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21
Forex / Nasdaq 100 Technical: Torpedoe...
Last post by PocketOption - Feb 25, 2024, 06:29 am
Nasdaq 100 Technical: Torpedoed by Nvidia, at risk of undergoing multi-week corrective decline

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  • Nasdaq 100 has remained sluggish and underperformed the Dow Jones Industrial Average since last Friday, 16 February.

  • The recent underperformance of the Nasdaq 100 has been triggered by the concentration risk of its significant YTD return contributor, Nvidia.

  • The options market has priced in around an 11% move in either direction on the share price of Nvidia after it reports its Q4 2023 earnings results later today.

  • Nasdaq 100 faces the risk of a potential multi-week corrective decline unfolding; immediate supports to watch will be at 17,350 and 17,160.


This is a follow-up analysis of our prior report, "US stock market bulls are facing a reality check (3 ominous signs to watch)" published on 14 February 2024. Click here for a recap.


The Nasdaq 100, the top outperformer among the major US benchmark stock indices has remained sluggish since last Friday, 16 February.


Yesterday, the mega-cap technology stocks heavy-weighted Nasdaq 100 slipped by -0.79% after shedding as much as -1.62% intraday. In contrast, the Dow Jones Industrial Average only recorded a minor loss of -0.17%


Concentration risk in Nvidia



Fig 1:  YTD performance of major US benchmark stock indices & key ETFs as of 20 Feb 2024 (Source: TradingView, click to enlarge chart)


The main culprit to blame for the Nasdaq 100's current short-term underperformance over the Dow Jones Industrial Average has been the horrendous sell-off seen in the share price of Nvidia yesterday where it plummeted by -4.35% with a maximum intraday loss of -6.58%, its worst daily return since 17 October 2023 ahead of its Q4 2023 earnings result release today after the close of the US session.


Market participants have started to remain weary of the high growth earnings expectations being placed on Nvidia, being the leader of the ongoing Artificial Intelligence (AI) high productivity and business cycle revolution optimism theme play. Analysts' consensus expectations have set a high bar for Nvidia’s Q4 2023 earnings per share to come in at $4.59, that's a whopping gain of +420% y/y over the same quarter a year ago.


A Wall Street Journal report dated yesterday, 20 February has cited data obtained from Cboe Global Markets that the options market has priced in around an 11% move in either direction on the share price of Nvidia after it reports its earnings later today at the close of the US session. The expected 11% move is based on an option trade known as a straddle which entails purchasing puts and calls at the same strike price.


Notably, market participants have turned cautious about the state of the US stock market as a significant portion of the current year-to-date (YTD) of the S&P 500 has been contributed by a huge portion from Nvidia's YTD return of +44 % with a current peak of +53% seen earlier on 14 February (see Fig 1) that surpassed the YTD returns of Nasdaq 100 by 7 times, and a wider margin of 38 times on the equal-weight S&P 500.


Bearish "Ascending Wedge" breakdown



Fig 2: US Nas 100 medium-term & major trends as of  21 Feb 2024 (Source: TradingView, click to enlarge chart)



Fig 3: US Nas 100 short-term trend as of  21 Feb 2024 (Source: TradingView, click to enlarge chart)


Yesterday's sell-off seen in the US Nas 100 Index (a proxy for the Nasdaq 100 futures) has led to a breakdown on the lower boundary of its medium-term bearish "Ascending Wedge" configuration that also confluences with the 20-day moving average that acted as a prior support at 17,630.


In addition, the daily RSI momentum indicator has flashed a bearish divergence condition since 24 January at its overbought region. These observations have increased the risk of a potential medium-term (multi-week) corrective decline unfolding within the Index's ongoing major uptrend phase in place since the 6 January 2023 swing low.


On a short-term horizon, as seen in the hourly chart, the key short-term pivotal resistance to watch will be at 17,730 (pull-back of the former "Ascending Wedge" support & 61.8% Fibonacci retracement of the recent slide from 16 February 2024 high to 21 February 2024 low).


If 17,730 is not surpassed to the upside, the Index may exhibit further weakness to expose the next intermediate supports at 17,350 and 17,160 (also the upward-sloping 50-day moving average) in the first step.


On the other hand, a clearance above 17,730 invalidates the bearish tone to see a retest on the current all-time high area of 18,000/18,030.


