retracement zone at 1.1335 to 1.1300 is the most likely downside target. Since the main trend is up, buyers are likely to show up on the first test of this area.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. This zone stopped the rally on Friday at 1.1483.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to the pivot at 1.1377.

Bullish Scenario

A sustained move over 1.1377 will indicate the presence of buyers. If this move creates enough upside momentum then look for a retest of the main retracement zone at 1.1439 to 1.1499 over the near-term.

Bearish Scenario

A sustained move under 1.1377 will indicate the early selling pressure is getting stronger. This could extend the selling into the retracement zone at 1.1335 to 1.1300. Since the main trend is up, buyers could come in on a test of this area so look for a technical bounce. This is the last major support before the multi-year low at 1.1186.

For a look at all of today’s economic events, check out our economic calendar.

Selling Pressure Could Drive AUD/USD into .7153 – .7116

The Australian Dollar is under pressure on Tuesday with the selling fueled by higher U.S. Treasury yields, weak domestic data out of New Zealand and a drop in demand for riskier assets.

The greenback is being underpinned against the Aussie as U.S. Treasury yields hovered near new two-year highs on their return from a long weekend break. Downbeat domestic data from New Zealand put a question mark over expectations for strong economic recoveries this year and weaker global equity markets weighed on demand for riskier currencies.

At 11:32 GMT, the AUD/USD is trading .7190, down 0.0020 or -0.27%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $72.18, up $0.02 or +0.03%.

Australian Dollar traders are also positioning themselves ahead of Wednesday’s major Employment Change and Unemployment Rate reports.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on January 13.

A trade through .7314 will negate the closing price reversal top and signal a resumption of the uptrend. A move through .7130 will change the main trend to down.

The minor range is .7130 to .7314. The AUD/USD is currently trading on the weak side of its retracement zone at .7200 to .7222, making it new resistance.

The short-term range is .6993 to .7314. Its retracement zone at .7153 to .7116 is the next downside target, and a potential trigger point for an acceleration to the downside.

The main range is .7556 to .6993. Its retracement zone at .7275 to .7341 is resistance. It stopped the selling at .7314 on January 13.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to .7200 to .7222.

Bearish Scenario

A sustained move under .7200 will indicate the presence of sellers. If this creates enough downside momentum then look for a break into .7153 to .7116.

Look for a sharp break into .7083 if .7116 fails as support.

Bullish Scenario

A sustained move over .7222 will signal the presence of buyers. If this move generates enough upside momentum then look for a surge into .7275.

For a look at all of today’s economic events, check out our economic calendar.

Short-Sellers Pressuring E-mini NASDAQ-100 Index

March E-mini NASDAQ-100 Index futures are taking a hit early Tuesday as investors return to work after the long U.S. holiday weekend. The tech-heavy index is down nearly 2%, putting it in a position to add to its nearly 4.5% year-to-date loss.

Having risen for 12 of the past 13 years, it is under heavy pressure from the prospect of higher interest rates and bond yields, more so than the broader S&P 500 Index or MSCI’s global equity benchmark.

At 09:55 GMT, March E-mini NASDAQ-100 Index futures are trading 15317.00, down 242.25 or -1.56%. On Friday, the Invesco QQQ Trust Series 1 ETF (QQQ) settled at $380.13, up $2.47 or +0.65%.

The 4.5% loss masks deeper falls – 29 shares have lost 10% or more already this year, according to Capital Economics.

Nasdaq futures positioning has shifted dramatically short, Citi analysts point out, noting that $2 billion worth of remaining long positions are deep in the red.

Daily March E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 15152.50 will reaffirm the downtrend. A move through 16009.25 will change the main trend to up.

The minor trend is also down. A trade through 15653.25 will change the minor trend to up. This will also shift momentum to the upside.

The main range is 14366.75 to 16768.00. The index is currently testing the lower end of its retracement zone at 15567.50 to 15284.00.

The short-term range is 16659.50 to 15152.50. Its retracement zone at 15906.00 to 16084.00 is resistance. This area stopped the rally at 16009.25 on January 12.

Daily Swing Chart Technical Forecast

The direction of the March E-mini NASDAQ-100 Index on Tuesday is likely to be determined by trader reaction to 15284.00.

Bearish Scenario

A sustained move under 15284.00 will indicate the presence of sellers. This could trigger a quick break into the main bottom at 15152.50. This is a potential trigger point for an acceleration to the downside with the next major targets 14587.25 and 14366.75.

Bullish Scenario

Holding 15284.00 will indicate that buyers are trying to defend against a steep decline. If this triggers an intraday short-covering rally then look for a possible surge into 15567.50.

Overcoming 15567.50 will indicate the buying is getting stronger. We could see an acceleration to the upside over 15653.25 with 15906.00 the next likely target.

For a look at all of today’s economic events, check out our economic calendar.