Upward Structure Still Intact, but Opportunities Significantly Narrowing

Stocks

Economic

Summary:

After experiencing declines in the past few trading days, the US stock market saw significant volatility during last Friday's trading session. Major indices fluctuated around the opening price, eventually closing slightly higher.

SELL US30

Close Time

CLOSED

37704.50

Entry Price

36308.00

38240.00

42561.92 -90.53 -0.21%

2621.0

Pips

Profit

36308.00

37442.40

Exit Price

37704.50

Entry Price

38240.00

Fundamentals

The US stock market saw a modest rise in last Friday's trading session. The tech-heavy Nasdaq index edged up by 13.77 points, or 0.1%, to 14524, ending a five-day losing streak. The Dow Jones Industrial Average (DJIA) also rose by 25.77 points, or 0.1%, to 37466; the S&P 500 index, after four consecutive trading days of declines, increased by 8.56 points, or 0.2%, to 4697.

Despite the minor gains on that day, major indices experienced declines throughout the first week of the new year. The Nasdaq index dropped by 3.3%, the S&P 500 index declined by 1.5%, and the DJIA fell by 0.6%. As the market retreated, major indices recorded their first weekly decline in ten weeks.

The day's volatility was a response to traders reacting to US economic data releases, including the highly anticipated report from the Department of Labor, which showed stronger-than-expected job growth in December.

Although this data initially raised concerns about the outlook for interest rates, as investors digested the details of the report, positive sentiment prevailed, driving an upward move in the stock market. The report also revealed significant downward revisions to job growth in October and November.

The Labor Department reported a substantial increase of 216,000 jobs in December, well above the market's expected 170,000. Meanwhile, job growth in October and November was downwardly revised to 105,000 and 173,000, respectively, reflecting a net reduction of 71,000 jobs.

Despite two consecutive months of downward revisions to non-farm employment data, this report indicates a robust economic backdrop with the unemployment rate holding steady at 3.7% and hourly wages continuing an unexpected rise, providing strong cushioning for sustained consumer spending. The report does not indicate any imminent threat of an economic downturn, nor does it give the Fed reason to worry about an overheating economy.

However, subsequently, the Institute for Supply Management (ISM) released a report showing a greater-than-expected slowdown in the growth of the US service sector, leading to market volatility.

ISM reported that the December Services PMI declined from November's 52.7 to 50.6. Although a reading above 50 still indicates growth, the market had previously expected the index to dip slightly to 52.6.

This data also caused significant fluctuations in the bond market, with the benchmark 10-year Treasury yield bouncing back and forth near the unchanged line, ultimately closing above 4.0% for the first time in four weeks.

After concluding 2023 with a nine-week winning streak in the weekly chart, the US stock market faced a challenging start in the new year. Notably, the Nasdaq, which performed exceptionally well last year, set a record for its longest losing streak since 2022. Concerns about the escalating tensions in the Middle East, overbought conditions in stocks and bonds, and fears that the Fed may not be able to cut interest rates as quickly as expected are considered reasons behind the selling.

After a period of rebound, the market witnessed some profit-taking, which is not uncommon, and investors are beginning to seriously consider the unfavorable factors they may face. The current investor sentiment is leaning towards the market's normal fluctuations, with a slight inclination towards caution.

Upward Structure Still Intact, but Opportunities Significantly Narrowing_1

Technical Analysis

The Dow Jones Industrial Average (DJIA) recently exhibited a potential structural weakness, with momentum indicators shifting toward the bearish side. The Average Directional Index (ADX) is rapidly approaching the 25 midpoint, indicating the potential end of the recent bullish trend.

Similarly, the Relative Strength Index (RSI) is poised to drop below the 50 midpoint for the first time in two months. More significantly, the stochastic oscillator has finally dropped below the moving average and the overbought zone. This move is often considered a strong bearish signal.

The first support level at 36955 has been identified as a retracement support level, indicating previous buying interest. The second support level at 36043 is considered a retracement support level, increasing its potential as a support level.

On the resistance side, the first resistance level at 37839 is a volatile high resistance level, coinciding with the 161.80% Fibonacci extension level. It will impede further upward movement for the bulls.

