This is not a correlated market. The dollar is Up+ and Crude is Down- which is 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 Lower and Crude is trading Lower 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 Lower with the exception of the Hang Seng exchange. Currently, Europe is trading Lower with the exception of the Paris exchange.

Possible challenges to traders today

No Major economic news to speak of.
Lack of Major economic news.

Bias

Yesterday we gave the markets a Neutral bias as we didn't see much in the way of correlation. The Dow dropped 210 points, the S&P dropped a fractional 2 points but the Nasdaq gained on the day by 122. Pretty much a down day for the Dow. Today we aren't dealing with a correlated market and our bias is to the Downside.

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

Commentary

Well the day after the FOMC meeting came and went and apparently the markets weren't too pleased with the Fed's hawkish tone on Wednesday after the announcement. The issue is whether or not the spike we are seeing with inflation is permanent or temporary. Most believe that it is permanent. The major issue confronting this is labor shortages and wages. Unfortunately for the last 30 years the US hasn't really seen inflation rear it's ugly head and many believe that labor costs should be kept to it's barest minimum. The minimum wage established by Congress is a joke. $7.25 an hour can't even fill a tank of gas on a regular basis. It is not a living wage and my stance has always been if businesses want or need people to buy their goods and services then a living wage is a prerequisite. The more disposable income people have the more they'll be able to buy the very goods and services that business owners need. Unfortunately, because this has been going on for so long we are in a period of everyone playing catchup and only time will tell how it all works out.

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.