Morning Note: U.S. Inflation Eases, S&P 500 Rises, Oil Faces Trade War Fears

U.S Inflation Eases, S&P 500 Climbs Higher

The latest U.S. Consumer Price Index (CPI) rose by 0.2% month-over-month and 2.8% year-over-year last month, down from the previous readings of 0.4% and 3.0%, respectively. The slowdown in inflation increases the likelihood of the Federal Reserve cutting interest rates this year, injecting liquidity into the markets and driving higher risk-on asset prices. As a result, the S&P 500 index gained 0.5%, closing at 5,599.3.

(S&P 500 Daily Price Chart, Source: Trading View)

From a technical analysis perspective, the bullish trend reversed when bearish momentum drove the price to break below the ascending channel at the end of February 2025. Recently, the price made a decisive break below the swap zone of 5,660 – 5,700. If the index fails to close above this zone in the near term, the strong bearish structure may drive the index further downward, potentially retesting the support zone at 5,400 – 5,440.

Markets Await U.S. PPI Data

The U.S. Producer Price Index (PPI) is scheduled for release on March 13 at 12:30 GMT. In January, the PPI registered a 3.5% year-over-year (YoY) increase and a 0.4% month-over-month (MoM) rise. For February, market expectations point to a slight moderation, with forecasts projecting a decline to 3.4% YoY and 0.3% MoM.

This expected slowdown reflects easing cost pressures in the supply chain, potentially driven by stabilizing input costs, improved logistics, and a cooling demand environment. Additionally, the Federal Reserve’s tight monetary policy may be curbing inflationary pressures, gradually leading to a softer increase in producer prices.

(U.S Dollar Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the overall trend of the U.S. Dollar Index has been bullish since the end of September 2024, as indicated by the formation of higher highs and higher lows. However, the index began to decline in early February 2025, marked by a significant double-top candlestick pattern.

Recently, consecutive bearish candlesticks with strong downward momentum have pushed the price lower, signalling a valid trend reversal from bullish to bearish. The index is currently retesting the support zone of 103.00 – 103.20. If it can find support here, it may potentially rebound and retest the swap zone of 104.00 – 104.30. Conversely, if the index breaks solidly below this support zone, it may continue to decline further.

Falling U.S. Gasoline Stocks vs. Trade War Fears: Oil’s Dilemma

U.S. gasoline inventories declined by 5.7 million barrels, significantly exceeding analysts' expectations of a 1.9-million-barrel draw, while distillate stocks also fell more than anticipated. The sharp drop in gasoline inventories fuelled expectations of a seasonal demand increase in the spring. However, market sentiment remained weighed down by concerns over the global economic impact of escalating trade tensions.

On 12 March, Donald Trump threatened to intensify the global trade war by imposing additional tariffs on European Union goods, prompting major U.S. trading partners to vow retaliation against existing trade barriers. With both bullish and bearish factors unfolding simultaneously, market direction remains uncertain, making it difficult for investors to take a clear stance on crude oil prices.

(U.S Crude Oil Futures Daily Chart, Source: Trading View)

From a technical analysis perspective, the recent price action has found support in the 66.20 – 66.50 zone, surging upward with bullish momentum. This is a key support level that has been verified multiple times in the past, suggesting that the price may continue riding this short-term bullish momentum and potentially retest the swap zone at 70.00 – 70.50. If the price can break above this zone, further upside movement is possible.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.