This is not a correlated market. The USD is Up and Crude is Down which is normal, and the 30 Year T-Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is Higher, then the bonds should follow and vice-versa. The S&P is Lower and Crude is trading Down which is not correlated. Gold is trading Higher which is not correlated with the US dollar trading Up. I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders you need to be aware of this and proceed with your eyes wide open. All of Asia traded Higher except the Aussie and the Nikkei exchanges. All of Europe is trading Lower with the exception of the London exchange which is Higher.

Possible challenges to traders

Core PCE Price Index m/m is out at 8:30 AM EST. This is Major.
Personal Income m/m is out at 8:30 AM EST. This is Major.
Personal Spending m/m is out at 8:30 AM EST. This is Major.
Revised UOM Consumer Sentiment is out at 10 AM EST. This is not Major.
Revised UOM Inflation Expectations is out at 10 AM EST. This is not Major.
FOMC Member Barr Speaks at 12:15 PM EST. This is Major.
FOMC Member Bostic Speaks at 3:45 PM EST. This is Major.

Traders, please note that we've changed the Bond instrument from the 10 Year (ZN) to the 2 Year (ZT). They work exactly the same.

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract. The YM contract is the Dow Jones Industrial Average, and the purpose is to show reverse correlation between the two instruments. Remember it's likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZT veered Higher at around 8:30 AM EST with Unemployment Claims pending at that time. The Dow moved Lower at the same time. Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM EST and the ZT moved Higher at around the same time. These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 2-year note, as a trader you could have netted about 20 plus ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for ZT is now Jun '25 and the Dow is Jun '25 as well. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Jun 2025 - 3/27/25

Dow - Mar 2025- 3/27/25

Bias

Yesterday we gave the markets an Upside bias as the indices were correlated in that direction Thursday morning. However continuing news regarding the upcoming tariffs served to drive the markets Lower, especially when it's reported that prices for a new foreign made car might exceed 25%. Even those vehicles assembled in the USA won't escape completely unscathed as the foreign made parts that would go into making a completed vehicle will be taxed. So, either way prices will go up which didn't sit well with the markets as they all retreated. The Dow dropped 155 points as did the other indices. All finished Lower. Today we aren't dealing with a correlated market, and our bias is to the Downside.

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

As stated above, the markets didn't quite like the news that prices for autos will increase. Mind you autos are the second highest expenditure after housing.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.