The new trading week begins with a mixed US dollar, lower Treasury yields and oil, and a split in US stock-index futures. Nasdaq 100 futures are leading the upside, while the Dow is pointing lower.
In the morning video above, I take a look at the three major currency pairs—EURUSD, USDJPY and GBPUSD—from a technical perspective. For each pair, I outline the bias, the risk-defining levels and the targets that would give either the buyers or sellers more control.
The main geopolitical headline comes from Al-Arabiya, which reports that a breakthrough in US–Iran negotiations could be announced this week. Meanwhile, China’s overnight economic releases beat expectations on growth, industrial production and retail sales. Canadian CPI is the main scheduled release ahead.
US–Iran negotiations put oil in focus
InvestingLive’s report on the possible US–Iran breakthrough says negotiators are working to narrow differences and secure mutual concessions.
Iran’s proposal to reopen the Strait of Hormuz within seven days reportedly remains on the table, subject to conditions including relief from the US blockade and oil sanctions. The sticking point remains the sequencing: Washington wants nuclear concessions addressed, while Tehran wants immediate relief from restrictions and a focus on maritime security.
There is a potentially important development here, but traders have heard optimistic headlines before. An agreement—and implementation—would carry more weight than another indication that the two sides are getting closer.
December WTI crude futures are trading at $98.20, down $0.82, or 0.83%.
For markets, a sustained decline in oil would help ease energy-related inflation pressure. That would be welcome after last week’s hotter US CPI and PPI reports. For now, the next headline can still change the tone quickly.
The dollar is mixed
The greenback is lower against the AUD, CAD, NZD and GBP, but higher against the EUR, JPY and CHF.
From the dollar’s perspective:
-
EURUSD: 1.1228, down 0.10% — USD higher.
-
USDJPY: 158.11, up 0.08% — USD higher.
-
GBPUSD: 1.3338, up 0.08% — USD lower.
-
USDCHF: 0.8245, up 0.07% — USD higher.
-
USDCAD: 1.4075, down 0.44% — USD lower.
-
AUDUSD: 0.6989, up 0.65% — USD lower.
-
NZDUSD: 0.5670, up 0.35% — USD lower.
The Australian dollar has the strongest gain against the USD, while the euro has the largest decline. The AUDUSD moved higher on Friday after the weaker than expected jobs report on Thurday sent the pair sharply lower and to the lowest level since early July, and bouncing.
China beats expectations, but property and investment remain weak
China’s overnight data dump offered some encouragement:
-
GDP growth: 4.5% year over year versus 4.4% expected and 4.3% previously.
-
Industrial production: 5.5% year over year versus 5.4% expected and 5.2% previously.
-
Retail sales: 1.1% year over year versus 0.5% expected and 0.4% previously.
-
Unemployment rate: 5.2% versus 5.3% expected and previously.
-
Fixed-asset investment: down 7.2% year to date versus a 7.3% decline expected.
-
New-home prices: down 0.14% month over month after a 0.17% decline previously.
Growth, production and spending were better than expected, and unemployment edged lower. However, falling home prices and contracting investment show that the recovery remains uneven.
The stronger releases provide a supportive backdrop for the Australian dollar, given Australia’s trade relationship with China.
Trading ranges: Which pairs have room to roam?
The range monitor shows the following activity relative to each pair’s 22-day average range (about a month of trading). Percentages are rounded:
-
EURUSD: 53 pips versus a 65-pip average — about 82% completed.
-
GBPUSD: 39 pips versus a 73-pip average — about 53% completed.
-
USDJPY: 58 pips versus a 100-pip average — about 58% completed.
-
USDCHF: 21 pips versus a 52-pip average — about 40% completed.
-
USDCAD: 59 pips versus a 62-pip average — about 95% completed.
-
AUDUSD: 41 pips versus a 48-pip average — about 85% completed.
-
NZDUSD: 23 pips versus a 43-pip average — about 53% completed.
USDCHF has the most room to roam relative to its normal range. GBPUSD, USDJPY and NZDUSD also have meaningful room for an extension.
USDCAD has already covered nearly a normal day’s range heading into Canadian CPI. That does not prevent a further move, but it does mean traders should recognize how much ground has already been covered.
The average range is context. It is not a ceiling, and it is not a promise that the quieter pairs must extend.
US stock futures: Technology leads
US futures are pointing to a mixed opening:
-
Dow industrial average futures: down 160 points.
-
S&P 500 futures: up 30.56 points.
-
Nasdaq 100 futures: up 282 points.
The Nasdaq is leading the recovery after last week’s weakness. The Dow’s decline shows that the buying is not uniform across the major indices.
Treasury yields move lower
US Treasury yields are lower across the curve:
-
2-year: 4.7145%, down 2.15 basis points.
-
5-year: 4.8771%, down 2.19 basis points.
-
10-year: 5.0771%, down 2.09 basis points.
-
30-year: 5.4220%, down 1.50 basis points.
Lower yields provide a more supportive backdrop for rate-sensitive growth stocks, consistent with the Nasdaq’s relative strength this morning.
Gold, silver and Bitcoin
-
Spot gold: $4,169.73, up $4.31, or 0.10%.
-
Spot silver: $57.64, up $0.67, or 1.17%.
-
Bitcoin: $82,183, down $633, or 0.76%.
Silver is outperforming gold, while Bitcoin is moving lower despite the gains in broader US equity futures.
The North American calendar
At 8:30 AM ET, Canada releases its inflation report:
-
Headline CPI month over month: 0.2% expected versus -0.1% previously.
-
Median CPI year over year: 2.0% expected versus 2.0% previously.
-
Trimmed CPI year over year: 1.9% expected versus 1.9% previously.
-
Common CPI year over year: 2.6% expected versus 2.6% previously.
-
Core CPI month over month: 0.1% previously; no consensus shown.
The Canadian dollar is already stronger heading into the release. The underlying inflation measures will help determine whether that move gets another shove or whether traders take some profits.
At 10:00 AM ET:
-
US NAHB Housing Market Index: 31 expected versus 32 previously.
The housing report provides another reading on builder confidence as elevated borrowing costs remain a challenge.
There’s always something new to learn about the markets. Explore investingLive’s educational video collection for quick explanations and useful insights.
This article was written by Greg Michalowski at investinglive.com.