Source: Nasdaq 100 Technical: Torpedoed by Nvidia, at risk of undergoing multi-week corrective decline
22
Forex / GBP/USD climbs after Bailey’s ...
Last post by PocketOption - Feb 25, 2024, 06:29 am
GBP/USD climbs after Bailey's dovish comments

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The British pound is higher on Tuesday. In the North American session, GBP/USD is trading at 1.2650, up 0.43%.


Is Bailey turning dovish?


With little else on the calendar today, Bank of England Governor Andrew Bailey is front and center. Bailey testified earlier before Parliament's Treasury Committee and was surprisingly open about possible rate cuts later this year. Bailey did not push back against market expectations and said that the BoE could cut rates even if inflation remained about the 2% target.


Up to this point, Bailey has pushed back against market expectations of a rate cut and today's comments could signal a major pivot in the Bank's rate policy. Bailey said that the market curve, which is projecting rate cuts, was "not unreasonable". The BoE has kept rates unchanged since August and there is pressure on the central bank to provide some relief to households and businesses and lower rates.


Bailey's dovish comments to lawmakers could be an attempt to put a positive spin on the weak UK economy, especially after last week’s GDP report indicated that the UK economy tipped into a recession in the second half of 2023. Bailey told lawmakers that the data indicated that this was a "very weak recession" and that here were "distinct signs of an upturn".


Still, Bailey's acknowledgment that rate cuts may be coming is a significant pivot and market pricing on interest rate cuts was brought forward after Bailey's testimony. Currently, the markets are predicting a first rate cut in August, with two more cuts before the end of the year.


GBP/USD Technical



  • GBP/USD tested resistance at 1.2607 earlier. Above, there is resistance at 1.2679

  • 1.2607 and 1.2530 are providing support



Source: GBP/USD climbs after Bailey's dovish comments
23
Forex / Australian dollar shrugs after...
Last post by PocketOption - Feb 25, 2024, 06:29 am
Australian dollar shrugs after RBA minutes, China rate cut

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The Australian dollar continues to rally and has extended its gains for a fifth successive day. In the European session, AUD/USD is trading at 0.6550, up 0.19%.


Minutes: RBA considered raising rates


The minutes of the RBA's February meeting were released earlier today. At the meeting, there RBA maintained the cash rate at 4.35%, as expected. The minutes indicated that some members supporting raising interest rates by a quarter-point. This was due to a concern about sticky inflation.


The RBA has raised rates only once since June, which has led to the markets pricing in rate cuts later this year. The RBA has pushed back against these expectations as inflation is running at 4.1%, well above the 1-3% target band. The central bank expects the inflation battle to be a long one, projecting that inflation will only fall back to 3% in mid-2025 and 2% by 2026.


At the February meeting, the RBA warned that it was prepared to raise rates. The minutes noted that the central bank expects the economy to continue to cool and it is prepared to lower rates if economic activity falls more than expected.


The minutes indicated that there is significant uncertainty over the economic outlook and the direction of inflation. Given this backdrop, the RBA has been forced to send mixed messages to the markets, stating that rate cuts and rate hikes both remain on the table. What will likely determine which direction the RBA eventually takes will be dependent on key data, such as the wage price index which will be released on Wednesday.


China cuts 5-year LPR


In a surprise move, the People's Bank of China cut the five-year loan prime rate by a quarter point to 3.95%, the largest rate cut since 2019. Lower rates should translate into a reduction in mortgage rates for homeowners and support the troubled property sector. Still, the move is not considered a game-changer for the Chinese economy and the Australian dollar isn't showing much of a response.


AUD/USD Technical



  • AUD/USD put pressure on support at 0.6506 earlier. Next, there is support at 0.6468

  • 0.6570 and 0.6608 are the next resistance lines



Source: Australian dollar shrugs after RBA minutes, China rate cut
24
Forex / USD/CAD – A quiet start to the...
Last post by PocketOption - Feb 25, 2024, 06:29 am
USD/CAD - A quiet start to the week but plenty to come

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  • Canadia inflation expected to have fallen again in January

  • Will the FOMC minutes shed any light on rate cuts?

  • USDCAD higher but momentum remains weak


It’s no surprise that it’s been a quiet start to the week, with both countries observing a bank holiday but several events on the horizon should ensure things pick up.


Canadian inflation data on Tuesday is the first of those, with the headline rate expected to have eased slightly in January. While not nearly enough to make the next Bank of Canada meeting on 6 March a real possibility for a rate cut – markets view it as around a 17% chance – a beat to the downside could improve the odds in the second quarter of the year.


