US Stockmarkets turn red

The USD edged lower yesterday against its counterparts yesterday, as financial data tended to be adverse for the USD. It was characteristic that the retail sales growth rate dived deeper into the negatives than expected as did the industrial production growth rate, while the PPI rates slowed down more than expected, all for the month of December. We consider the financial data released yesterday as a result of the Fed’s monetary policy tightening, which are signaling that economic activity is contracting, the demand side of the economy is weakening, and inflationary pressures are cooling off in the US economy. On the other hand, we have to note that the USD may have gotten also some support from safe-haven inflows, keeping it from tumbling, as the earnings report releases of US companies continued to disappoint, increasing market worries for the US economy. It was characteristic that all three major US stock market indexes, the Dow Jones, Nasdaq and the S&P 500 were in the reds for the day providing a more decisive bearish signal to the markets in comparison to the mixed signals of the past two days.

Should the market worries for the outlook of the US economy intensify we may see US stock markets dropping even further, while among the earnings releases for the day, we note Netflix (#NFLX) and Procter and Gamble (#PG). On the monetary front, we are getting some mixed signals and it was characteristic that Cleveland Fed President Mester yesterday stated that there is evidence that interest rate hikes have started to lower inflationary pressures finally. The interesting element of the comments come from the fact that Mester was considered to be among the hawks in the central bank supporting a more aggressive stance. On the flip side, St. Louis fed President Bullard stated that Fed’s policymakers should maintain a rapid interest rate hike pace and also stated that he would be open to the idea of another 50-basis points rate hike, something that is in contrast to market expectations for a 25 basis points rate hike in the bank’s next meeting. Overall, we seem to be at crossroads for the market sentiment and a more cautious approach seems to be forming.

USD/JPY tumbled breaking the 128.60 (R1) support line, now turned to resistance. We tend to see some stabilization efforts for the pair, yet the bears may still be at work here. Should a selling interest be expressed by the market, we may see the pair breaking the 126.50 (S1) support line on its journey southwards. On the flip side should the pair find fresh buying orders along its path, we may see USD/JPY breaking the 128.60 (R1) resistance line and aim for the 131.40 (R2) resistance level.

Nasdaq dropped yesterday breaking the 11490 (R1) support line, now turned to resistance. There was an interruption in the bullish movement of the index, hence we switch our bullish outlook in favor of a sideways bias for the time being. Should the drop be extended we may see Nasdaq taking aim of the 10955 (S1) support line, while should yesterday’s drop prove to be a mere correction and the bulls take over again we may see Nasdaq breaking the 11490 (R1) resistance line and aim for the 12100 (R2) resistance base.

Other highlights for the day:

Today in the European session, we note on the monetary front the interest rate decisions from Norway of Norgesbank and from Turkey of CBT, while ECB President Christine Lagarde is scheduled to speak. In the American session we get from the US the number of Building Permits and Housing starts for December, the weekly initial jobless claims figure, January’s Philly Fed Business index and from Canada the wholesale trade growth rate for November, while oil traders are to keep an eye out for the weekly EIA crude oil inventories figure. Also, please note that Boston Fed President Collins, ECB board member Schnabel and Fed Vice Chair Brainard are scheduled to speak. During tomorrow’s Asian session, we note the release of Japan’s CPI rates for December, while NY Fed President Williams is scheduled to speak.    

USD/JPY H4 Chart

Support: 126.50 (S1), 124.00 (S2), 121.25 (S3)

Resistance: 128.50 (R1), 131.40 (R2), 134.80 (R3)

US 100 Cash Daily

Support: 10955 (S1), 10385 (S2), 9750 (S3)

Resistance: 11490 (R1), 12100 (R2), 12580 (R3)

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