This is a nearly correlated market. The dollar is Down- and Crude is Up+ which is 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 correlated with the US dollar trading Down. 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. All of Asia is trading Lower. Conversely, all of Europe is trading Higher.

Possible challenges to traders today

Final Manufacturing PMI is out at 9:45 AM EST. This is Major.
ISM Manufacturing PMI is out at 10 AM EST. This is Major.
Construction Spending m/m is out at 10 AM EST. This is Major.
ISM Manufacturing Prices is out at 10 AM EST. This is Major.
Wards Total Vehicle Sales is out All Day by Brand. This is Major.
Loan Officer Survey is out at 2 PM EST. This is Major.
FOMC Member Williams Speaks at 2:10 PM EST. This is Major.
Fed Chair Powell Speaks at 2:20 PM EST. This is Major.

Bias

On Friday we gave the markets a Downside bias as we saw no evidence of Market Correlation Friday morning. The Dow traded Lower by about 186 points and the other indices lost ground as well. Today we are dealing with a nearly correlated market and our bias is to the Upside.

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

Commentary

Well, it would appear as though the Biden speech rally ended Friday as the markets fell. Not by much mind but they retreated nonetheless. Saturday represented May Day globally which is an official celebration of the start of spring with many nations celebrating with Music, Food and dance. I think of it as either an early Labor Day or Octoberfest. In any case, many of the banks in Europe are closed for a bank holiday. Of course, we in the United States are still open. This may either serve to stabilize the markets or confuse them all together. Of course, time will tell how this works out. We do have the Fed chair Powell speaking this afternoon.

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.