Markets take more of a risk-off tone after last week's higher US inflation data and increasing war tensions in the Middle East.
- Markets are reacting to the ongoing US / Iran confrontation. With talks going nowhere, the prospect of renewed kinetic war involving the USA becomes stronger. Probably even more importantly, the rise in the price of crude oil and supply issues which have been caused by this conflict over the past few months has begun to feed into inflation data, which are showing meaningful increases almost everywhere. Last week saw US inflation reach 3.8%, a firm increase and a bit higher than expected. With President Trump posting very aggressive tweets hinting strongly at a renewal of attacks on Iran, there is clearly a more risk-off mood in the market as this new week gets underway.
- Equties are firmly off their recent highs, with both the S&P 500 Index and the NASDAQ 100 Index trading lower so far today after strong falls on Friday. Having said that, the declines are not especially dramatic or alarming, so longer-term traders or investors should not be worried in my opinion. It is still a bull market led higher by the tech sector over the longer term. Hawkish central banks and sticky inflation take their toll from time to time and we are seeing that now.
- The Forex market is dominated by a stronger US Dollar and rising US Treasury Yields which are breaking to new 1-year highs. I am long of the 10-Year US Treasury Yield future - a micro future is available at the CME and can be attractive to retail traders with relatively smaller accounts. Rate futures have historically given good results for trend traders. The US Dollar's most noteworthy action right now is probably its continuing recovery against the Japanese Yen following the Bank of Japan's intervention to try to prop up the Yen some days ago. Earlier today, the USD/JPY currency pair touched ¥159. Since today's Tokyo open, price movements have not been especially strong. The strongest major currency has been the British Pound, while the weakest has been the Japanese Yen. Day traders might want to look for long USD trades today.
- Gold touched a 1.5 month low price a few hours ago, although it has recovered slightly. Silver is less weak but also not looking bullish. I feel this tends to prove my point that precious metals are not really safe havens, but tend to respond more to low interest rates and rising US stock markets these days.
- Bitcoin is continuing to trade lower since breaking down from its ascending price channel last Wednesday.
- It is likely to be a relatively quiet day in the markets as it is a Monday and there aare no major data releases scheduled. However, it is possible leaks from the White House might drive war fears higher which could move prices.
- It is a public holiday in Canada today.