Wednesday US cash market close:
- The Dow Jones Industrial fell -534.34 points (-1.51%) to close at 35,028.65
- The S&P 500 index fell -44.35 points (-0.97%) to close at 4,532.76
- The Nasdaq 100 index fell -162.916 points (-1.07%) to close at 15,047.84
- Australia's ASX 200 futures are up 30 points (0.41%), the cash market is currently estimated to open at 7,362.50
- Japan's Nikkei 225 futures are up 60 points (0.22%), the cash market is currently estimated to open at 27,527.23
- Hong Kong's Hang Seng futures are up 244 points (1.01%), the cash market is currently estimated to open at 24,371.85
- China's A50 Index futures are up 19 points (0.12%), the cash market is currently estimated to open at 15,249.69
Bond yields eased, dollar bulls took a step back
Selling across bond markets saw yields ease form their highs and break a 3-day winning streak. The US10-year reached a high of 1.9% before closing -21 bps lower, whilst the 2-year reached 1.077% before effectively closing flat. US indices all closed in the red as they extended their declines with the Nasdaq falling over 1%. The S&P 500 was down just under 1% and the VIX rose to a 19-day high. Short-term volatility is also rising relative to longer-term volatility as the 30-day VIX is approaching levels similar to VIX futures contract 6-months out. It’s not in backwardation yet but volatility will likely spike if it does (this is where near-term VIX is higher than future VIX contracts).
Direction for USD/JPY remains on a knives edge
USD/JPY remains beneath trend support and prices breached the bearish pinbar low to warn of a near-term reversal. Yet prices also holding above key support around 114.26 which is a bullish hammer high and 50-day eMA. Should prices break below 114 then we need to take trend resistance a bit more seriously, otherwise the bias remains for an eventual upside break of trend resistance / 115 as USD/JPY tracks yield differentials higher. Take note that Japan’s trade data is scheduled for 10:50 AEDT.See yesterday’s video on USD/JPY for a closer look.
AUD firms ahead of today’s employment report
The softening of the dollar saw AUD/USD as the strongest major, but the Aussie also rose against all of its major peers. AUD/CAD rose from key support to delay it potential break of the December low. Over the near-term the March 2020 highs could either be a bullish target or area for bears to fade into. 82 remains a key level for AUD/JPY and price action from the Jan high appears to be corrective. We therefore suspect it is building a base above 82 and looking for evidence is bullish trend from the
December low resumed. Employment data is scheduled for 11:30 AEDT, although as Tony Sycamore noted, the report doesn’t capture the pr-Omicron surge (which will not be revealed until the Jan and Feb reports). Unemployment is expected to fall to 4.5% and 60k jobs are expected to have been printed in December.
Read our guide on the Australian Dollar
Clear break of trend support on the ASX 200
The ASX 200 fell to a 3-week low yesterday and cleared several levels of support, including the December trendline, January 6th low and 61.8% Fibonacci level. We therefore prefer to fade into rallies whilst prices remain below the monthly pivot point. Next major support is the 7257 low with 7300 making a likely interim support level.
ASX 200: 7332.5 (-1.03%), 19 January 2022
- Energy (0.59%) was the strongest sector and Information Technology (-2.56%) was the weakest
- 2 out of the 11 sectors closed higher
- 9 out of the 11 sectors closed lower
- 7 out of the 11 sectors outperformed the index
- 140 (70.00%) stocks advanced, 49 (24.50%) stocks declined
- +2.97% - Harvey Norman Holdings Ltd (HVN.AX)
- +2.83% - Premier Investments Ltd (PMV.AX)
- +2.54% - Virgin Money UK PLC (VUK.AX)
- ·-16.1% - Megaport Ltd (MP1.AX)
- ·-9.7% - Novonix Ltd (NVX.AX)
- ·-6.8% - Allkem Ltd (AKE.AX)
Up Next (Times in AEDT)
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