Hello traders, welcome back to another forum on my personal sentiment analysis series where i will be sharing my personal view on the general feel of the global markets.
SPX
Starting with the SPX, the index has been trading within a relatively tight trading range since April 4th as it tries to test the 4200 resistancemoving average, level after the strong bu-un from mid of March. While the 4021 support level still holds the buh bias aremainsis still remain above the 50-day moving average200-dayMA) and the 200 DMA. While last week we had softening economic data coming from the US, it seems to have stopped the bull rally, which may signal a pause in risk appetite in the market for now.
BOND YIELDS
Looking at treasury yields, the US 10-year treasury yields rose to 3.5% from 3.4% last week as the FOMC minutes showed a hawkish FED at the next meeting. The 3.35% and 3.6% level still remains a solid level to keep an eye on coming into the week as the US10Y is more weighted to the downside as investors are pricing in interest rate cuts starting in July. Also, the US10Y is also below both the 50 and the 200 DMA, which does put more weight to the downside for the US10Y.
VIX
The VIX, which shows the risk appetite in the market, surprisingly dropped even lower as the US PPI and retail sales showed softening numbers. With the significant drop in the VIX, it does put an emphasis on a risky environment.
INTEREST RATE
If we take a look at the market expectation on the FED’s monetary policy, the market expects an 83.5% chance of a 25 bps rate hike in the next upcoming meeting in March. Followed by a hold for the next two meetings, which push the interest rate cut expectation to September. A further delay in the interest rate cut expectation could limit the risk-on bias as high borrowing costs can be detrimental for businesses and households.
ECONOMIC CALENDAR
This week, most of the economic data will focus on non-US countries, as we have inflation rates from Canada, the UK, and Japan. Also, we have the unemployment rate, retail sales, and consumer confidence from the UK. So looking at the economic data, volatility could be high on the pound sterling as the UK dominates the economic data release.
CONCLUSION
To conclude, from several metrics, the market is showing a pause in the risk-on environment because of the softening data from the US last week; however, the risk-on bias still remains as we have a rising SPX, a drop in the VIX, and rising yield. This week seems like trading opportunities can be found on the pound sterling due to the high concentration of key economic data releases coming from the UK.