All Eyes On Jerome

This is the last chance to hear from the Fed before it enters the two-week blackout period this weekend ahead of its 17 march FOMC meeting. The tone set today will in all likelihood determine risk sentiment for the next two weeks at least.

Although many retail traders especially, and also Wall Street equity traders too can switch off at the first mention of bonds, fixed income and yield curves, the debt market continues to drive the global investment environment, including risk-taking in FX markets. (Whisper it quietly but bond traders are always convinced that their market leads the way, acting as the best indicator and predictor of economic conditions, which other markets then follow…)

“So, does Powell continue to hold the view that the rise in long-term rates is proportionate with an improving economic outlook?”

Little concern of the recent sharp moves would probably trigger another spike in yields as the bond market tried to find the “right level”, while also seeing more dollar short covering. Or does the Fed Chair follow in Brainard’s footsteps that we mentioned yesterday and comment that he is monitoring events in the Treasury market, which might be enough to calm things down, which would probably result in the dollar softening.

USD/JPY toppy

US stocks have opened up very modestly in the green while the dollar is trading above 91 on the DXY.

Notably USD/JPY continues to travel north at a rate of knots, now touching levels not seen since July of last year. That month’s high at 108.16 looks to be the next target, although momentum indicators are now stretched, and the pair is trading way through its Bollinger and Keltner bands. Support lies at the 61.8% retracement of the move down from the June 2020 high around 107.01.

Oil volatile into OPEC+ meeting

Oil is climbing as key OPEC+ members are highlighting the ongoing uncertainty around the global recovery. They have urged “caution” and “vigilance” while also mentioning that they should “keep their powder” dry in a sign that markets presume means they will not flood the market with more output.

“The concern is that Russia may ask for an increase bigger than the 500k bpd for 1 April and ultimately pressure others, as they believe the conditions in the market are good.”

The 20-day SMA acted as good support in Brent just above $62.50 and with momentum now turning slightly higher, oil bulls will hope to push on to the recent cycle highs.

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