Fundamental Overview
Global markets are struggling to establish a clear direction following a week of unexpectedly strong US inflation figures and a more cautious response from the Federal Reserve.
Wednesday’s CPI data showed renewed consumer price pressures, while Thursday’s Producer Price Index reinforced the trend. Headline monthly PPI increased from 0.5% to 1.3%, with core PPI rising from 0.2% to 0.7%.
Despite these inflationary pressures, comments from Federal Reserve policymaker Kevin Walsh suggested little urgency to raise interest rates at the October meeting. The emphasis on assessing incoming data has softened expectations of an immediate policy response.
Meanwhile, stable unemployment claims, weaker Philadelphia Fed manufacturing figures and a modest recovery in retail sales present a mixed economic picture.
Risk Sentiment
The broader fundamental backdrop continues to favour risk-off conditions, supported by persistent inflation, uncertainty surrounding AI investments and ongoing geopolitical tensions.
However, the market reaction has been less decisive than expected.
Following Wednesday’s equity selloff, the S&P 500 and Nasdaq have recovered towards resistance rather than extending their declines. Treasury yields have also retreated from recent highs, providing some support for risk appetite.
The risk-off bias remains intact, but sustained downside momentum has yet to materialise.
Technical Overview
The S&P 500 and Nasdaq have retraced part of their initial declines. These recoveries create potential selling opportunities near resistance, provided renewed bearish confirmation develops.
EUR/USD has recovered strongly, with 1.1241 emerging as an important upside reference. Failure to break higher, followed by a move below 1.1200, could strengthen the case for renewed dollar appreciation.
AUD/USD has also recovered towards resistance, where a bearish structural failure could present another potential selling opportunity.
USD/JPY remains trapped in a narrow range, although the directional bias continues to favour yen strength.
Gold lacks sufficient confirmation for a bearish trade, while US oil retains a bullish structural outlook, supported by continuing supply and geopolitical concerns.
Focus for Today
With limited scheduled economic news, attention turns to whether the recent recoveries develop into sustained buying or provide opportunities for another move lower.
The priority is to monitor equity resistance, potential dollar strength and further upside in US oil.
The next opportunity depends on confirmation: the inflation narrative supports caution, but price action must validate the trade.
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