S&P 500 INDEX: 4625 TO TRY AND CAP FOR A FALL BACK TO RETEST SUPPORT AT 4453/50 – CREDIT SUISSE

10 February 2022, 15:55

The S&P 500 has recovered strongly for a break above its downtrend from early January to retest of its early February high and 61.8% retracement of the January sell-off at 4591/95. We see scope for a move above the early February high and 61.8% retracement of the January sell-off at 4591/95 to test the 63-day moving average (DMA) at 4625, but with a fresh cap looked for here. 

Close below 4453/50 to mark a more important turn lower again

“With daily MACD momentum having turned higher, there is a risk for a break above the early February high and 61.8% retracement of the January sell-off for a deeper recovery yet to test the falling 63-DMA, currently placed at 4625.”

“Our bias remains for the 4625 level to prove a major barrier and for the broader risk to then turn lower again in line with our broader ranging view.”

“We note though the continued similarities between now and 2018 and if we were to continue to repeat this path this suggests a move to the 78.6% retracement of the January collapse at 4691 cannot be ruled out.”

“Support is seen at 4548/47 initially, then the lower end of the price gap from yesterday morning at 4522. A close back below here can ease the immediate upside bias for a fall back the key price pivot and 20-DMA at 4453/50. A close below here is needed to mark a more important turn lower again.”

 

EUR/USD SINKS TO WEEKLY LOWS NEAR 1.1380 ON US CPI

10 February 2022, 16:00

• EUR/USD reverses the initial optimism and breaches 1.1400.
• US CPI rose 7.5% YoY in January. Core CPI gained 6.0% YoY.
• US Initial Claims rose by 223K in the week to February 5.

The sudden bout of strength in the greenback forced EUR/USD to give away earlier gains and break below the 1.1400 support on Thursday.

EUR/USD weaker post-US CPI

EUR/USD drops to new multi-session lows after US inflation figures tracked by the CPI surprised to the upside in January, showing consumer prices rose 7.5% from a year earlier while prices excluding food and energy costs rose 6.0% also on a yearly basis.

The higher-than-expected US CPI gave extra wings to the buck and US yields and reinforce further the speculation of a more aggressive lift-off by the Fed at the March meeting.

Extra results from the US docket also saw weekly Claims bettering estimates after rising 223K in the week to February 5.

EUR/USD levels to watch

So far, spot is losing 0.12% at 1.1407 and faces the next up barrier at 1.1483 (2022 high Feb.4) followed by 1.1496 (200-week SMA) and finally 1.1664 (200-day SMA). On the other hand, a break below 1.1381 (weekly low Feb.10) would target 1.1323 (55-day SMA) en route to 1.1121 (2022 low Jan.28).

 

USD/JPY RALLIES FURTHER BEYOND 116.00 MARK, EYEING 2021 HIGH POST-US CPI

10 February 2022, 16:04

• USD/JPY rallied hard and shot to over one-month high during the early North American session.
• Stronger US CPI prints pushed the US bond yields higher and provided a strong lift to the USD.
• Technical buying above the 115.70 region and the 116.00 mark contributed to the momentum.

The USD/JPY pair caught fresh bids during the early North American session and surged past the 116.00 mark, hitting over a one-month high in reaction to stronger US CPI.

Data released by the US Bureau of Labor Statistics reported this Thursday showed that the headline CPI in the US edged higher to 0.6% in January as against 0.5% expected and the previous. Moreover, the yearly rate jumped to a fresh multi-decade high and accelerate to 7.5% during the reported month. This was above consensus estimates pointing to a rise to 7.3% from the 7% recorded at the end of 2021.

Additional details revealed that the core CPI, which excludes food and energy prices, climbed 6.0% from a year ago as against 5.5% in December and 5.9% anticipated. The data lifted market bets for a 50 bps Fed rate hike in March. This, in turn, pushed the yield on the 2-year US government bond, which is more sensitive to rate hike expectations, to the highest level since February 2020, around 1.434%.

Adding to this, the yield on the benchmark 10-year US note shot back closer to the 2.0% threshold, or the highest level since August 2019 touched earlier this week. This prompted aggressive short-covering around the US dollar and provided a strong boost to the USD/JPY pair. The momentum confirmed a bullish breakout through the 115.70 area and took along some trading stops near the 116.00 round figure.

Sustained break through the mentioned hurdle might have already set the stage for additional gains and supports prospects for a move towards testing 2021 high, around the 116.35 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent appreciating move witnessed since the beginning of this month.

EUROPEAN COMMISSION RAISES 2022 INFLATION FORECAST TO 3.5% FROM 2.2%

10 February 2022, 12:14

The European Commission announced on Thursday that it raised the eurozone 2022 inflation forecast to 3.5% from 2.2% in November's forecast, as reported by Reuters. For 2023, the Commission sees inflation at 2.2%, compared to 1.7% in November. 

The publication further showed that the 2022 growth forecast got revised lower to 4% from 4.3%. 

"Multiple headwinds have chilled Europe's economy this winter: the swift spread of Omicron, a further rise in inflation driven by soaring energy prices and persistent supply-chain disruptions," European Economic Commissioner Paolo Gentiloni said, per Reuters. "With these headwinds expected to fade progressively, we project growth to pick up speed again already this spring."

Market reaction

This report doesn't seem to be having a significant impact on the shared currency's performance against its rivals. EUR/USD was last seen trading in the positive territory near mid-1.1400s.

SILVER PRICE ANALYSIS: XAG/USD BULLS HAVE THE UPPER HAND ABOVE 100-DAY SMA

10 February 2022, 12:35

• Silver edged higher for the fifth straight day and climbed to a two-week high on Thursday.
• The overnight sustained move above the 100-day SMA supports prospects for further gains.
• Bulls might now aim to reclaim the $24.00 mark and test the YTD high touched in January.

Silver traded with a mild positive bias through the first half of the European session and was last seen hovering near a two-week high, around the $23.35 region. The uptick, however, lacked bullish conviction as traders now seemed to wait for the release of the US CPI report, due later during the early North American session.

From a technical perspective, the overnight sustained strength above the 100-day SMA could be seen as a fresh trigger for the XAG/USD bulls. Some follow-through buying beyond the $23.40-$23.45 resistance would reaffirm the positive bias and set the stage for an extension of the appreciating move witnessed over the past one week or so.

The positive outlook is reinforced by the fact that technical indicators on the daily chart have just started moving into bullish territory. Hence, a subsequent strength towards reclaiming the $24.00 round-figure mark, en-route the YTD high around the $24.70 area touched on January 20, remains a distinct possibility.

On the flip side, the 100-day SMA resistance breakpoint, around the $23.20-$23.15 region, now seems to protect the immediate downside ahead of the $23.00 mark. A convincing break below would expose the $22.75 support area before the XAG/USD drops to mid-$22.00, which if broken decisively will negate any near-term positive bias.

The XAG/USD would then turn vulnerable and accelerate the slide towards the next relevant support is near the $22.00 mark. Some follow-through selling will shift the bias in favour of bearish traders and pave the way for a slide towards challenging the double-bottom support, around the $21.40 region.