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 Lower. 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 Higher which is not 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 mainly Lower with the exception of the Hang Seng and Singapore exchanges which are mainly Higher. At this time all of Europe is trading Higher.

Possible challenges to traders today

Goods Trade Balance is out at 8:30 AM EST. This is Major.
Prelim Wholesale Inventories m/m is out at 8:30 AM EST. This is Major.
Crude Oil Inventories is out at 10:30 AM EST, This is Major.
FOMC Statement is out at 2 PM EST. This is Major.
Federal Funds Rate is out at 2 PM EST. This is Major.
FOMC Press Conference starts at 2:30 PM EST. This is Major.

Bias

Yesterday we gave the markets a Downside bias as the USD, Crude, and the Bonds were all trading Higher and that is usually a recipe for a Downside day. The markets didn't disappoint as the Dow dropped 86 points and the other indices lost ground as well. Today is FOMC Day and as such our bias is Neutral.

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

Yesterday we gave the markets a Downside bias as our rules of Market Correlation told us such. After 8:30 AM EST Durable Goods and Core Durable Goods were released and they did not meet expectations. Today is FOMC Day and therefore our bias is Neutral. Why? Because the markets have never shown any sense of normalcy on that day. Do we think the Federal Reserve will raise rates? No. The Fed knows the economy is still not out of the woods yet so we don't expect them to hike. Lastly, I don't if any of you saw the Capital Police testimony yesterday but if you didn't it was very emotional and quite frankly there wasn't a dry eye in the house.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.