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 Mixed. Conversely all of Europe is trading Higher.

Possible challenges to traders today

ADP Non-Farm Employment Change is out at 8:15 AM EST. This is Major.
FOMC Member Evans Speaks at 9:30 AM EST. This is Major.
Final Services PMI is out at 9:45 AM EST. This is Major.
ISM Services PMI is out at 10 AM EST. This is Major.
Crude Oil Inventories is out at 10:30 AM EST. This is Major.
FOMC Member Evans Speaks at 3 PM EST. This is Major.

Bias

Yesterday we gave the markets a Neutral or Mixed bias as we saw no real evidence of Market Correlation. The markets closed Mixed as the Dow traded Higher by about 20 points but the S&P and Nasdaq both closed Lower. 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

A funny thing happened on the way to the markets yesterday. Janet Yellen our new Secretary of the Treasury made some comments to the effect that in the future the Federal Reserve will have to raise interest rates to calm an overheated economy. I personally think her comments were taken out of context. The Fed will hike rates when feel it is appropriate to do so and that time is not now. But as always the markets hears one thing and ignores the rest. If the economy was booming and growing at 5% a year or better then the Fed may feel obligated to hike if only to keep inflation at bay. But the Fed has already stated that they didn't any hikes in the horizon until late 2022 or early 2023. Again that time is not now and if the economy is roaring by that time and as of now we do not know that.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD holds lower ground near 1.1850 ahead of EU/ US data

EUR/USD remains in the negative territory for the fourth successive session, trading around 1.1850 in European trading on Friday. A broadly cautious market environment paired with modest US Dollar demand undermines the pair ahead of the Eurozone GDP second estimate and the critical US CPI data.

GBP/USD keeps losses around 1.3600, awaits US CPI for fresh impetus

GBP/USD holds moderate losses at around 1.3600 in the European session on Friday, though it lacks bearish conviction. The US Dollar remains supported amid softer risk tone and ahead of the US consumer inflation figures due later in the NA session on Friday.

Gold trims intraday gains to $5,000 as US inflation data loom

Gold retreats from the vicinity of the $5,000 psychological mark, though sticks to its modest intraday gains heading into the European session. Traders now look forward to the release of the US consumer inflation figures for more cues about the Fed policy path. The outlook will play a key role in influencing the near-term US Dollar price dynamics and provide some meaningful impetus to the non-yielding bullion.