Russell Shor

FXCM’s CFD for Brent, UKOil, and its WTI CFD, USOIL, have both moved into their bullish channel on the H4 time frame. Oil is responding to forecasts for China’s growth.

Join FXCM senior market specialists, Russ and Nik, as they discuss the themes driving the markets for this week. In this podcast, the two analysts discuss the Fed minutes that were released last week and how they differed from Fed Chair Powell’s press conference. Core PCE also came in ahead of expectations, with inflation being a primary driver. Join the discussion for these and more.

The GER30 weekly has charted a higher trough, followed by a higher peak. This is an uptrend. Its RSI remains on the bullish side of 50.

FXCM’s dollar basket is trading in its bullish channel between the upper blue and red bands. This is in the daily timeframe. Its stochastic is trading above 80. This denotes a strong underlying upwards momentum.

The daily NAS100 (left) has a weak bias. It is trading in its bearish channel between the lower blue and red bands. Also, its underlying momentum is to the downside; its stochastic has dropped below 20. The longer it stays there, the greater the prospects for lower prices.

The top chart shows the US 10-Year real rate and the middle chart is the EURUSD. The correlation coefficient (cc) between the two series is -61% (bottom indicator). This correlation does not always hold true, but it has been the dominant relationship since March 2022.

Core PCE ticked up to 4.7% y/y from the previous 4.6% y/y. Markets are now betting on 25bps hikes by the Fed for March, May and June, which would take the target rate to the 5.25%-5.50% range. The monthly core PCE printed at 0.6% m/m, greater than the previous 0.4% m/m and larger than the 0.4% consensus. Annualised, this gives a worrying 7.44%, much higher than the Fed 2% average…

Money is seeking the safety of the dollar ahead of the core PCE release. On the hourly chart, the trend following EMAs and the momentum-based stochastic have crossed up. Market participants are worried that inflation remains resilient. Here, the Fed will need to remain hawkish and tighten further, which will negatively affect the present value of risk assets.

The GER30 has had a negative correlation to the US real rate since June 2021. Despite the geography, this makes a certain sense.

Yesterday’s GDP data show that the US economy decelerated at a higher pace than previously reported. Q4 GDP was revised to 2.7%, which is down from the previously reported number of 2.9% and lower than Q3’s 3.2%. The revision is due to lower consumer spending and exports, with personal consumption expenditure up 1.4% compared with the prior forecast of 2.1%.

GER30 has bounced off of the support around the 15,260 level (green shaded horizontal). Since the beginning of February, it has been threatened seven times. Every time it has been defended.