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 as well. 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 Higher with the exception of the Shanghai and Singapore exchanges which are Lower. Currently Europe is trading Higher with the exception of the Milan and Spanish IBEX which is trading Lower.

Possible challenges to traders today

Retail Sales is out at 8:30 AM EST. This is Major
Core Retail Sales is out at 8:30 AM EST. This is Major.
PPI is out at 8:30 AM EST. This is Major.
Core PPI is out at 8:30 AM EST. This is Major.
Empire State Manufacturing Index is out at 8:30 AM EST. This is Major.
Industrial Production m/m is out at 9:15 AM EST. This is Major.
Capacity Utilization Rate is out at 9:15 AM EST. This is Major.
Business Inventories m/m is out at 10 AM EST. This is Major.
NAHB Housing Market Index is out at 10 AM EST. This is Major.
TIC Long-Term Purchases is out at 4 PM EST. This is not Major.

Bias

Yesterday we gave the markets an Upside bias as the USD and Gold were trading Lower and this usually reflects an Upside day. The markets however had other ideas as the Dow closed lower by 86 points, however the S&P and Nasdaq both traded Higher. All in all a Mixed day. Today we aren't dealing with a correlated market and our bias is Neutral.

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

Commentary

Yesterday we suggested an Upside day as both the USD and Gold were trading Lower and that typically is indicative of an Upside day. The markets had other ideas of course. Today we have a virtual tsunami of economic news and reports in that we have 10 economic reports, most of which are major. Given that they are Major they can change market direction so this is something to be mindful of. Tomorrow we have the FOMC Meeting which of course is major as well.

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.