Some impressive daily chart reversals are beginning to appear with a few hours until the close.
EUR/USD is now up 142 pips on the day to 0.9735 after falling as low as 0.9537. That’s traced out an outside day from new lows, which is a strong bullish signal.
The price action started with bonds and the Bank of England restarting its QE program for a month. They also called off planned QT operations that were set to start on Monday.
Bond buyers had been lurking with rates a +10-year highs but the buyers were overwhelmed by forced selling due to liquidations and quarter end. With the momentum now shifting, there’s some FOMO in bonds that’s pushed US 10s down 23 bps.
This could be the start of a long-end led bull flattener that interts the curve even deeper with the front-end pinned higher by Fed policy.
In any case, all the broader marked needed was a bit of stability in bonds to spark a reversal, something I’ve been highlighting for a week. The S&P 500 fell for six straight days until today and it’s now up 58 points.
At the moment though, the dollar is what’s on the move. It won’t take much to keep this going until the weekend but if it’s going to have any staying power we’ll need to see signs of a Fed pivot or weakening US economic data. Tomorrow’s US economic calendar features initial jobless claims and on Friday we get an important PCE report.