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by Darius Anucauskas

US Indices Hit New All-time Highs, Japanese Data Slightly Mixed

Yesterday, the US stock indices re-opened after the Christmas break and hit new all-time highs again. The best performer was Nasdaq, with the Composite index breaking above the psychological 9000 mark. For now, the positivity in the US stock market is driven by optimism surrounded around the “Phase 1” trade deal between China and the US. But as we know from the recent past, whenever there is good news coming out from the negotiations, after that we get some worrying headlines, which bring investors back to reality. So far, we are not getting those type of headlines. This could be due to the festive period and to let the markets enjoy its gains. But something that caught the attention yesterday was the fact that the risk asset – Gold – was on a rise as well. The precious metal was able to pop back above the psychological 1500 barrier, as the last time it was there was on November 5th. Normally, gold is seen as a safe-haven when the stock market is not performing well. But maybe this time, investors are trying to be slightly ahead of the game and not to wait until the equity market reverses south. Such precautions are understandable, given that the US indices keep hitting new highs almost every day lately. It is clear that at some point there will be a correction to the downside, but the only issue here is to try and figure out will it be sooner or later?

Retailers are enjoying this time of the year a lot. Although store sales are not at their best levels, online shopping was able to improve the situation. Also, yesterday’s optimism in the US market was supported by the initial jobless claims, which came out not only better than the previous 235k, but also beating the forecast of 224k. The actual reading was at 222k.

During the Asian morning today, we got some of the Japanese economic indicator readings. The consumer confidence had declined slightly from 100.9 to 100.4, while the Tokyo core and headline CPIs on a YoY basis for the month of December have improved a bit. The core has gone from +0.6% to +0.8% and the headline climbed from +0.8% to +0.9%. The MoM preliminary industrial production figure for November came out -0.9%, which is way better than the previous -4.5%. Before the release, the forecast was already quite optimistic, at -1.4%, but the actual data managed to beat even that. That said, although it is quite a significant rise, still, the number is in the negative territory. The Japanese unemployment is showing healthy signs, as the figure dropped to 2.2% from the previous 2.4%. But the disappointment came from the YoY Japanese retail sales number for the month of November. The actual reading came out at -2.1%, which is much better than the previous -7.0%. But economists and analysts were hoping to see a slightly better number than that, at -1.7%.

The only newsworthy data to keep an eye on the today, are the retail sales figures from Spain and Sweden and the Swiss ZEW Expectations number for December. Later on, we will be getting the US Crude oil inventories, which are expected to have fallen from -1.085M to -1.724M. A fall in the supply of crude oil inventories might imply a rise in oil prices.

S&P 500 – Technical Outlook

The S&P 500 continues to gain as it drifts further north, while trading above a short-term upside support line taken from the low of December 10th. This morning, the cash index managed to hit a new all-time high near the 3248 barrier, which so far is keeping the price lower. Given that the US index is quite overbought, especially on the shorter timeframes, we may see a small move back down. But if the above-discussed upside line continues to hold, this move lower may be classed as a temporary correction before another leg of buying.

As mentioned above, there could be a good chance for a small correction lower, where the price may test the aforementioned upside line again. If it continues to hold, the buyers might take this opportunity and step in again, potentially lifting the index up. We will then aim for today’s high on the cash index, at 3248, a break of which could set the stage for higher areas in the uncharted territory.

If the previously-mentioned upside line breaks and the price falls below the 3231 hurdle, marked by an intraday swing low from yesterday, this may spook the buyers temporarily and allow more bears to join in. We will then aim for the 3220 obstacle, a break of which could test the 3210 zone, which is the high of December 19th. If the selling doesn’t stop there, a further decline might bring the S&P 500 to the 3199 level, marked near the highs of December 17th and 18th.

S&P500 4hour

AUD/JPY – Technical Outlook

The bulls continue to control AUD/JPY, as it keeps on grinding higher. The pair is trading above its short-term upside support line taken from the low of December 10th and yesterday it managed to create a new high for December. Although AUD/JPY might retrace a bit lower, as long as the rate remains above that aforementioned upside line, we will stay positive, at least in the short run.

A small throwback might test the above-mentioned upside line, which if holds, could attract the buyers back into the game. This could help push the rate to the 76.28 hurdle, a break of which might set the stage for a test of the 76.79 level, marked by the low of May 6th and near an intraday swing high of May 13th.

Alternatively, if the aforementioned upside line breaks and the rate slides below the 75.58 zone, marked by the low of December 24th, this could make the bulls worry, as more bears might be joining in. We will then target the 75.21 obstacle, which if broken could open the door for the sellers to drive the pair to the 74.85 level, marked by the low of December 18th.

AUDJPY 4hour


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