The XJO is expected to open flat despite a fall in the U.S overnight. Their positive futures and willingness to hold key support is likely responsible for our muted open.

Yesterday we managed to hold gains but continued the consolidation as we await U.S CPI tonight. Don’t be surprised if we see some meek selling today and overall inaction.

7,280 remains key support and 7,380 to 7,400 remains key resistance. It seems likely one of these will be tested over the coming days following the CPI reading. The U.S has been largely positive over the past several months with peak rates and an end to the tightening cycle in sight. Therefore, it seems more likely than not it is a good reading tonight and markets have a mildly positive reaction.

US Markets

US shares closed lower overnight, with each of the three major indices finishing firmly in the red. Shares displayed some nervousness ahead of tonight’s CPI reading, which is expected to show inflation growth rising from 3.0% in June, to 3.3% in July. For a market that has rallied on the hopes that the inflation problems were over, the potential for inflation to reaccelerate is causing some jitters. Rising energy prices throughout July has worsened the inflation situation, and energy prices rose again overnight. There was otherwise a lack of major economic from the US, though an oil inventory reading did show a build-up in inventories; a positive sign that hopefully brings oil prices back down in the coming week. The CPI reading will come out just before US markets open this evening.

Four of the eleven sector groups of the SP500 closed higher overnight, with Energy stocks the strongest performers as oil powered higher again despite a build-up in US inventories. Technology, Communications, and Discretionary stocks were the worst performers.

Technically the S&P500 has been falling from the resistance level at 4,600 and looks like continuing the bearish move to the uptrend line. The potential downside targets for the move are the longer-term uptrend and the previous resistance which may now act as support – both of these lines currently sit around 4,450. This level is now not too far away and we could see it reached tonight if the bearish momentum holds.

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