Overall, after a significant rally from the October low last year, the DJIA has experienced a correction. With the support of bearish momentum indicators, this correction may gain further traction. In terms of trading strategy, it is recommended to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 37650

Target Price: 36308

Stop Loss: 38240

Valid Until: 2024-01-22 23:55:00

Support: 36955, 37280, 36043

Resistance: 37630, 37737, 37839

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Ukadike Micheal

Forex

Traders' Opinions

Economic

Summary:

The EUR/AUD currency pair has demonstrated resilience by avoiding a descent towards the support level, instead exhibiting an upward trajectory towards a supply zone. The current price action prompts a critical analysis to discern whether this movement signifies the initiation of a bullish resurgence or merely constitutes a reaffirmation of bearish sentiment. Traders are advised to closely monitor price dynamics within this context for informed decision-making in navigating the market.

SELL EURAUD

Close Time

CLOSED

1.65000

Entry Price

1.58500

1.67000

1.66256 +0.00267 +0.16%

124.4

Pips

Loss

1.58500

1.66244

Exit Price

1.65000

Entry Price

1.67000

As the release of the Australian Consumer Price Index (CPI) data approaches, traders and investors are closely monitoring the potential impact on the EUR/AUD forex pair. The upcoming CPI release is expected to provide valuable insights into inflationary pressures in Australia, with significant implications for the Reserve Bank of Australia's (RBA) monetary policy stance and the overall health of the Australian economy. Market participants will scrutinize the CPI figures and assess their potential influence on the exchange rate dynamics between the Euro and the Australian Dollar.

If the Australian CPI data comes in higher than expected, indicating a rise in inflationary pressures, it could lead to expectations of a hawkish stance from the RBA. The prospect of the central bank tightening its monetary policy by raising interest rates could support the Australian Dollar, potentially leading to strength against the Euro. Conversely, if the Australian CPI data comes in lower than expected, signaling subdued inflation, it could lead to expectations of a dovish stance from the RBA. The prospect of the central bank maintaining or lowering interest rates in response to weak inflationary pressures could weigh on the Australian Dollar.

The interpretation of the CPI release and its impact on the EUR/AUD pair will depend on a range of factors, including the magnitude of the deviation from expectations, the underlying components of inflation, and the broader market sentiment. Market participants will closely monitor the reaction of the Australian Dollar to the CPI data, assessing the magnitude and duration of any currency movements. The response of the forex market to the CPI release will provide valuable insights into the prevailing sentiment towards the Australian Dollar and its implications for the EUR/AUD pair. Analyzing the Impact of Australian CPI Data on EUR/AUD Forex Pair Dynamics_1

Analyzing the Impact of Australian CPI Data on EUR/AUD Forex Pair Dynamics_1

EURAUD 4 HOUR CHART

In conclusion, the upcoming release of the Australian CPI data has the potential to significantly impact the exchange rate dynamics between the Euro and the Australian Dollar. Traders and investors will closely monitor the CPI figures and assess their implications for the RBA's monetary policy stance and the broader economic conditions in Australia. The interpretation of the CPI release and its impact on the EUR/AUD pair will shape trading strategies and market sentiment in the forex market.

TRADE RECOMMENDATION

SELL EURAUD

ENTRY: 1.65000

TAKE PROFIT: 1.58500

STOPLOSS: 1.67000

NOTE: wait for the price to confirm the supply zone (show of bearish strength) before entering the sell trade.

Risk Warnings and Disclaimers

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Eva Chen

Forex

Central Bank

Summary:

The AUDUSD weakened by over 0.50% in the intraday session, currently trading at 0.6684. The Reserve Bank of Australia (RBA) remains cautious on interest rate issues, but there is a perceived risk of "excessive expectations" in the market. This could potentially lead to adjustments in early 2024.

SELL AUDUSD

Close Time

CLOSED

0.66999

Entry Price

0.65600

0.67800

0.61948 -0.00204 -0.33%

101.0

Pips

Profit

0.65600

0.65989

Exit Price

0.66999

Entry Price

0.67800