Category: Technical analysis

  • Japanese yen eyes wage data

    Japanese yen eyes wage data


    The yen has edged higher on Wednesday. In the European session, USD/JPY is trading at 158.33, up 0.19% on the day.

    Japan’s consumer confidence for December data showed a slight decline, falling to 36.2 from 36.4 in November. This missed the market estimate of 36.4 as consumers remain in a pessimistic mood about economic conditions.

    Japan’s wage growth expected to rise

    Japan will release wage growth early on Thursday and Bank of Japan policy makers will be watching carefully. The market estimate for November stands at 2.7%, up from 2.6% a month earlier. Governor Ueda has repeatedly said that he won’t raise rates before wage growth approaches a level consistent with  2% inflation. Ueda has been mum about a time frame and the BoJ is hesitant to telegraph its rate plans ahead of time, in order to ward off yen speculators. This leaves investors with a great deal of uncertainty with  regard to the timing of a rate hike. The BoJ meets next on Jan. 23-24 and could announce a rate hike, or remain on the sidelines until March or even later.

    The BoJ is also concerned about the yen’s rapid descent. The Japanese currency plunged 10.3% against the dollar in 2024 and could face further headwinds, including an incoming Trump administration that has pledged trade tariffs. The government intervened in the currency markets last July after the yen fell to 160 against the dollar and the yen is closing in on that level.

    The US posted strong data on Tuesday. The ISM Services PMI rose to 54.1 in December, up from 52.1 and above the market estimate of 53.3. JOLT Job Openings jumped to 8.09 million in November and 7.8 million in October. The market is looking ahead to Friday’s nonfarm payrolls, which is expected to drop to 154 thousand, compared to 227 thousand in November.

    USD/JPY Technical

    • USD/JPY tested support at 157.96 earlier. Next, there is support at 157.49
    • There is resistance at 158.54 and 159.01

    Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.





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  • Hang Seng Index: Transforming into a medium-term bearish trend despite improving Services PMI from China


    • Sentiment remains fragile in China and Hong Kong stock market even China services activities have improved in December.
    • Weak market breadth and a persistent bearish trend of the Chinese yuan since November has added to more woes to the Hang Seng Index.
    • Watch the 19,700/20,130 key medium-term resistance on the Hang Seng Index.

    This is a follow-up analysis of our prior report, “Hang Seng Index: Medium-term bullish trend in jeopardy after China stimulus disappoints” dated 12 November 2024. Click here for a recap.

    Since our last publication, the Hong Kong benchmark stock indices (a proxy for international investors and traders to get exposure into China equities) have wobbled where market participants have lost patient over China’s top policy makers’ rhetoric of the “yet to materialise” forceful fiscal stimulus measures to negate the ongoing deflationary spiral in the Chinese economy.

    The Hang Seng Index has broken below its 19,700 key medium-term support and shed 5% to print an intraday low of 19,111 at this time of the writing.

    Start of the start of the new year, China and Hong Kong bench stock indices are the worst performers against the rest of the world as both of them recorded losses of 2.22% and 2.58% respectively despite services activities have started to show signs of growth in December as indicated by the latest the official NBS non-manufacturing PMI and privately complied Caixin services PMI data.

    Weak market breadth

    Fig 1: Major stock indices percentage of component stocks above 200-day MA as of 7 Jan 2025 (Source: MacroMicro, click to enlarge chart)

    Sentiment has remained fragile as the number of component stocks of the two key benchmark stock indices; China’s CSI 300 and Hong Kong’s Hang Seng Index that are trading above their respective long-term 200-day moving averages have declined steadily since November 2024.

    The percentage of CSI 300 component stocks trading above their respective 200-day moving averages have slipped to 56% in January from 79% previously recorded in November, and the Hang Seng Index also showed a similar dire fate where the percentage of its component stocks declined to 54% currently from 64% in November (see Fig 1).

    A persistent weak yuan has more negative impact on China and Hong Kong stock markets

    Fig 2: USD/CNH major trend with HSCEI, HSI & CSI 300 as of 8 Jan 2025 (Source: TradingView, click to enlarge chart)

    Since the outcome of the US presidential election on 6 November, the offshore Chinese yuan has depreciated by 3.7% against the US dollar to a two-year low where the USD/CNH exchange rate its now coming close to a major swing high of 7.3750 printed on 25 October 2022.

    China policy makers have “deliberately” allow the yuan to weaken to offset the potential incoming higher trade tariffs from US President-elect Trump’s hawkish trade policy towards US major trading partners that includes China where he has proposed to implement 60% additional tariffs on China’s exports to the US.

    Even though, a weaker yuan on a trade weighed basis may allow China to maintain its share of exports but it may create a negative feedback loop into the stock markets of China and Hong Kong as hot capital flight can materialised. Further sparked by a potential regional currency war where other Asian trading hubs such as South Korea, Singapore, and Taiwan may be forced to weaken their respective domestic currencies to maintain export competitiveness (see Fig 2).

