Yen and Dollar surged strongly overnight, but lost some momentum after on stocks recovered from initial steep selloff. Both are still firm with Asian markets in risk aversion mode. Canadian Dollar is currently the worst performing for the week, followed by Aussie. Focus will now turn to FOMC minutes for guidance on the next moves, in stocks, yields, and currencies.
Technically, while the greenback jumped, some key near term levels remain intact for now. The levels include 1.1806 support in EUR/USD, 1.3730 support in GBP/USD, 0.7443 support in AUD/USD and 0.9273 resistance in USD/CHF. USD/CAD did breach 1.2485 resistance but there is no follow through buying yet. Additionally, Gold appears to have bottomed for the near term at 1750.49, on bullish convergence condition in 4 hour MACD, after breaking 1794.75 resistance. Dollar’s weakness could still come back any time.
In Asia, at the time of writing, Nikkei is down -1.26%. Hong Kong HSI is down -1.08%. China Shanghai SSE is up 0.36%. Singapore Strait Times is down -1.61%. Japan 10-year JGB yield is down -0.0011 at 0.035. Overnight, DOW dropped -0.60%. S&P 500 dropped -0.20%. NASDAQ rose 0.17%. 10-year yield dropped -0.061 to 1.370.
NASDAQ staying on bullish track after 0.17% gain
DOW had a steep pull back overnight and was once down over -430 pts. Yet, it managed to recovered most losses to close down -208.98 pts, or -0.60% only, at 34577.37. S&P 500 dropped only -0.20% while NASDAQ even rose 0.17%. Overall market sentiments remain generally positive.
NASDAQ’s outlook is unchanged that further rise is expected as long as 14439.39 support holds. Current up trend should target 61.8% projection of 10822.57 to 14175.11 from 13002.53 at 15074.39. With 15k psychological level in proximity, that would be a key hurdle to overcome, that could shape the outlook for the second half of the second half of the year.
US 10-year yield dropped to lowest since Feb, more downside first
US 10-year yield dropped sharply overnight, by -0.061 to close at 1.370, hitting the lowest level since February. Some analysts noted that the move reflected believes that inflation in the US, and even the strong growth, were transitory only. The move also came in tandem with notable pull back in major stock indexes. Focuses will now turn to FOMC minutes for more guidance.
The speed of the fall in TNX was a surprise, even though the direction isn’t. Prior rejection by 55 day EMA already hinted that corrective pattern from 1.765 would more likely extend lower than not. For the moment, we’d expect strong support 38.2% retracement of 0.504 to 1.765 at 1.283 to contain downside and bring rebound. In other words, there is room for further decline in the near term, but downside is relatively limited.