Optimism characterizes the markets

The market seems to be characterized by relative optimism as S&P 500 rose, passing clearly the 5000 points hallmark on Friday and providing a psychological boost. The next big test though may prove to be the release of the US CPI rates for January tomorrow and a possible slowdown may intensify market expectations for the Fed to proceed with extensive rate cuts, starting in May supporting US stockmarkets. We have to note that Fed policymakers tend to push back against market expectations which tend to cool down the optimism of the markets, while the earnings season is till on and may influence the markets.

S&P 500 rose beyond the 5000 psychological threshold on Friday. We tend to maintain our bullish outlook as long as the upward trendline guiding the index since the 27^a. of October remains intact. Also, we note that the RSI indicator below our daily chart has risen above the reading of 70 highlighting the strong bullish sentiment of the market for the index, yet at the same time may be implying that the index is in overbought territory and may be ripe for a correction lower. Should the bulls maintain control over the index, we set as the next possible target for the bulls the 5100 (R1) resistance line. Yet the index is already at record high levels, which may give the bulls cold feet and provide the bears with a chance to take over. Yet for a bearish outlook we would require the index’s price action to break the prementioned upward trendline clearly, signaling an interruption of the upward movement and continue to break the 4975 (S1) support line clearly.

In the FX market we note that the USD tended to edge lower on Friday, and given the lack of high-impact releases from the US today, we expect fundamentals to lead the way for the greenback, while the market’s relative optimism, should it be maintained, could provide support for riskier currencies.

USD/JPY maintained a sideways motion yesterday between the 150.00 (R1) and the 148.55 (S1) levels breaking the upward trendline guiding it. Currently, we tend to maintain our bias for the sideways motion to continue between the prementioned levels. Should the bulls take over we may see the index breaking the 150.00 (R1) resistance line and aim for the 151.85 (R2) resistance level. Should the bears be in charge, we may see the pair breaking the 148.55 (S1) support line aiming for the 146.30 (S2) support barrier.         

Other highlights for the day:

We note in the European session, the release of Sweden’s Housing Price for February as well as Turkey’s unemployment rate for December. On the monetary front, we note that  ECB’s Lane, Cipollone, Buch, Minneapolis Fed President Kashkari, BoE Governor Andrew Bailey and RBA’s Kohler are scheduled to speak. During tomorrow’s Asian session, we get Australia’s February Consumer sentiment and Japan’s Corporate goods prices for January.

As for the rest of the week:

On Tuesday we note the release of UK’s employment data for December, Switzerland’s January CPI rates, Germany’s ZEW indicators for February and highlight the release of the US CPI rates for January. On Wednesday we get UK’s CPI rates for January and Eurozone’s revised GDP rate for Q4. On Thursday we start with Japan’s GDP rates for Q4, Australia’s January employment data, UK’s preliminary GDP rate for Q4, the Czech Republic’s CPI rates for January, Canada’s House Starts for the same month and manufacturing sales for December and from the US we get the weekly initial jobless claims figure, the Philly Fed business index for February as well as January’s retail sales and industrial production growth rates. On Friday we get UK’s retail sales growth rate for January, the US PPI rates for the same month and finally the preliminary US University of Michigan consumer sentiment for February.

USD/JPY H4 Chart

Support: 148.55 (S1), 146.30 (S2), 144.45 (S3)

Resistance: 150.00 (R1), 151.85 (R2), 154.00 (R3)

US 500 Cash Daily Chart

Support: 4975 (S1), 4840 (S2), 4660 (S3)

Resistance: 5100 (R1), 5250 (R2), 5400 (R3)

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