Global review: Inflation may be rearing its ugly head [Video]
|US Dollar: Jun '21 USD is Up at 90.205.
Energies: Jun'21 Crude is Up at 70.41.
Financials: The Sept '21 30 year bond is Up 12 ticks and trading at 159.22.
Indices: The Jun'21 S&P 500 emini ES contract is 8 ticks Higher and trading at 4240.00.
Gold: The Aug'21 Gold contract is trading Down at 1895.00. Gold is 14 ticks Lower than its close.
Initial conclusion
This is not a correlated market. The dollar is Up+ and Crude is Up+ which is not normal and the 30 year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The S&P is Higher and Crude is trading Higher which is not correlated. Gold is trading Lower which is correlated with the US dollar trading Up. I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders you need to be aware of this and proceed with your eyes wide open. Asia is trading Mixed with half the exchanges HIgher and teh other half Lower. Currently all of Europe is trading Higher with the exception of the Milan exchange which is Lower at this time.
Possible challenges to traders today
-
Prelim UOM Consumer Sentiment is out at 10 AM EST. This is Major.
-
Prelim UOM Inflation Expectations is out at 10 AM EST. This is Major.
Bias
Yesterday we gave the markets an Upside bias as the Bonds and Gold were both trading Lower Thursday morning and this usually reflects an Upside day. The markets didn't disappoint as the Dow climbed 19 points Higher, the S&P gained 20 and the Nasdaq 109. Today we aren't dealing with a correlated market and our bias is Neutral or Mixed.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Finally after nearly a week of down or mixed days we finally see some upward trend and correlation. All indices gained ground yesterday as initial Unemployment Claims came in lower than last week by 9,000 and the markets claimed that as a victory. It came in at 376,000 versus 385,000 last week. However inflation may be rearing its ugly head as that came in at 0.6% versus 0.4% expected. This may very well be a temporary situation as the economy is opening we are seeing shortages in many areas and sectors. Case in point automobiles used integrated chips as a major component to control the various systems in a car. Now that the economy is opening up, demand for autos is rising and chips are in short demand which means a price increase and we are seeing that across the board. Time will tell how this all works out but we believe it is a temporary scenario.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.