Things are slow to start in European trading today but the important detail is that markets actually shrugged off the 7% US inflation print yesterday, keeping with the more positive mood from earlier this week.

So even with a bit of a breather or a light pullback, that is still the prevailing sentiment this week.

Equities are more tepid for now but I reckon if we are to see bids flow through, it will come thick and fast. As for outside risks, China and omicron developments globally are still things to be wary about.

The dollar slump yesterday has opened up some interesting technical levels at least:

  1. EUR/USD finally broke free from its range since mid-November. Price has pushed past 1.1400 and may be looking towards 1.1500 next as the potential target.
  2. USD/JPY dropped as Treasury yields also look a little stretched, with the drop now testing the 50.0 retracement level of the swing higher from December to January @ 114.44.
  3. GBP/USD is continuing to push higher after a break of its 100-day moving average and 1.3600, now nearing its 200-day moving average @ 1.3733. That will be a key resistance point to watch.
  4. USD/CAD is also dragged down to 1.2500 and testing its own 200-day moving average @ 1.2498, with higher oil prices also providing a tailwind for the loonie to contest the key support level.

Meanwhile, oil itself is also continuing to stay more perky in looking for a push back towards $85 next. There might be some room to pause around there after what looks to likely be four consecutive weeks of gains so bear that in mind despite the improving fundamental picture since the omicron news at the end of November.

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