The release of the FOMC minutes on Wednesday could generate more interest than usual at a time when traders appear unusually unsure of the timing and pace of rate cuts. This comes after a start to the year in which the data has not been as favorable as the final weeks of last forcing markets to scale back expectations for rate cuts this year. Could the FOMC minutes offer some clarity on that?


Weak momentum in the recent moves again?


The US dollar is edging higher against its Canadian counterpart early in the week but may continue to face strong headwinds around last week’s peak.


USDCAD Daily



Source – OANDA


New highs over the last month have been matched with weakening momentum which has created a divergence between the price and the stochastic and MACD. It occurred initially around the 50% Fibonacci retracement level and then between it and the 61.8%, both potentially important areas of resistance. While momentum could pick up in any renewed push higher, the mild gains of the last three sessions aren’t particularly encouraging.


Source: USD/CAD - A quiet start to the week but plenty to come
25
Forex / AUD/USD Technical: Bulls have ...
Last post by PocketOption - Feb 25, 2024, 06:29 am
AUD/USD Technical: Bulls have failed to break above the 0.6570 resistance

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  • Recent China's stimulus policies have failed to provide a positive feedback loop for AUD/USD bulls.

  • The recent movement of the AUD/USD seems to be more driven by the fixed income yield spread between the 2-year US Treasury note and the Australian government bond.

  • The pushback in expectations of the first Fed funds rate cut has put downside pressure on the 2-year negative yield spread between the Australian government bond and the US Treasury note.

  • Watch the 0.6570 key short-term resistance for the AUD/USD.


This is a follow-up analysis of our prior report, "AUD/USD Technical: Potential short-term bullish reversal for AUD supported by China's stock market rescue package" published on 23 January 2024. Click here for a recap.


Since our last analysis, the price actions of the AUD/USD have failed to rally despite being a traditional risk-on proxy currency pair that tends to be supported by stimulus policies enacted by China.


Before the Lunar New Year break, the Chinese central bank, PBoC issued an advance notice on 24 January that major commercial banks' reserve ratio requirement would be cut by 50 basis points (bps) that took effect on 5 February which translated to an additional 1 trillion yuan in long-term capital to negate the persistent weakness in the property sector as banks now have more capital to provide loans.


The AUD/USD did not react positively but in contrast, declined by -178 pips (-2.7%) from its 24 January high of 0.6621 to a recent 14 February low of 0.6443.


No positive reaction from AUD/USD despite more stimulus policies from China


In addition, today's more-than-expected 25 bps cut (the consensus view was a 15 bps cut) on China's 5-year loan prime rate, the benchmark for mortgage rates to 3.95%. This latest cut is the largest since 2019 but has failed to provide a positive feedback loop for the AUD/USD where it shed by -0.14% on an intraday basis at this time of the writing.


Based on an intermarket perspective, it seems that the ongoing weakness in AUD/USD is likely to be primarily driven now by the timing and pace of the US Federal Reserve's highly anticipated interest rate cut cycle initiation in 2024 which in turn impacts the fixed income yield spread between the 2-year US Treasury note and Australia government bond.


The hotter-than-expected US CPI print for January has pushed back the expectations of the first Fed rate cut to June from March (priced at the start of the year based on the CME FedWatch Tool) and reduced the number of expected cuts from six (at the start of the year) to four before 2024 ends.


A widening of the yield discount between 2-year Australian government bond over US Treasury note has put downside pressure on the AUD/USD


A less dovish Fed has put downside pressure on the 2-year negative yield spread between the Australian government bond and the US Treasury note where the spread has declined by -50 bps from 15 January to 19 February, making the Australian government bond less attractive to the US Treasury note, in turn capping AUD/USD's potential upside movement.


Bearish breakdown from "Head & Shoulders"



Fig 1: AUD/USD medium-term trend as of 20 Feb 2024 (Source: TradingView, click to enlarge chart)



Fig 2: AUD/USD short-term trend as of 20 Feb 2024 (Source: TradingView, click to enlarge chart)


Also, through the lens of technical analysis, the AUD/USD has staged a bearish breakdown from a medium-term bearish "Head & Shoulders" reversal configuration on 2 February and its former neckline support of 0.6570 has now turned into a pull-back resistance that also confluence with the 200-day moving average (see daily chart).


