FXCM's US30 CFD has charted a bullish 1-2-3 pattern on the weekly scale. It seems to be in the midst of its next impulse move. To this end, we note that the stochastic has pushed into the upper quintile (blue arrow). The longer it stays in this region, the greater the chances of an impulse swing.
The US30 represents the value side of the market which tends to outperform in the early part of a bull market. So whilst it is still too early to call for a bull market, the DJIA (US30) outperformance makes us sit up and take notice.
In particular, it coincides with the topping out of median CPI and core PCE. Our concern is the wage inflation data that printed on Friday.
This upside surprise is a cause for concern as the Fed will not allow a wage spiral to entrench and will use aggressive policy to ensure this does not happen.
Given that the median inflation seems to be rolling over, this may reflect in the next wage data point. However, if it surprises again to the upside, the Fed will likely start flexing its muscles again, which will act as a headwind against risk-on instruments.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.