US Stocks Fall Ahead of Data and Nvidia – Dow Down 1.2%
US equities pulled back further in trading yesterday as investors focused on upcoming economic releases and the much-anticipated Nvidia earnings report. The Dow fell 1.18% to 46,590, the S&P 500 declined 0.92% to 6,672, and the Nasdaq lost 0.84% to 22,708. Treasury yields were mostly steady, with the 2-year note rising 0.4 bps to 3.610% and the 10-year falling 1.0 bps to 4.139%. The US dollar strengthened, gaining 0.24% to 99.54. Oil prices eased lower after a key Russian port reopened following Ukrainian strikes. Brent dropped 0.61% to $64.01, and WTI fell 0.58% to $59.74. Gold also retreated, down 0.95% to $4,044.96 amid a firmer dollar and softer expectations for Fed rate cuts.
Yen in Focus for FX Markets
The Yen has declined considerably against both the dollar and on the crosses in recent weeks, and market ‘chatter’ is building up strongly that we could see some intervention from authorities in Tokyo if the move continues. Most experienced traders feel that the move would have to accelerate for the Bank of Japan to come in and hit the market hard, but if this does happen, they would normally expect to see the initial impact knock the major pair for at least 200 pips. Generally, the impact lessens over time as the market becomes adjusted to these sharp revaluations, but that initial move could see thousands of carry trades knocked out in one go. USDJPY has broken through the key 155 level but has not pushed through in spectacular fashion yet, and the next resistance level will be up at the January high just below 159 from a technical perspective. At the moment, traders are happy to remain long and will continue to pick up the carry, but most experienced traders will be ready to hit the sell button on any sharp moves down.
Quiet Calendar Day Ahead – But More Moves Expected
It is a quiet day ahead for traders in terms of scheduled risk events on the macroeconomic calendar; however, the market is still expecting plenty of volatility across the sessions, with geopolitical updates and pending data likely to factor. The Asian session will see a focus on Australian markets, with the RBA’s Monetary Policy Meeting Minutes due out. Given the recent spate of higher-than-expected data, traders will be focusing on the bank’s position, with most leaning towards a more hawkish outlook. There is little on the calendar in both the European and US sessions today; however, several products are sitting near sensitive levels, which could lead to exacerbated moves if they break. In addition to a pending US data flood, which has lifted investor concerns, President Trump has been speaking – last night advising that he would allow US military action in Mexico to combat drugs – and traders are expecting that we will hear more from him in the coming days, which can only add to volatility.
