Tech climbs, Dow slips in split session

In the forex market, the US dollar was sharply lower overnight. On Monday, it staged a strong rally in reaction to the tariff slashing, which followed the US-China trade talks over the weekend. But it has pulled back since then. Traders piled in to take profits from the bounce off very oversold levels.

The selling accelerated after yesterday’s benign US inflation numbers, which were viewed as giving the Federal Reserve more room to cut rates. Even despite the weekend breakthrough, the tariff situation remains uncertain, and the Japanese yen emerged as an early gainer, benefiting from the dollar’s ongoing softness.

The market continues to price in two interest rate cuts from the Federal Reserve by the end of the year, capping any significant upward pressure on the greenback for now.

Gold prices edged lower overnight, reflecting diminished demand for safe havens amid improving risk sentiment. Prices gapped lower on Monday following the unexpected breakthrough in US-China trade talks over the weekend.

Since then, gold has consolidated at lower levels, with the first line of support coming in around $3,200. It looks as if the path of least resistance may be down for gold. But much now depends on how staunchly the bulls can defend the $3,200 level.

Meanwhile, the bulls can take some comfort from seeing the daily MACD fall sharply. While this suggests that downside momentum may be picking up, it also means that gold prices are returning to ‘neutral’ levels. This increases the possibility that gold can rebase and form a platform for another leg higher. If it can’t, then there’s also a chance that the top is already in for gold prices.

Meanwhile, silver is stuck in a tight range, with resistance at $33 and support at $32. The daily MACD is flat as a pancake, indicating no overall momentum in either direction.

Oil prices have pulled back from Tuesday’s highs. Yesterday, front-month WTI turned lower after testing the 50-day moving average (DMA) around $63.50. This morning, it has repeated that process as the 50-DMA dropped to $63.40. This is probably just a coincidence, but these things are often worth noting.

Oil prices are moderately oversold. However, the daily MACD indicates that upside momentum is picking up as prices have risen off the $55 lows seen ten days ago. Hopes that the US-China trade talks made unexpectedly good progress over the weekend have added some support to oil prices.

But it is early days, and the two sides now have 90 days to hammer out a convincing and lasting trade deal that is seen to suit all sides. Traders now shift their focus to today’s weekly US inventory report, which is expected to show a draw of 2 million barrels.

Natural Gas was under pressure early this morning. Both markets remain sensitive to the ongoing demand story and broader risk sentiment.

Cryptocurrencies were mostly lower overnight, although declines were relatively modest compared to recent gains. Cryptos have put in a strong performance so far this month, led by Ether.

Bitcoin appears to be nestling in quite comfortably above $100,000. But it may need to spend more time consolidating around $105,000 to recharge its batteries before it can launch another attack on all-time highs, which has paused after briefly flirting with record highs. For now, crypto has taken a place in the backseat as equity markets command the spotlight.

The VIX remains anchored in the mid-18s, underscoring a prevailing sense of calm across financial markets. Could this prove to be the calm before the storm? The pullback below 20.00 reflects a broader easing in investor anxiety following a better-than-expected inflation print and continued strength in equities.

While risks remain, the bulls appear to be growing in confidence, at least over the short term. The VIX’s steady retreat below 20 reinforces the current risk-on environment.

Wednesday is light on major macroeconomic data, offering investors a brief pause before tomorrow’s busier calendar. Oil inventory data is today’s focus for commodity watchers, while the broader markets will pay more attention to Thursday’s US PPI and Retail Sales reports for the next directional cues. 

On the earnings front, Cisco is due to report after the bell, while Walmart takes the stage tomorrow morning.

IPO watchers will be paying attention to eToro, which has priced at $52 ahead of its debut. Meanwhile, notable names continue to perform well. Goldman Sachs has notched five straight days of gains, and Disney has strung together a six-day rally. Market breadth appears robust. 

However, UBS has bucked the trend, issuing a downgrade on US equities even as others remain bullish.

Divergence was the name of the game on Wednesday, with the Nasdaq continuing to lead thanks to tech strength, while the Dow stumbled under the weight of UnitedHealth’s sharp decline.

Investors appear to have absorbed the inflation data well, boosting expectations for two 25 basis point rate cuts this year and putting a lid on the US dollar’s recent rally. Gold has eased as safe-haven demand recedes, while crypto has paused after recent gains.

The VIX suggests little stress beneath the surface. But attention now shifts to upcoming retail and inflation prints. It may be a quieter session, and the bulls appear to be firmly in charge. But for how long?