In the short term, last week's push-up from the 14 February low of 0.6443 to the 19 February high of 0.6552 has started to show signs of exhaustion. The price actions have failed to make a clear breakout above a minor descending trendline resistance from the 31 January high and at the same time, the hourly RSI momentum indicator has flashed out a bearish divergence condition at its overbought region (see 1-hour chart)


Watch the 0.6570 key short-term pivotal resistance for the risk of a potential decline to expose the near-term supports of 0.6500/6470. Failure to hold at 0.6470 may see further weakness for the medium-term support to come in at 0.6410/6390 (also the 76.4% Fibonacci retracement of the prior upmove from 26 October 2023 low to 28 December 2023 high).


On the flip side, a clearance above 0.6570 negates the bearish tone for the next intermediate resistance to come in at 0.6620 (also the downward-sloping 50-day moving average).


Source: AUD/USD Technical: Bulls have failed to break above the 0.6570 resistance
26
Forex / Market Insights Podcast – FOMC...
Last post by PocketOption - Feb 25, 2024, 06:29 am
Market Insights Podcast - FOMC minutes, flash PMI from Japan, Eurozone & UK are the key focus

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OANDA Senior Market Analyst Kelvin Wong joins Jonny Hart to discuss this week’s key economic data and events, notably on the release of the FOMC minutes of the recent January Fed’s monetary policy meeting where market participants will be scrutinizing the thoughts and comments of Fed official on the views of US inflationary pressure trajectory given the hotter than expected CPI and PPI prints for January. Meanwhile, China stock market is backed after a 5-day Lunar New Year break, and the Nikkei 225 has remained firm at the start of the week, just a 1% whisker away from its Dec 1989 all-time high level of 38,957.


Next up, the focus will be on flash manufacturing and services PMI from the Eurozone, UK, and Japan which are leading economic survey-based data especially to monitor the economic health and cyclical points given that the UK and Japan have slipped into a “technical recession” as the respective GDP growth contracted in Q4 2023.



Source: Market Insights Podcast - FOMC minutes, flash PMI from Japan, Eurozone & UK are the key focus
27
Forex / New Zealand dollar rises on st...
Last post by PocketOption - Feb 25, 2024, 06:29 am
New Zealand dollar rises on strong services data

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The New Zealand dollar continues to gain ground and has extended its gains for a fourth straight day. In the North American session, NZD/USD is trading at 0.6149, up 0.44%.


Services PMI hits 8-month high


New Zealand's BusinessNZ Performance of Services Index improved to 52.1 in January from 48.8 in December, above the forecast of 49.6. This put the index in expansion territory and marked the highest pace of activity since July 2023. The 50 level separates contraction from expansion. This is welcome news for the economy, which has cooled down due the Reserve Bank of New Zealand's steep rate-tightening cycle.


Is the RBNZ done with raising rates? The markets think so and have priced a rate cut for the middle of the year. The central bank has been more cautious and has pushed back against these expectations. Governor Orr's said last week that inflation expectations remain too high, the latest salvo aimed at dampening rate cut speculation. At its last meeting in November, the RBNZ said it hadn't ruled out a rate hike and projected no rate cuts before mid-2025.


New Zealand's inflation rate is running at 4.7%, more than double the midpoint of the 1%-3% target range. The RBNZ is unlikely to trim rates until inflation falls much closer to 2% and unless inflation drops dramatically, a rate before late in the year is looking doubtful. The RBNZ meets next on February 28th and is expected to keep rates unchanged for a fifth straight time.


NZD/USD Technical



  • NZD/USD is putting pressure on resistance at 0.6168. Above, there is resistance at 0.6211

  • 0.6109 and 0.6066 are providing support



Source: New Zealand dollar rises on strong services data
28
Forex / Australian dollar extends gain...
Last post by PocketOption - Feb 25, 2024, 06:29 am
Australian dollar extends gains, RBA minutes next

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The Australian dollar extended its gains for a fourth straight day. In the European session, AUD/USD is trading at 0.6537, up 0.10%.


Last Tuesday, the Australian dollar suffered its worst one-day showing of the year, declining by 1.18%, after US inflation was higher than expected, which sent the US dollar surging higher. The Aussie has since recovered those losses and is trading at a two-week high against the US dollar.


Markets eye RBA minutes


The Reserve Bank of Australia will release the minutes of the February meeting on Tuesday. At the meeting, the RBA maintained the cash rate at 4.35%, as expected. The RBA has raised rates only once since June, which has led to the market pricing in rate cuts later this year. The RBA has pushed back against these expectations, as it is concerned that inflation remains sticky and won't fall back to the 2%-3% target range until 2025.


