In the final two months of last year, market players were convinced that the disinflation narrative is going to prevail and that major central banks are going to cut rates much sooner than anticipated. That resulted in aggressive pricing for rate cuts, which saw the dollar sink heavily alongside Treasury yields while risk trades ripped higher.

It settled on that note but on the first day of the new year, we’re running it all back again in reverse mode. The dollar is gaining solid ground now in European trading while stocks are seeing their opening day optimism get dashed quite badly.

EUR/USD is down 0.7% to 1.0970 while USD/CHF is up 1.1% on the day to 0.8501 currently. This comes as 10-year Treasury yields are holding higher by nearly 9 bps to 3.951%. As such, USD/JPY is also keeping in a solid spot as it is up 0.7% to 141.80 on the day.

It is just one of those things that tells you that if you’re thinking 2024 is going to be as straightforward as what markets have been saying at the end of last year, it certainly isn’t going to progress that smoothly. And that’s a big lesson that we already learned last year. Are we in for a repeat in 2024?

This article was written by Justin Low at www.forexlive.com.

There was so much promise and hope for equities coming into the new year but we’re seeing all of that get dashed on opening day as the mood turns sour. US futures were little changed and marginally higher to start the session but are now down all the way amid a steep drop in the past hour or so.

S&P 500 futures are now down 0.7% with Nasdaq futures down 1.0% and Dow futures down 0.5% currently. That has also seen European indices erase their early gains as well with the Eurostoxx down 0.4%, DAX down 0.3% and CAC 40 down 0.4% on the day.

It is still early on but all of this is helping to see the dollar firm further across the board in a run against the supposed consensus outlook for 2024.

This article was written by Justin Low at www.forexlive.com.

Last week, we saw a bit of a Christmas rally in the
Dow Jones, although some of the gains got erased in the final couple of days.
The market is all-in on the soft-landing trade with the Fed expected to cut
interest rates soon, the labour market coming into better balance and the
inflation rate on track to reach the 2% target by the end of the year. It’s
hard for the bears to fight the current positive sentiment, especially without
significant bearish catalysts, but such crowded trades are generally liable to
fast unwinding in case the prevailing narrative proves to be wrong, so the bulls
should be extra careful going forward.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones continues
to print new all-time highs amid positive risk sentiment and the support from
the recent Fed’s pivot. From a risk management perspective, the buyers would be
better off waiting for a pullback into the most recent swing low around the
37070 level where they will also find the red 21 moving average for confluence.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the
trendline has been defining the strong uptrend since last October. Last week
though, the price broke below the trendline, and
we can also notice that the latest leg higher diverged with
the MACD. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. This might be a confirmation that a deeper pullback into the 37070
level could be in the cards.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and the divergence with the MACD. The sellers should
pile in around these levels with a defined risk above the high to target a drop
into the 37070 level. The buyers, on the other hand, will likely lean on the
37070 level with a defined risk below it to position for a rally into another
all-time high.

Upcoming Events

This week is full of key economic data which will
culminate with the NFP report on Friday. We begin tomorrow with the ISM
Manufacturing PMI and Job Openings and given the recent trends there could be
room for disappointment. Later in the day, we will get the release of the FOMC
Minutes, but it’s not expected to be market-moving given that it’s three weeks
old data. On Thursday, we will have another slate of US labour market data with
the release of the US ADP and Jobless Claims figures. Finally, on Friday, we conclude
the week with the NFP report and the ISM Services PMI.

This article was written by FL Contributors at www.forexlive.com.

It is only the Australian dollar that is sitting higher than the US dollar in trading so far today. Traders adopted a more risk-on approach early on but we have seen equities pare most of that gains in European morning trade as flows are slowly trickling back in to start the new year.

USD/JPY is up 0.5% to 141.60 while USD/CHF is up 0.7% to 0.8473 currently. The former is still shying away from a test of the 140.00 mark while the latter looks to be holding above the 0.8400 level after attempted breaks below that in thin trading last week.

Meanwhile, EUR/USD is down 0.3% to retest the 1.1000 level while GBP/USD is down 0.2% to 1.2700 after some back and forth action with the high earlier touching 1.2760. It is only AUD/USD that is up 0.1% to 0.6818 but off earlier highs in Asia of 0.6839 on the day.

In other markets, gold is starting off January on a solid note with price up 0.6% to $2,075 while oil is also up 2.5% to $73.43 at the moment. In the bond market, yields are higher with 10-year Treasury yields up over 7 bps to 3.935%. It is but a small bump higher as the downtrend since November remains intact for the most part.

In the equities space, European stocks were off to the races at the open but have cooled a fair bit with the Eurostoxx now up just 0.2%, DAX up 0.5%, and CAC 40 up 0.2% on the day.

It is a time where traders are settling in and getting back their groove, with flows returning after the holiday period. So, be mindful of looking too much into the trends we’re seeing. As a side note, just be wary that we also do have US non-farm payrolls on Friday to work through this week.

This article was written by Justin Low at www.forexlive.com.

Last week, we saw a bit of a Christmas rally in the
S&P 500, although all the gains got erased in the final couple of days. The
market is all-in on the soft-landing trade with the Fed expected to cut
interest rates soon, the labour market coming into better balance and the
inflation rate on track to reach the 2% target by the end of the year. It’s
hard for the bears to fight the current positive sentiment, especially without
significant bearish catalysts, but such crowded trades are generally liable to
fast unwinding in case the prevailing narrative proves to be wrong, so the
bulls should be extra careful going forward.

S&P 500 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the S&P 500
is now roughly 1% away from the all-time high. This is truly incredible if we
think that it happened amid many headwinds like the second most aggressive
tightening in history and geopolitical attritions. From a risk management
perspective, the buyers would be better off waiting for a pullback into the
recent swing low around the 4700 level where we can also find the red 21 moving average for confluence.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the
price has been trading inside a rising channel with the latest leg higher diverging with
the MACD. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we should see a pullback into the lower bound of the
channel where the buyers will look to lean onto to position for a rally into
new all-time highs. A break below the channel and the 4700 level would
invalidate the bullish setup and likely trigger a selloff into the 4548 level.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the recent fall erasing all the gains
from the Christmas rally. The buyers might want to split their position in half
as the price could bounce either on the lower bound of the channel or the 4700
level, where we have also the 38.2% Fibonacci
retracement level for confluence. The sellers, on the
other hand, will want to see the price breaking below the 4700 level to
position for a drop into the 4548 level.

Upcoming Events

This week is full of key economic data which will
culminate with the NFP report on Friday. We begin tomorrow with the ISM
Manufacturing PMI and Job Openings and given the recent trends there could be
room for disappointment. Later in the day, we will get the release of the FOMC
Minutes, but it’s not expected to be market-moving given that it’s three weeks
old data. On Thursday, we will have another slate of US labour market data with
the release of the US ADP and Jobless Claims figures. Finally, on Friday, we conclude
the week with the NFP report and the ISM Services PMI.

This article was written by FL Contributors at www.forexlive.com.