Hello traders, and welcome to Wednesday — a day that holds the potential to be highly influential across global markets. Several key instruments are approaching critical technical zones, while the broader macro landscape continues to shape sentiment.
Let’s begin with a quick recap of Tuesday’s data. The Eurozone CPI came in right in line with expectations, providing no real catalyst for EUR volatility. Across the Atlantic, the U.S. ISM Manufacturing PMI also matched forecasts, while JOLTS job openings surprised to the upside, suggesting a still-resilient U.S. labor market. We also heard from a trio of central bankers: Andrew Bailey (Bank of England), Kazuo Ueda (Bank of Japan), and Jerome Powell (Federal Reserve). While Bailey and Ueda provided little in the way of market-moving insights, Powell’s comments gave the U.S. dollar a notable lift, reversing recent weakness and sparking a wave of technical shifts across major pairs.
That brings us to the dominant narrative heading into midweek: the potential for a broader recovery in the U.S. dollar. This resurgence is already being felt in several key FX pairs. USD/JPY is in the midst of a convincing rebound, aided by a bounce from key technical support and growing momentum on the back of Powell’s hawkish undertone. Meanwhile, NZD/USD shows signs of topping out with a developing head and shoulders pattern. GBP/USD — or Cable — is breaking a mid-term uptrend line, a move that underscores growing dollar strength and could be the early stages of a broader trend shift.
Wednesday’s calendar adds further fuel to the fire. Overnight, Australian retail sales came in at 0.2%, a soft reading that surprisingly didn’t weigh on the Aussie much — which is holding firm for now. Looking ahead, all eyes turn to the ADP Non-Farm Employment Change report from the U.S., expected just shy of 100,000. While not always a perfect predictor of Thursday’s official jobs data, it often sets the tone for dollar sentiment midweek.
In the equity space, indices continue their march higher. Major U.S. benchmarks remain near or at all-time highs, and the European session has kicked off firmly in the green. For now, there seems to be no slowing the bull run, even as questions linger about overextension and macro risks.
Over on the commodities front, the picture is more mixed. Oil is stuck in sideways motion — WTI trades slightly in the red, while Brent is modestly higher. Gold, which had a strong start to the week, is now retreating in a corrective move. Silver is also under pressure, although the drops remain relatively mild.
All eyes are now on the U.S. dollar. Is this the start of a full-blown recovery, or merely a corrective blip before further weakness? The day ahead may provide the answers.