End of the news Forexlive Americas FX: Stocks fall but yields are not showing the way today. USD lower.
US stocks closed near the day’s lows, but the downward movement was not driven by higher yields. In fact, the 10-year yield is trading just below the 1.700% level after trading at 1.808% earlier this week. The NASDAQ interest rate sensitive index fell the most with a drop of -381.57 points or -2.51%.
Meanwhile, in the forex market, the USD fell again today, possibly in reaction to lower yields. So there is a certain disconnect with the interest rate market, the foreign exchange market and the stock market, recent relationships.
How is it going in the future?
One of the catalysts for the downturn today appears to be analyst sentiment for the stock market on CNBC’s halftime report show (especially Josh Brown and Pete Najarian). All analysts seemed to be jumping on the bearish train (at least so it seemed). Perhaps it was a coincidence, but the market started to accelerate lower on their more bearish comments.
The inability to stay above its 100-day moving average yesterday and its inability to break above its 100-day moving average today also contributed to the downside in stocks (particularly the NASDAQ index). That moving average stands at 15,278.31. The highest price of the NASDAQ index today reached 15259.71. Yesterday the highest price hit 15,319.03.
This failure sent the index back to its 200-day moving average of 14,719.42. As a reminder from Monday’s trading, the price broke below the 200-day moving average for the first time since early April 2020. Speculation is that another move below the 200-day moving average would trigger no more anxiety and sales.
Meanwhile, in the debt market, for the second day in a row, the market was able to absorb higher inflation data. The US CPI rose to 7% yesterday and yields have come down. Today, PPI data reached 9.7% year-on-year. Although this is one tick later than the expected 9.8%, it is still 9.7%. Yields did come down nonetheless and seemed to anticipate lower inflation / slowing economy / a yield curve likely to flatten.
Frankly anything is possible. The market reactions are somewhat in this direction. I don’t know if this will be a good thing or a bad thing, but it will probably just be a volatile thing. Time will tell us.
In the foreign exchange market, the JPY was the strongest of the currencies, followed by the CHF (safe haven currencies). On the weak side are the CAD and AUD. The US dollar was the weakest of the major currencies, but hit its low at the close. Nonetheless, it was still lower against all major currencies except for small gains against the CAD and AUD.
Looking at some of the individual currencies,
- EURUSD: EURUSD hit its highest level since November 11, hitting 1.1481 before falling back to 1.14524 near the close. As a reminder from yesterday, the price moved outside of the trendless ascending and descending range above 1.1385. The almost 100 point increase since the break is correct, but not exactly a headlong rush. The decline in the 100-day moving average currently at 1.1505 remains a bullish target going forward. From this level can be broken, it could trigger further upward buying
- USDJPY: USDJPY continued to fall lower but stalled just near support in the 113.95 to 114.00 area (see article here). Going below this level would bring the price back into a swing zone which kept the pair more or less confined from late November to late December.
- GBPUSD: GBPUSD also rose today and traded above the 200 day moving average for the first time since September 16 at 1.3733. The price also broke the 50% retracement of the downward movement from the June 2021 high at 1.3704. The high price hit 1.37479 before turning. The current price is trading at 1.3713. On the new trading day, going below the 50% midpoint at 1.3704 would give sellers more reason to pause.
In other markets, at the end of the US session, the snapshot shows
- Spot gold is trading down four dollars on this day.
- Bitcoin is trading at $ 42,831
- Crude Oil is down about a dollar or -1.2% to $ 81.65