• Should not move towards confrontation because of differences
• Artificial decoupling is moving against the tide and losses outweigh gains
• The need for cooperation is not weakened, but stronger at this time
• No conflict between China and US is the most important peace dividend for the world
• Both sides should make use of foreign affairs, economy, finance to bolster relations

All this talk is mostly still just for show as both sides are not going to actually give in to make any real progress in strengthening ties. A lot of the relationship between the two countries is just for show. And while China has held strong leverage in the past, their recent economic struggles are not making it easy to portray such a strong front. Not only that, the outlook – especially on the demographics front in the next few decades – is one that could see China have to pick their battles wisely.

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

European indices are down roughly 1% now as stocks are struggling to stay afloat once again. The push lower comes as 10-year Treasury yields are at session highs, up 4.7 bps to 4.038% as bond sellers look to validate a break above the 4% mark on the week. US futures are also struggling, gradually moving lower on the day with S&P 500 futures now down 0.3%:

All of this continues to keep the dollar underpinned with commodity currencies struggling at the moment. AUD/USD is down 0.4% to 0.6680 with the weekly drop now nearing 2%. This will mark six straight days of losses for the pair as it falls to a three-week low at the moment.

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

• Prior +2.4%
• Core CPI +3.4% vs +3.5% y/y expected
• Prior +3.6%

Headline annual inflation may show a jump in price pressures but core annual inflation actually eased slightly further in December to 3.4%, down from 3.6% in November. As such, this still reaffirms the ECB’s case to remain in pause mode at least for the time being. However, if price pressures start to become stickier in and around the 3% mark, that may see policymakers struggle to sell any talk of an imminent pivot. So, we’ll see.

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

Yesterday, the S&P 500 remained on the back
foot as the correction that began last week seems to have more room to go. As
of now, the data has been overall positive with the US ISM Manufacturing PMI beating
expectations and US Job Openings missing
forecasts. Moreover, yesterday we got a beat in the US ADP and US Jobless Claims data. If
the data remains positive, we can expect the market to bounce back once the
froth from the aggressive rate cuts expectations gets unwound. Today, is an
important day as we get the release of the US NFP and the US ISM Services PMI.

S&P 500 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the S&P 500
yesterday broke below a key support where we
had the confluence of the
recent swing low and the 21 moving average. This
has opened the door for an even bigger drop into the next support around the
4547 level. The sellers should have even more conviction now while the buyers
will need the price to rise back above the 4700 level to regain some control.

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 but the price eventually broke
not only below the lower bound of the channel but also below the key support
around the 4700 level where we had also the 38.2% Fibonacci
retracement level for confluence. We can also notice
that the latest leg higher diverged with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we got a reversal signal and the target should be
right at the 4547 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 break below the 4700 support.
The sellers should keep piling in around these levels with the lower high
around the 4726 level as the last line of defence. In fact, if the price breaks
above the 4726 level, the recent downtrend would be broken and the buyers
should regain control.

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

The trading year for Japan officially began today after an extended new year’s holiday, and we are seeing the yen drop further. It seems like domestic banks are fueling the fire in saying that the supposed impossible task by the BOJ to perform an early policy pivot, has now just became even more impossible. In referring to the Ishikawa earthquake, this is what they have to say:

„Although there must be quite a few foreign investors who have been anticipating the end of negative rates in January, under these circumstances, the BOJ will almost certainly not move this month. Should negative rates not be lifted in January, ending it in the first half of 2024 will also become doubtful.“ — Mizuho Bank

„The January move seems even more impossible. The earthquake is likely to depress production activity while the government may have to set up a supplementary budget for recovery measures.“ — Daiwa Securities, also revising forecast for exit from negative rates to April from January previously

„Any lingering expectation for an end to negative rates in January is completely shattered.“ — SMBC Nikko Securities

Meanwhile, Morgan Stanley MUFG Securities also revised its call for a change to the BOJ rate decision this month and sees the central bank leaving policy unchanged instead. Adding that any exit from negative rates will only come on April at the earliest. Besides that, Nomura Holdings also chimes in by saying that the earthquake may delay the BOJ’s plans to exit from negative rates in January although it also depends on the extent of the economic damage from the incident.

