US open stocks ease from record highs

US futures

Dow futures -0.1% at 33750

S&P futures -0.1% at 4122

Nasdaq futures -0.2% at 13811

In Europe

FTSE -0.4% at 6869

Dax +0.15% at 15253

Euro Stoxx  -0.1% at 3975

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Cautious trades ahead of bond auctions & earning season

Stocks are set to open slightly lower on Monday, easing back from last week’s record highs, as investors digest comments from Fed Chair Powell over the weekend and amid caution ahead of earning season.

The S&P 500 closed at a record high on Friday boosted by tech and banking sector. Meanwhile the Nasdaq surged 3% across the previous week.

Expectations of a strong economic recovery combined with a supportive policy by the Fed and more fiscal stimulus helped stocks tear higher.

Upbeat Powell but risks still exist

Federal Reserve Jerome Powell sounded optimistic regarding the outlook for the US economy. He reiterated that the coming rise in inflation is likely to be transitory and the Fed is unlikely to raise interest rates soon.

PPI data on Friday jumped 1% MoM in March. CPI data is due tomorrow.

Fed Chair Powell also warned over the risks of reopening the US too quickly. Covid cases have been steadily rising in the US over the past two weeks.

US treasury yields are easing lower today after Jerome Powell’s comments. Attention will turn to the 10 year bond auction which is a potential catalyst for volatility.

Where next for the Dow Jones?

The Dow Jones trades hit a fresh record high if 33800 overnight. The futures trade -0.1% at the time of writing.

The Dow Jones trades above its 20 & 50 sma and within an ascending channel indicating an established bullish trend.

Price has broken out of the upper band of the ascending channel within which it has traded since early November in a bullish sign. Although lacks follow through highlighted by the neutral doji candle.

The RSI is sitting on the edge on overbought territory some consolidation at this level before additional gains could be on the cards.

Immediate resistance can be seen at 34000 round number, ahead of 35,000.

On the flip side sells could find support at 33,000 the 20 ema. A break below here could see 32350 tested the 50 sma.

FX – GBP outperforms on reopening optimism

After a strong start the US Dollar is easing lower, tracing 10 year yield southward despite encouraging comments from Fed Chair Jerome Powell over the outlook for the US economy.

GBP/USD is outperforming its peers as the UK economy takes its next step to easing lockdown restrictions. All shops, hairdressers and outside hospitality reopen today putting the UK economy on track for a rebound. Tomorrow’s GDP data will provide further clues as to how the UK economy is holding up.

EUR/USD – better than forecast retail sales has helped to lift the common currency out of the red. Retail sales rose 3% MoM in Feb, up from -5.2% in January. Retail sales are still down 6% since October due to lockdown restrictions across the winter months

GBP/USD +0.4% at 1.3765

EUR/USD trades +0.07% at 1.1909

Oil rises despite covid concerns

Crude oil prices are on the rise, clawing back some of last week’s 3.5% losses. Buyers and sellers continue to tussle over the covid outlook. Whilst on the one hand, rising covid cases, particularly in key developing markets such as India and Brazil were dragging on price. Meanwhile optimism surrounding the US economic recovery was offering support to oil prices.

Indirect talks between Iran and the US surrounding the nuclear deal went well at the end of last week and are due to restart on Wednesday. Progress could mean that the OPEC member can start supplying oil again.

US crude trades +1.4% at $60.02

Brent trades +1.3% at $63.64

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The complete guide to trading oil markets

Looking ahead

18:00 3, 10 & 30 year treasury auction