At the February meeting, board members kept a rate hike on the table, with the policy statement noting that "a further increase in interest dates cannot be ruled out". The minutes could provide some insights as to what factors would prompt the central bank to raise rates.


Last week's employment report was softer than expected and the RBA will be keeping a close eye on Wednesday's wage price index report. The RBA has reiterated that its rate path would be data-dependent, and wage inflation is an important contributor to inflation. A soft release would reduce the likelihood of the RBA raising interest rates.


AUD/USD Technical



  • 0.6506 and 0.6468 are providing support

  • 0.6570 and 0.6608 are the next resistance lines



Source: Australian dollar extends gains, RBA minutes next
29
Forex / EURJPY Price Action and Techni...
Last post by PocketOption - Feb 25, 2024, 06:29 am
EURJPY Price Action and Technical Analysis Overview

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Talking Points:



  • FOMC January 31st, 2024, Meeting Minutes.

  • Technical Analysis EUR/JPY 8-Hour chart

  • Commitment of Traders Report – EUR/JPY

  • OANDA's Position Ratio Indicator


FOMC January 31st, 2024, Meeting Minutes


This Wednesday, markets await the FOMC minutes for their latest meeting on January 31st, 2024; it is not expected that there will be any significant surprises in the minutes; however, traders will be searching within the text for indications regarding the Fed's economic projections and what was the Fed's view on inflation on the meeting day. An overall view of the surprising January Consumer Price Index - US CPI, Producer Price Index - US PPI and US Retail Sales combined, as well as other economic indicators, suggests that inflation rose slightly and economic activity contracted in January; this led traders to continue pushing their expectations for the FED's first interest rate cut to take place in June/July 2024, rather than in May. On Friday of last week, FED’s  Bostic said, "There is no rush to cut Interest rates with the US Labor market and economy still strong and cautioned it's not clear, yet, that inflation is heading sustainably to the central bank's 2% target, the evidence from data, our surveys, and our outreach says that victory is not clearly in hand and leaves me not yet comfortable that inflation is inexorably declining to our 2% objective".


Markets anxiously await the Fed's preferred inflation indicator, "Personal Consumption Expenditure PCE," due on February 29th, 2024, for more clarity on how the interest rate path will be. The numbers can impact most currency pairs, so we will review the technical analysis for EURJPY.


Technical Analysis Overview - 8-Hour Chart


https://www.tradingview.com/



  • Price has been trading in an intermediate uptrend since early December 2023 (Green line), forming higher highs along the way; the intermediate uptrend is part of two longer-term uptrends, which began in 2011 and 2020; both can be seen on more extended time frames.

  • The uptrend is currently finding resistance at its weekly R1 and monthly R1 standard calculations within the range of 161.87 - 162.21; a break above the resistance level may lead price action to the next resistance at 162.74; however, if the resistance level was to hold, price action might retest the intermediate trendline.

  • Price action broke and closed above EMA9, SMA9, SMA21, and its weekly pivot point.

  • A negative divergence can be identified between Price action and the MACD indicator on the weekly close, as price action makes higher highs while MACD makes lower highs. (Blue circles), MACD line remains tangled with its signal line.


COT Report Analysis


https://cotbase.com/



https://cotbase.com/



  • Upon comparing the Positioning for the Euro to JPY on the most recent commitment of the trader's report, we can see that large speculators’ Euro net positioning continues to move down towards the short from its extreme long positions. On the other hand, the same group’s positioning on JPY is very close to the extreme short level, suggesting a potential change in sentiment.


OANDA's Position Ratio


https://trade.oanda.com/



  • The Orderbook indicator reflects that retail traders continued to add to their long positions as of early February 2024; the long ratio changed from 40.43% to the current 46.29%, which may suggest that a change in sentiment can be approaching.


Source: EURJPY Price Action and Technical Analysis Overview
30
Forex / Market Insights Podcast – US P...
Last post by PocketOption - Feb 25, 2024, 06:29 am
Market Insights Podcast - US PPI higher, UK retail sales bounce back

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OANDA Senior Market Analyst Craig Erlam joins Jonny Hart and Trader Nick to discuss the latest data from the US and UK, and preview the week ahead.




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Source: Market Insights Podcast - US PPI higher, UK retail sales bounce back
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