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

Copper has been on a
retreat since last week as the US Dollar strength coupled with year-end flows
might have weighed a bit on the market. The sentiment around the Chinese
economy remains weak and the recent data from the US doesn’t look good either.
In fact, yesterday the inside data of the US ISM Manufacturing PMI report painting a weaker picture
compared to the headline beat and the upbeat comments. Moreover, the US Job Openings missed expectations with the hiring
rate now below the pre-pandemic levels which could be a bad omen.

Copper Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Copper is
bouncing near a key trendline where we
can also find the confluence with the
Fibonacci retracement levels and the
red 21 moving average. This is
where the buyers are stepping in with a defined risk below the trendline to
position for a rally into the 4.03 resistance.

Copper Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
bounce around the trendline as we have a strong support zone with many
technical confluences. The sellers will want to see the price breaking below
the trendline to invalidate the bullish setup and position for a drop back into
the 3.55 support.

Copper Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD
falling into the key trendline. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. We can also notice that the recent
downtrend got broken after the price breached the trendline. The buyers should
have even more conviction for a rally now while the sellers will need to wait
for the price to break below the key trendline.

Upcoming Events

Today we will have another slate of US labour market
data with the release of the US ADP and Jobless Claims figures. Tomorrow, we
conclude the week with the NFP report and the ISM Services PMI. Weak data is
likely to weigh on Copper due to lower future demand fears while strong data
should keep the market supported.

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

There seems to be a bit of pushing and pulling in markets at the moment, and I would say that something’s gotta give in due time. The dollar is mostly lower across the board, with it only gaining against the Japanese yen today. That comes as Treasury yields are pushing back higher on the session with 10-year yields now up 4.3 bps to near 3.95%.

Elsewhere, the dollar is down against the European currencies as noted here and also down just slightly against the commodity currencies. USD/CAD is down 0.3% to 1.3318 while AUD/USD is up 0.2% to 0.6740, though the latter has large option expiries at 0.6755 to contend with as well.

It is a bit of a mixed bag as equities are slightly higher but bond yields as well, then you couple that with the action in major currencies above. It seems like traders are trying to find some answers on the week but for the day itself, there are some conflicting convictions. I reckon it’s going to be all about where the data takes us in the closing stages this week it would seem.

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

While the UK economy arguably ended the year on a high, the Eurozone economy is still suffering a downturn even with the positive revisions to the French and German data earlier. But amid a steadier market mood today, the euro and pound are able to push a little higher against the dollar now.

EUR/USD is up 0.4% to 1.0960 while GBP/USD is also up 0.4% to 1.2710 on the day, keeping tabs with the gains in the commodity currencies. The greenback suffered a setback yesterday, with 10-year Treasury yields failing to hold a push at 4% and has since struggled to recapture the momentum from earlier this week.

After two days of traders seemingly correcting the moves in November and December, we might be in for a return to the norm today if risk trades can hold up. European stocks are up slightly by around 0.3% to 0.7% while S&P 500 futures are marginally higher, up 0.2% on the day currently.

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

Yesterday, the Nasdaq Composite extended the fall
with all the gains from the Fed pivot now basically erased. The economic data
didn’t help the market either with the inside data in the US ISM Manufacturing PMI painting
a weaker picture than the headline beat and the US Job Openings coming
in lower than expected with the hiring rate now below the pre-pandemic levels. There
are still key data to be released this week, but the new year is starting on a
negative note.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq Composite
dropped below the swing low around the 14770 level and the red 21 moving average. This
has opened the door for a bigger fall into the 14050 level. The sellers are
likely to keep piling in, especially if the data continues to disappoint, while
the buyers will need the price to rise back above the 14770 level to get back
some conviction.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the Nasdaq
Composite has been trading inside a rising channel with the lower bound of the
channel being a strong support zone
given that we had also the confluence with the
swing low and the 38.2% Fibonacci retracement level.
This support zone got breached with more bearish bets piling in to target the
14050 level.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and the support zone around the 14770 level. From
a risk management perspective, a pullback into the support now turned
resistance will offer a better risk to reward setup
with the sellers finding also the red 21 moving average for confluence.

Upcoming
Events

Today we will have another slate of US labour market
data with the release of the US ADP and Jobless Claims figures. Tomorrow, we
conclude the week with the NFP report and the ISM Services PMI.

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

• Prior -1.5%
• Market index 173.5 vs 191.6 prior
• Purchase index 140.7 vs 148.7 prior
• Refinance index 358.2 vs 437.6 prior
• 30-year mortgage rate 6.76% vs 6.83% prior

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