Asia Pacific Market Open Talking Points
- British Pound and New Zealand Dollars climbed. Former enjoyed Brexit news, latter rallied on CPI
- S&P 500 recovered after risk-aversion dominated US markets on shutdown news. USD depreciated
- AUD/USD may fall as market mood sours in Asia, jobs data misses expectations. Eyes chart support
See our study on the history of trade wars to learn how it might influence financial markets!
The British Pound and New Zealand Dollar were some of the best performing majors on Wednesday. Sterling continued rallying amid ebbing ‘No-Deal’ Brexit bets despite UK Prime Minister Theresa May leaving the door open to one. Meanwhile, the Kiwi Dollar enjoyed fading expectations of an RBNZ rate cut this year after a better-than-expected local inflation report.
For pro-risk currencies such as the Australian Dollar, the US trading session offered little fuel to extend their gains. White House Economic Adviser Kevin Hassett spoke and warned the continuation of the government shutdown could result in near-zero growth. After gapping higher, the S&P 500 traded lower as domestic government bonds rallied. After a slight rally later, the index closed +0.22%.
This signaled a flight-to-safety as risk capital flowed into haven assets. The US Dollar, which tends to benefit in this scenario, failed to capitalize on gains and ended the day cautiously lower. Falling yields alongside a fading Fed rate hike bets may have been a more prominent influence. Meanwhile the anti-risk Japanese Yen still ended the day lower, perhaps due to the Bank of Japan lowering inflation expectations.
Earlier in the day, US President Donald Trump warned China that tariffs could increase should a trade deal not be reached. As the markets then transitioned into Thursday’s session, the White House requested data on if the shutdown prolongs into March. This showed that it may continue for the time being. As such, these developments may adversely impact Asia Pacific benchmark stock indexes as markets turn risk-averse.
This could boost the Japanese Yen at the expense of the sentiment-linked Australian and New Zealand Dollars. Australia’s December jobs report will also cross the wires. Data out of the country has been tending to underperform relative to economists’ expectations as of late. Such an outcome could increase expectations of an RBA rate cut as AUD/USD falls. Overnight index swaps are pricing in a 34% chance of a cut later this year.
AUD/USD Technical Analysis
The continuation pattern outlined in my weekly Australian Dollar forecast appears to have been broken on the AUD/USD chart below. Typically, a “Pennant” is a continuation pattern. The descent under it may open the door to losses instead. Near-term support is at 0.70211 with resistance around 0.71645.
Each week I conduct a poll to see which Aussie crosses to cover in the technical forecast. You can participate in the poll by following me on twitter @ddubrovskyFX as well as to see timely updates on the Aussie Dollar.
AUD/USD Daily Chart
Chart created in TradingView
US Trading Session
Asia Pacific Trading Session
** All times listed in GMT. See the full economic calendar here
FX Trading Resources
— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
Traders Net-Short Are 63.3% Higher from Last Week
TRADERS REMAIN NET-SHORT
US 500: Retail trader data shows 24.6% of traders are net-long with the ratio of traders short to long at 3.07 to 1. In fact, traders have remained net-short since Jan 07 when US 500 traded near 2473.53; price has moved 11.9% higher since then. The number of traders net-long is 1.7% higher than yesterday and 1.6% lower from last week, while the number of traders net-short is 5.2% higher than yesterday and 63.3% higher from last week.
For more in-depth analysis, check out the Q1 2019 Forecast for Equities
S&P 500 SUGGESTS STRONG BULLISH BIAS
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger US 500-bullish contrarian trading bias.
— Written by Nancy Pakbaz, CFA, DailyFX Research
Follow Nancy on Twitter @NancyPakbazFX
On to the Next Big Levels of Resistance
S&P 500/Dow Jones/Nasdaq 100 Technical Highlights:
- S&P 500 nearing 2800-area, several swing-highs from last year
- Dow Jones 26k-ish stands between it and record highs
- Nasdaq 100 trading around resistance already
Check out the forecasts for Global Stock Indices and other markets on the Trading Guides page.
S&P 500 nearing 2800-area, several swing-highs from last year
The S&P 500 is continuing to show impressive strength since its v-bottom began the day after Christmas, with it having a few points along the way where it could have been stopped in its tracks. But it wasn’t, and this has levels prior to the December swoon in view. The area surrounding 2800 is a big one.
From 2800 up to 2817 there were three peaks created from failed rallies, a logical area, with the rally having come this far, to look for stocks to weaken from. Watching price action will be key, as always, but especially around the levels just ahead.
While resistance looks likely to get tested soon, the upward channel structure over the past month will keep stocks pointed higher for as long as it holds. If the S&P is rejected off resistance, to further bolster the notion of a sizable retracement we’ll need to see the underside parallel undermined.
For now, the top-side must be respected, but the time for material weakness may be nearing…
Stocks are rallying, but will it last in the long-term? Find out where our analysts see stocks headed in the Global Equities Forecast.
S&P 500 Daily Chart (2800/817 big spot)
Dow Jones 26k-ish stands between it and record highs
The Dow is nearing the 26k-area, a spot which is basically the equivalent of what 2800 is to the S&P 500. The zone runs up to near 26300. The focus is primarily on the S&P right now as it is the broader index, but depending on how price action plays out, the Dow may be the better index to short at some point if it shows relative weakness to the broader market.
Dow Daily Chart (26k-ish stands in the way)
Nasdaq 100 trading around resistance already
The Nasdaq 100 continues to lag behind, which is something to continue monitor given it was the bull-market leader with its leading group of stocks – FAANG – dominating price action and sentiment. The NDX is trading around the 200-day and near late-year swing highs equivalent to the ones discussed with regard to the S&P 500 and Dow. So far, relative weakness is making the 100 the preferred fade if the S&P finds material selling off resistance surrounding 2800/17.
Nasdaq 100 Daily Chart (trading around resistance)
To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.
Tools for Forex & CFD Traders
Whether you are a beginning or experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
Aussie Dollar Falls on RBA Minutes, US-China Trade Talks Eyed
TALKING POINTS – AUSSIE DOLLAR, RBA MINUTES, ZEW, TRADE WARS, CHINA
- Aussie Dollar, commodity bloc FX down on downbeat RBA meeting minutes
- Germany’s ZEW survey may compound worries about slowing global growth
- Trade wars in focus on US-China negotiations, fears of US auto tariff hike
The sentiment-linked Australian, Canadian and New Zealand Dollars weakened in otherwise quiet Asia Pacific trade. The move appeared to be inspired by an ominous tone in minutes from February’s RBA policy meeting. Meanwhile, the US Dollar corrected gently higher.
RBA officials cited “significant uncertainties”, noting that trade tensions and cooling domestic demand have increased negative knock-on risks from China. They added that consumption may fall if domestic house prices fall much further. They suffered the worst drop since 1983 in the three months through January.
TRADE WAR DEVELOPMENTS, GERMAN ZEW DATA MENACE MARKETS
Looking ahead, Germany’s ZEW survey of analyst sentiment may compound the downbeat mood, especially if it echoes the disappointing trend in regional data outcomes since September. A small improvement in the forward-looking Expectations index is nevertheless expected to keep it within a hair of six-year lows.
The tone of US-China trade negotiations may also be formative as a delegation from Beijing arrives in the US for continued talks. Both sides painted a rosy picture earlier in the week, but the Trump administration may be preparing a spoiler as the President ponders raising auto import tariffs.
What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!
ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
** All times listed in GMT. See the full economic calendar here.
FX TRADING RESOURCES
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
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