Asian Open Appetite for Risk is Back on The Menu

Markets exhibited classic risk-on patterns overnight as traders absorbed the FOMC meeting and therefore the latest round of economic data.
Indices, commodities and commodity currencies moved higher in tandem, and yields also rose (with the long end of the curve outperforming) following the Fed’s hawkish meeting. And this is often despite flash PMI data hitting a 12-month low within the US and jobless claims rising for a second week. Although a positive on the vaccination front is that the CDC (Centre for Disease Control and Prevention) voted to recommend providing booster shots for 65 and above, and high risk adults with medical conditions.

The Flash Markit PMI composite read for the US slipped to 54.5 from 55.4, missing estimates and sitting at its lowest level since September 2012 as supply constraints remained whilst demand softened. Higher input costs remained in situ which points to higher levels of inflation, although this had been accounted for in expected average inflation for 2021 within the Fed’s forecasts on Wednesday.

The Dow Jones was the strongest performer, rising 1.5% to a 5-day high. The S&P 500 accelerated above its 200-day eMA for a second day, 9 of its 11 sectors rallied led by energy ad financial stocks. The Nasdaq 100 rose 0.9%.

Japan’s exchanges reopen today after today’s public holiday, and that they have some catching up to try to to . We suspect the Nikkei 225 will now track Wall Street higher and plan to break to a 31-year high.Indices, commodities and commodity currencies moved higher in tandem, and yields also rose (with the long end of the curve outperforming) following the Fed’s hawkish meeting. And this is often despite flash PMI data hitting a 12-month low within the US and jobless claims rising for a second week. Although a positive on the vaccination front is that the CDC (Centre for Disease Control and Prevention) voted to recommend providing booster shots for 65 and above, and high risk adults with medical conditions.

The Flash Markit PMI composite read for the US slipped to 54.5 from 55.4, missing estimates and sitting at its lowest level since September 2012 as supply constraints remained whilst demand softened. Higher input costs remained in situ which points to higher levels of inflation, although this had been accounted for in expected average inflation for 2021 within the Fed’s forecasts on Wednesday.

The Dow Jones was the strongest performer, rising 1.5% to a 5-day high. The S&P 500 accelerated above its 200-day eMA for a second day, 9 of its 11 sectors rallied led by energy ad financial stocks. The Nasdaq 100 rose 0.9%.

Japan’s exchanges reopen today after today’s public holiday, and that they have some catching up to try to to . We suspect the Nikkei 225 will now track Wall Street higher and plan to break to a 31-year high.
Commodity currencies were the clear winner with NZD, CAD and AUD leading the pack with JPY and USD at rock bottom . NZD/JPY was the strongest cross, rising around 1.5% and moving 200% of its ATR (average true range).

In fact, there are impressive moves on all the xxx/JPY pairs. Whilst it paints an upside bias today, it’s questionable on whether similar levels of volatility might be expected. they’ll therefore suit bulls on an intraday bias seeking small continuation patterns, whilst remaining nimble.

The US dollar was caught between a hawkish FOMC meeting and weak economic data. The US dollar index (DXY) did not keep onto FOMC gains and produced a bearish engulfing candle on the daily chart. 93.0 is that the key level for bulls to defend but, given the 2-bar bearish reversal, the bias currently favours an opportunity beneath it. Therefore, 93 is that the pivotal area of interest to ascertain which way momentum moves from its next.

The pound was also stronger following a hawkish BOE meeting. Rising energy prices didn’t see them twiddling my thumbs from hinting at a rate hike, so markets still entertain a possible rise in February. The pound was slightly lower of flat against commodity currencies but made notable ground against the yen, rising 1.2% and erasing over 2 days of losses.

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