    Bearish momentum in Hang Seng Index

    Fig 3: Hang Seng Index medium-term trend as of 8 Jan 2025 (Source: TradingView, click to enlarge chart)

    The Hang Seng Index has failed to reintegrate above its 50-day moving average and traded below it since the start of 2025.

    In addition, the daily RSI momentum indicator has continued to exhibit bearish elements where it printed series of lower highs below the 50 level and has not reached its oversold region.

    These observations suggest that bearish momentum is still intact. Key medium-term pivotal resistance at 19,700/20,130 and a break below 18,430/17,990 (also the 200-day moving average) may trigger a deeper corrective decline sequence to expose the next medium-term support at 16,610 in the first step (see Fig 3).

    On the other hand, a clearance above 20,130 negates the bearish tone to revisit the next medium-term resistances at 21,420 and 22,690.

    Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.





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  • SPX & Nasdaq 100 React to Strong US Data: Rate Cut Outlook Shifts


    • Stronger-than-expected US economic data (JOLTs job openings and ISM Services Index) weigh on US Indices.
    • Markets exhibited sensitivity to monetary policy expectations and potential volatility, with sector performance varying.
    • Technical analysis of the S&P 500 suggests a range-bound market with key support and resistance levels identified.
    • Upcoming non-farm payrolls and Fed meeting minutes releases are expected to further influence market volatility.

    Most Read: Gold (XAU/USD) Price Outlook: Bulls to Take Charge? US Services PMI Ahead

    US Indices and stocks are on course to end two consecutive days of gains following a batch of strong US data. The data fueled speculation that any potential rate cuts in 2025 would come later in the year, evidenced by the fact that traders no longer fully price in a Fed rate cut before July.

    US ISM Services and JOLTs Data Smash Estimates

    The US Labor Department reported 8.098 million job openings in November, higher than the 7.7 million economists surveyed by Reuters had expected.

    Additionally, an ISM survey showed that services activity in December remained strong with a reading of 54.1, beating the expected 53.3 and improving from the previous month.

    The robust data has added to expectations around rate cuts from the Federal Reserve this year.

    Markets Remain Sensitive to Monetary Policy Expectations

    If today’s data confirmed anything it is that markets will remain sensitive to changes in monetary policy expectations moving forward. There is also the belief that extremely high valuations have left markets and US stocks more sensitive to volatility shocks. 

    However despite these high valuations and a stellar 2024, the election of Donald Trump as well as historical data appear to support further gains. 

    Bulls rejoice when the S&P 500 posts a 20% annual return. Historically, the following year has seen positive returns 81% of the time, with an average gain of 10.6% since 1950.

    Source: Isabelnet, Carson Research (click to enlarge)

    Winners and Losers

    Looking at the sector performance today as well as individual winners and losers thus far, healthcare stocks saw a 1% rise, leading gains in the S&P 500 sectors. Vaccine makers like Moderna, Novavax, and Pfizer jumped due to rising worries about bird flu.

    Tesla shares fell 2.9% after BofA Global Research downgraded the stock from “buy” to “neutral,” which also impacted the consumer discretionary sector.

    Micron Technology rose 5% following comments from Nvidia’s CEO, Jensen Huang, that the company is supplying memory for Nvidia’s new GeForce RTX 50 Blackwell gaming chips.

    Big banks performed well, with Citigroup increasing by 0.3% after positive coverage from Truist Securities, and Bank of America gaining 0.6% thanks to favorable ratings from several analysts.

    Source: LSEG (click to enlarge)

    The Week Ahead

    This week, the main highlights are the important non-farm payrolls report and the release of the Fed’s December meeting minutes due on Wednesday and Friday respectively. 

    Judging by today’s reaction, volatility seems to be a given. The bigger question right now is whether any moves to the downside remain sustainable or are they just opportunities for potential longs to get involved?

    For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

    Technical Analysis 

    S&P 500

    From a technical standpoint, the S&P 500 remains in somewhat of a range having broken the previous bullish structure that was in play.

    The overall price action picture does remain bearish following the daily candle close on December 18, 2024. Since then the Index has printed a lower high but failed to print a lower low.

    This could be seen as a sign of the bullish pressure and overall buoyant mood toward US stocks in general. 

    More recently the index has failed to break the 6025 swing high or the 5828 swing low, keeping it confined in a +- 100 point range. 

    A break of the swing high at 6025 could facilitate a move toward the all time just above and potentially the next key area on the upside around 6170. (based on a triangle pattern breakout yet to be fulfilled). 

    A continuation of today’s bearish move may find support at 5910 and 5828 which rests just above the 100-day MA, making this a key area of support. 

    A break of this key support level could pave the way for a deeper retracement toward the 5700 swing low from October 31, 2024.

    S&P 500 Daily Chart, January 7, 2025

    Source: TradingView (click to enlarge) 

    Support

    Resistance

    Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

    Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.





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