S&P 500, EUR/USD analysis: European open – 11/10/2023

Asian Indices:

• Australia's ASX 200 index rose by 47.5 points (0.67%) and currently trades at 7,088.10
• Japan's Nikkei 225 index has risen by 272.9 points (0.86%) and currently trades at 32,019.43
• Hong Kong's Hang Seng index has risen by 254.82 points (1.44%) and currently trades at 17,919.55
• China's A50 Index has risen by 39.44 points (0.32%) and currently trades at 12,281.26

UK and Europe:

• UK's FTSE 100 futures are currently down -11.5 points (-0.15%), the cash market is currently estimated to open at 7,616.71
• Euro STOXX 50 futures are currently down -20 points (-0.47%), the cash market is currently estimated to open at 4,185.23
• Germany's DAX futures are currently down -14 points (-0.09%), the cash market is currently estimated to open at 15,409.52

US Futures:

• DJI futures are currently up 4 points (0.01%)
• S&P 500 futures are currently up 2.5 points (0.06%)
• Nasdaq 100 futures are currently up 27.75 points (0.18%)

Events in focus (GMT+1):

• 06:00 – Germany CPI
• 06:00 – Japan’s machine tool orders
• 08:00 – China’s loan data, M2 money supply, social financing
• 08:15 – FOMC member Bowman speaks
• 12:30 – US PPI
• 14:15 – Fed Waller speaks
• 16:00 – EIA short-term energy outlook
• 16:15 – FOMC member Bostic speaks
• 17:00 – US 10-year note auction
• 18:00 – FOMC meeting minutes
• 20:30 – APR weekly crude oil stock

There are a few moving parts in today’s calendar which could sway sentiment one way or another for bond yields, and therefore the US dollar. Producer prices are a standout economic event, and if it leans strong enough in a particular direction then I’d expect the dollar to take notice. Rising energy prices could provide PPI with another leg higher on the monthly and annual basis (just like we’re seeing on China’s PPI and CPI data sets). But if we see core measures of producer prices move higher then it could build some excitement ahead of Thursday’s inflation report.

We also have the FOMC minutes, which could shed some more light on their ‘higher for longer’ narrative and whether there really is room for another hike this year. We also have several Fed members speaking, and if recent comments are anything to go by then they could take the sting out of any higher producer prices. The script some are seemingly veering towards is that high yields may be enough to warrant another hold by the Fed in November, and if this narrative is extended today alongside softer-than-expected producer prices, perhaps we’ll see the US dollar retrace for a sixth day.

And if the US dollar retraces on bets of lower CPI and Fed rates, it could give another boost to the equity market.

S&P 500 technical analysis (weekly chart):

The weekly chart shows that a 3-wave correction formed on the S&P 500 E-mini futures weekly chart, with a bullish pinbar forming last week above 4,230 and prices have broken above that 1-week bullish reversal candle. Whether that marks the end of the correction remains to be seen, as we could now see a minor rally form with a lower high and then break to a new cycle low to mark a deeper correction. But the fact that prices remain above the August 2022 high and respected the September bullish trendline / 38.2% Fibonacci retracement level shows there is at least a chance momentum could push higher over the near-term.

S&P 500 technical analysis (daily chart):

The S&P 500 has seen a nice bounce from the 200-day EMA, although the 50-day EMA is now acting as resistance. From here, low volatility pullbacks towards 4,350 / Aug 2022 high could be tempting for bulls who anticipate a move towards the 4,500 area. In all honesty, I am in the camp that suspect stock market indices have got off too lightly, so whist my near-term bias remains bullish I am also keeping a close eye for a strong bearish reversal. But if prices can get above yesterday’s high, a liquidity gap could see prices move towards 4,500 where I would then be seeking evidence of a swing high.

EUR/USD technical analysis (daily chart):

He US dollar has retraced for five days, yet remains above the January and September 29 low. So it is interesting to note that the rise of EUR/USD has stalled just below 1.0632 lows and the daily bearish trendline. If could take some strong US PI data and hawkish Fed comments to knock it lower from current levels, but if the euro can break above resistance then it likely opens up a run for 1.0700 near the 50-day EMA.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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