USA equity indices; the DJIA and SPX, all displayed whipsawing behavior during the New York trading session, leading many technical analysts to suggest that the equity markets are lately exhibiting the classic indications of reaching the end of their 2017 full year bullish trend. As we enter what’s termed “earnings season” in the USA, several of the FAANG stocks look under pressure, most notably Amazon shares, which fell by circa 4% on Thursday, before reporting its earnings after the close, the NASDAQ index has lost circa 2% this week. Earnings season was touted as the reason that equity markets would continue to print record highs in Q1-2 2018, once Trump’s tax reduction program had been priced in, however, there appears to be nervousness regarding: Apple, Alphabet (Google) and Amazon, as they’re all reporting their annual figures after Thursday’s market close.
Markets for equities also appeared to be spooked by ten year treasury bonds breaching 2.78%, as a consequence of what’s being translated as a hawkish statement from the Fed/FOMC, after the key interest rates was kept at 1.5%, announced at the culmination of their recent two day meeting. Analysts and investors are preparing a scenario of interest rates of circa 2.75% at the end of 2018, finally killing the decade long bubble in the bond market.
Despite the nervousness, the economic calendar news relating to the USA was largely positive; Challenger job losses came in below forecast at -2.5%, initial weekly jobless claims beat forecast at 230k, the ISM manufacturing reading beat forecast by coming in at 59.1 and construction spending beat forecast, coming in at 0.7% for December.
USD experienced mixed fortunes during Thursday’s trading sessions; versus the euro and U.K. pound the USD also fell, but made modest gains of circa 0.2% versus yen. The dollar index fell by circa 0.3%, WTI oil breached the $65 a barrel handle Brent threatened the $70 level, whilst gold rose by circa 0.3%, retaking the critical $1350 an ounce handle, at one stage during the day’s sessions.
Eurozone economic news, in the form of generally positive manufacturing PMIs from: Italy, France, Germany and the E.Z., helped the euro rise versus the majority of its peers, the readings failed to beat forecasts by some distance, however, this early in the year the purchasing managers’ optimism was well received by investors in the euro. EUR/USD rose by as much as circa 0.8% on the day, whilst reclaiming the 1.2500 handle. European equity investors refused to buy into the optimism; all leading indices closed down, DAX by 1.41. %
Sterling experienced gains during Thursday’s sessions, rumors have gathered that the U.K. central bank the BoE will deliver a hawkish policy as they announce their latest base interest rate decision, whilst the consensus of economists polled leans to a view that rates will be held at 0.5%. The governor, Mark Carney, may deliver a forward guidance statement, suggesting a tightening of monetary policy, beginning in the spring months. GBP/USD rose by circa 0.5% on the day, versus yen the U.K. pound rose by circa 0.5%. Whilst manufacturing PMIs were positive for the E.Z. the reading for the U.K. fell sharply, its lowest level since June 2017, coming in at 55.3, missing the forecast of 56.5.
AUD fell versus the majority of its peers after the latest construction figures for Australia published early Tuesday morning, missed the forecast targets by some distance. Building approvals fell by -20% in the month of December, with YoY falling by -5.5%, from an 18.1% rise in November. Import prices rose by 2%, export prices by 2.8% QoQ for the fourth quarter. Investors took this data as evidence that the RBA will refrain from raising the key cash interest rate during their meeting next week. AUD/USD closed out down 0.2%, recovering from an earlier 0.6% loss.
U.S.DOLLAR
USD/JPY traded in a narrow range with a bias to the upside, breaching R1 during the European morning session and the 109.00 handle, and closing out the day up circa 0.3% at 109.46. USD/CHF traded in a wide daily bearish channel, falling through S1, to arrest its fall just before S2, down circa 0.6% at 0.9265. USD/CAD traded in a tight bearish range, falling by circa 0.2% on the day at 1.226.
STERLING
GBP/USD traded in a wide bullish range during the day’s sessions, initially falling through S1, cable recovered to breach R1, then rising through to close out at circa 1.426, up circa 0.5% on the day. GPB/CHF whipsawed during the day, initially rising through R2, to then reverse aggressively and erase the gains, closing out at 1.321, close to flat on the day, with price reaching near to the daily pivot point. Since breaching the 100 DMA (sited at 1.313) to the downside on January 30th, GBP/CHF has recovered strongly.
EURO
EUR/GBP traded in a tight range with a bias to the downside, falling to S1, then reversing direction, ending the day at circa 0.876, flat on the day with price close to the daily PP. EUR/USD rose by approx. 0.6% on the day, after initially dropping through the PP, the currency pair reversed, to reach R2 and close out at circa 1.2508. EUR/CHF traded in an approx. 0.2% range during the day, closing out close on flat near to the daily PP at 1.158.
GOLD
XAU/USD initially fell through the daily PP reaching an intraday low of 1,337, before recovering to reach an intraday high of 1,351, the precious metal ended the day at circa 1,348, up circa 0.3% on the day.
INDICES SNAPSHOT FOR FEBRUARY 1st.
• DJIA closed up 0.14%.
• SPX closed down 0.06%.
• NASDAQ closed down 0.35%.
• FTSE 100 closed down 0.57%.
• DAX closed 1.41%.
• CAC closed down 0.50%.
• EURO STOXX closed down 0.88%
KEY ECONOMIC CALENDAR EVENTS FOR FEBRUARY 2nd.
• GBP. Markit/CIPS UK Construction PMI (JAN).
• EUR. Euro-Zone Producer Price Index (YoY) (DEC).
• USD. Change in Non-farm Payrolls (JAN).
• USD. Unemployment Rate (JAN).
• USD. Factory Orders (DEC).
• USD. Durable Goods Orders (DEC F).
