Fundamental Overview
Markets enter Friday with the same mixed conditions that have characterised much of the week, with attention now shifting firmly toward US employment data.
Recent US economic releases have provided a relatively supportive backdrop. Private-sector employment came in above expectations, Core PCE was lower than anticipated and final GDP was stronger. Despite this, equity markets have struggled to generate a consistent broad-based response.
Inflation pressures remain important globally. Tokyo Core CPI accelerated from 1.8% to 2.7%, potentially increasing the scope for tighter Bank of Japan policy. Eurozone inflation is also expected to remain elevated, reinforcing the possibility of further ECB tightening.
Meanwhile, government bond yields remain close to significant highs. Although yields are taking a breather following their recent aggressive advance, the overall structure remains elevated and continues to represent a restrictive backdrop for financial markets.
Risk Sentiment
Risk sentiment remains mixed rather than decisively risk-on or risk-off.
The Nasdaq remains close to all-time highs, but broader equity price action has lacked consistency. The S&P 500 and several other major markets continue to move through relatively indecisive conditions.
Bond yields have softened slightly from their highs, but remain elevated enough to support the broader risk-off argument and the underlying strength of the US dollar.
The Middle East remains another important source of uncertainty. Oil continues to react to changing expectations around supply, conflict and the possibility of negotiations, making the energy market particularly sensitive to headlines.
With US jobs data approaching, patience remains important. A significant employment surprise could become the catalyst that provides greater directional clarity.
Technical Overview
EUR/USD remains the clearest directional market. The pair has maintained its broader downward structure and recently moved close to its downside target before bouncing from the lows. That recovery currently resembles a pullback within an established downtrend rather than a confirmed reversal, leaving further dollar strength as the preferred bias.
USD/JPY remains a medium-term opportunity centred on potential yen strength. Higher Japanese inflation could support expectations for tighter Bank of Japan policy, while the possibility of intervention remains another consideration. Progress has been slow, however, and patience remains necessary.
The Nasdaq remains close to its all-time highs, but recent price action across US indices has not provided sufficient consistency for strong directional conviction.
Gold has also been indecisive, while oil remains around the mid-$90s after volatile trading and continues to lack a sufficiently clear technical setup.
Across the US yield curve, yields remain elevated despite the recent pause. The curve has also begun to steepen somewhat, with the longer end maintaining a significant premium over the two-year yield.
Focus for Today
- EUR/USD: Maintain the downside bias and watch for another attempt at recent lows.
- US dollar: Further strength remains possible while yields stay elevated.
- Japanese yen: Maintain the medium-term yen-strength view, with patience required.
- US indices: Remain selective while price action lacks coherence.
- Gold: No compelling directional opportunity currently.
- US oil: Remain cautious amid headline-sensitive and volatile conditions.
- US jobs data: The key potential catalyst for a change in today’s market narrative.
The main priority is not to force opportunities before the US employment numbers. Market conditions remain mixed, and several major assets are producing conflicting signals. Clear confirmation remains preferable to anticipating a breakout before the catalyst arrives.
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