This is not a 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 Lower and Crude is trading Higher which is correlated. Gold is trading Lower which is not 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 Higher. Currently all of Europe is trading Higher as well with the exception of the German Dax which is fractionally Lower at this time.

Possible challenges to traders today

Prelim GDP is out at 8:30 AM EST. This is Major.
Core Durable Goods Orders is out at 8:30 AM EST. This is Major.
Durable Goods is out at 8:30 AM EST. This is Major.
FOMC Member Bostic Speaks at 8:30 AM EST. This is Major.
Prelim GDP Price Index is out at 8:30 AM EST. Major.
Unemployment Claims is out at 8:30 AM EST. Major.
Pending Home Sales is out at 10 AM EST. This is Major.
Natural Gas Storage is out at 10:30 AM EST. This is Major.
FOMC Member Quarles Speaks at 11:10 AM EST. Major.
FOMC Member Bostic Speaks at 12 Noon EST. This is Major.

Bias

Yesterday we gave the markets an Upside and finally the markets cooperated. The Dow closed Higher by 425 points, The S&P gained 44 and the Nasdaq gained 133. 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 was Day Two of Fed Chairman Powell's testimony to a Congressional Committee and in it he basically stated his continued cooperation for a sustained period of easing for interest rates which is a key driver for Consumer Spending in the United States. Consumer Spending represents about 70% of GDP in the US economy and the Chairman and his members seemed intent on keeping it low for an extended period of time. The markets took this as positive news and exploded to the Upside. Today we have about 10 economic news reports, all of which are major; so we will see if this upward momentum can continue.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

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: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

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.