Jump to content

Fourth straight day of losses for US indices: Natural gas, USD/JPY, GBP/EUR

Recommended Posts

The US equity markets kickstarted the new trading week with their fourth straight day of losses, following the aggressive de-risking process in the aftermath of the recent Fed meeting.

USSource: Bloomberg

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Tuesday 20 December 2022 

Market Recap

The US equity markets kickstarted the new trading week with their fourth straight day of losses (DJIA -0.49%; S&P 500 -0.90%; Nasdaq -1.49%), following the aggressive de-risking process in the aftermath of the recent Federal Reserve (Fed) meeting. Two months of downside surprise in the US inflation readings and signs of a weaker economy are insufficient to sway the Fed’s hawkish views for now, which brought about some unwinding of previous dovish-pivot bets. With the sell-off, market breadth for the S&P 500 has moderated to more neutral levels from previous overbought conditions, while the lean towards defensive sectors continue to reveal some caution in the risk environment. Sentiments may attempt to recover over the coming days as the VIX failed to see much of a significant pick-up in tandem with equities’ weakness overnight, but the overall downward bias could seem to remain.

The lower-than-expected print for NAHB/Wells Fargo Housing Market Index (31 versus 34 forecast) provided the only economic data on the calendar to digest, with the US housing market showing a quicker moderation in response to higher interest rates and lower consumer affordability. Market initial reaction to economic weakness was to the upside on the dovish-pivot story, but gains were proven to be short-lived without the go-ahead from the Fed. US Treasury yields were higher across the board, driving the underperformance in the rate-sensitive Nasdaq. The US dollar index was higher as well, but remained below the key 105.00 level.

On another front, the European Union (EU) has reached an agreed gas price cap of 180 euros per megawatt hour to cushion the impact of its energy crisis, which is higher than the current price of around 109 euros per megawatt hour. The overall effectiveness remains to be seen, but nevertheless, the move aid to remove a key overhang over its previous deadlock situation. US natural gas futures have previously rallied off their December low at the US$5.320 level, but gains were short-lived as prices seem to be heading back towards the key US$5.320 support once more. A break below the level could potentially pave the way towards the US$4.740 level next.


GasSource: IG charts


Asia Open

Asian stocks look set for another downbeat open, with Nikkei +0.21%, ASX -0.74% and KOSPI -0.66% at the time of writing, largely tracking the negative handover from Wall Street overnight. The Nasdaq Golden Dragon China Index closed lower (-0.62%) as well, as reopening optimism is seeing a face-off with virus surges. The Hang Seng Index continues to hang just below its 200-day moving average (MA), but the largely muted moves upon retest of the key MA resistance still suggest some resilience from buyers.

The day ahead will leave the Bank of Japan (BoJ) meeting in focus. While the central bank’s easing stance is expected to remain unchanged at the upcoming meeting once more, any shift in tone to lay the groundwork for an eventual rise in interest rates will be heavily scrutinised. For the USD/JPY, narrower yield differentials on falling US Treasury yields have triggered an 11% retracement from its October 2022 peak, which brought the pair to retest a confluence of its 200-day MA and key 38.2% Fibonacci retracement level. Any downward break of the key 200-day MA support may leave the 132.00 level on watch next.


USD/JPYSource: IG charts


On the watchlist: GBP/EUR remains under pressure from policy outlook divergence

The aftermath of the Bank of England (BoE) and European Central Bank (ECB) meetings was met with a tale of divergence whereby despite similar 50 basis-point (bp) hikes, the ECB’s forward guidance was seen to be far more hawkish. The vote split among BoE policymakers support further downshift to 25 bp moves early next year, while on the contrary, the ECB displayed a tougher policy stance as inflation forecasts are revised higher, quantitative tightening is guided to start from March 2023 and interest rates are guided to stay higher for longer. The policy divergence translates to the GBP/EUR paring back all of its previous month’s gains, with yesterday’s attempt to recover finding downward pressure with a bearish pin bar formation as the moving average convergence/divergence (MACD) heads below zero. Further downside may leave the 1.156 level on watch as a key Fibonacci support, which marks its October and November lows.


GBP/EURSource: IG charts


Monday: DJIA -0.49%; S&P 500 -0.90%; Nasdaq -1.49%, DAX +0.36%, FTSE +0.40%

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 11:53

    Newest Member
    Joined 07/06/23 07:10
  • Posts

    • The US Securities and Exchange Commission (SEC) has sued cryptocurrency platform Coinbase the second lawsuit in two days against a major crypto exchange.  Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Wednesday 07 June 2023  IGTV’s Angeline Ong takes a look at the differences between the SEC’s crackdown on Binance and Coinbase, and why this could be a gamechanger for the crypto industry. (Video Transcript) SEC cracks down on cryptos The crypto crackdown is escalating as the SEC has issued a lawsuit against Coinbase, the second in two days against a major crypto exchange. Now on Monday, the SEC targeted Binance, the world's largest cryptocurrency exchange. The two cases are of a different nature though with the SEC accusing Binance and its CEO, Chang Ping Tao of operating a "web of deception", while with Coinbase, the regulator considers it is operating illegally because it failed to register as an exchange. Now, if successful, these lawsuits could trigger a major change in the crypto world, asserting the SEC's jurisdiction over it. So far, the industry's argument is that tokens do not constitute securities and should not be regulated by the SEC. Coinbase share price chart Just checking in on Coinbase, which is on all-session stock on IG. It fell almost 10% in the previous session.
    • Spotify Inc., Elliott Wave Technical Analysis Spotify Inc., (SPOT:NASDAQ): Daily Chart, 7 June 23, SPOT Stock Market Analysis: We have witness an outstanding up move in Spotify as we rallied over 100% from the bottom at around 70$. It looks like we are looking for a potential top soon as we seem to be having different reasons to believe so.   SPOT Elliott Wave Count: Wave (v) of {v}. SPOT Technical Indicators: Above all averages. SPOT Trading Strategy: Looking for a down move to begin the correction soon.   TradingLounge Analyst: Alessio Barretta Source : Tradinglounge.com get trial here!   Spotify Inc., SPOT: 4-hour Chart, 7 June 23 Spotify Inc., Elliott Wave Technical Analysis SPOT Stock Market Analysis: As you can see we are looking at a potential ending diagonal in wave {v} as we encounter resistance which is visible on the daily chart and I highlighted the area in yellow. We have RSI bearish divergence suggesting we could be due a pullback.   SPOT Elliott Wave count:  Wave (v) of {v}. SPOT Technical Indicators: Above all averages. SPOT Trading Strategy: Looking for a sudden drop to confirm the end of the uptrend. 
    • Stocks in Asia managed to move higher overall, though weakness in Japan was the outlier. A poor performance from China's trade data raised hopes that some form of stimulus might eventually come to pass in the world's second-largest economy, as the slowdown intensifies. Markets remain relatively quiet overall, as the focus shifts to next week's clutch of central bank meetings. Yesterday's more hawkish RBA may give the Bank of Canada cover to raise rates once again, defying general expectations of a pause.   
  • Create New...