EQUITIES: E-Mini Remains Within a Tight Range, Attention on Support at 6751.50
A strong short-term reversal in EuroStoxx 50 futures has resulted in a breach of both the 20- and 50-day EMAs. This continues to highlight potential for a deeper pullback and Tuesday’s sell-off confirms this threat. Sights are on 5689.00 next, the Dec 18 ‘25 low. On the upside, initial firm resistance is 5956.56, the 50-day EMA ahead of 5999.50, the 20-day EMA. For now, short-term gains would likely be corrective. S&P E-Minis have recovered from their most recent lows. For now, the contract continues to trade inside a range. Attention is on the base of this range at 6751.50, the Feb 6 low. This support has been pierced, a clear break of it would highlight a stronger bear threat. On the upside, a resumption of gains and a breach of 6983.75, the Feb 25 high, would instead refocus attention on key resistance and the range top at 7043.00, the Jan 28 high.
- Japan's NIKKEI closed higher by 342.78 pts or +0.62% at 55620.84 and the TOPIX ended 14.26 pts higher or +0.39% at 3716.93.
- Elsewhere, in China the SHANGHAI closed higher by 15.628 pts or +0.38% at 4124.194 and the HANG SENG ended 435.95 pts higher or +1.72% at 25757.29.
- Across Europe, Germany's DAX trades lower by 21.92 pts or -0.09% at 23793.68, FTSE 100 higher by 8.61 pts or +0.08% at 10422.56, CAC 40 down 9.89 pts or -0.12% at 8035.91 and Euro Stoxx 50 down 15.66 pts or -0.27% at 5767.23.
- Dow Jones mini down 125 pts or -0.26% at 47855, S&P 500 mini down 23 pts or -0.34% at 6812, NASDAQ mini down 101 pts or -0.4% at 24948.75.
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JPY: USDJPY Extends Rebound, BOJ Minutes Stir Hiking Speculation
- USDJPY continues to grind higher on Wednesday, extending the recovery from last week’s lows to 3% in recent trade. The move back above the 50-day EMA, intersecting at 155.75, undermines the recent bear theme and highlights a stronger short-term bull cycle. Price action this morning has bridged the gap to initial resistance at 156.64, the 61.8% retracement of the Jan 14 - 27 bear leg, with 157.72 the next topside level of note.
- The swift recovery has been primarily driven by a more stable backdrop for the dollar following Kevin Warsh’s nomination, while expectations for the LDP securing a majority bring concerns surrounding Japan’s fiscal trajectory back to the fore.
- Going slightly under the radar has been the latest release of the BOJ’s summary of opinions, which were published during Monday’s APAC session and have stirred some speculation surrounding the Bank’s short-term hiking timeline.
- Indeed, HSBC believe the BoJ may prove to be a more reliable lifeline for the JPY in the coming weeks and months. They highlight considerably more “hawkish” comments on the JPY in the January edition when USDJPY was around 158. New innovations included concerns of how a weak yen can lead to wider inequality, how it raises housing prices and an explicit link to the JPY’s depreciation and loose financial conditions.
- Additionally, JP Morgan said the minutes read a tad hawkish, and that with some political stability post-election the BOJ could hike in March, which could also lead to some shift in local flow dynamics.
- Finance Minister Katayama was on the wires again on Tuesday, reiterating the MoF will keep close communication with the US about the currency markets. CIBC believe official warnings could get louder if USDJPY nears 157-158 ahead of Sunday’s vote.
MNI: EUROZONE JAN FLASH HICP 1.7% Y/Y (MNI MED 1.7%, DEC 2.0%)
- MNI: EUROZONE JAN FLASH HICP 1.7% Y/Y (MNI MED 1.7%, DEC 2.0%)
- EUROZONE JAN FLASH CORE HICP 2.2% Y/Y (MNI MED 2.2%, DEC 2.3%)
- EUROZONE JAN FLASH SERVICES HICP 3.2% Y/Y (MNI MED 3.3%, DEC 3.4%)
MNI: EUROZONE DEC PPI -0.3% M/M, -2.1% Y/Y (VS +0.7% M/M, -1.4% Y/Y NOV)
- MNI: EUROZONE DEC PPI -0.3% M/M, -2.1% Y/Y (VS +0.7% M/M, -1.4% Y/Y NOV)
