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Traders expect the markets to be choppy having hit record levels

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Last week we learnt that the UK and Japan are in a technical recession. This meant little to markets and perhaps the bigger issue in Japan was the steady stream of pushback from key Japanese officials on recent JPY weakness.

US retail sales fell 0.80% in January, a sinister turn when both US CPI and PPI were far hotter than expected, putting us on notice that the US core PCE print (due on 29 February) could be above 0.4% MoM, which if seen a year ago would have been a trigger for the Fed to hike by 25bp. The February CPI print (due 12 March) will get huge attention, and while some way off, is a key date for the diary.

Among a barrage of ASX200 companies reporting last week, we also saw a poor Aussie employment report, which now puts great emphasis on the February employment report (due on 21 March) given economists (and the ABS) expect a solid snapback in hiring in this data series. The ASX200 eyes new ATHs, and key earnings from the likes of BHP, Rio Tinto, Quantas and Woolworths this week could take us there.


USD continues to strengthen

In markets, the USD gained for a sixth straight week, although a 0.2% week-on-week (Wow) gain was more of a stealth grind higher than an impulsive one-way tear. Assisting USD flows was a reduction in US swaps pricing, where we started the week with 113bp of cuts priced by December 2024, and finished with 91bp (or 3.6 cuts), which helped lift the US 2YR Treasury to 4.64% (+16bp on the week). If the market hadn’t already amassed a sizeable USD position, then one could argue the USD move would have been higher.

The EURUSD weekly shows indecision to push the pair lower and a move above 1.0805 (last week’s high) and should take the pair through 1.0828 (200-day MA) and onto 1.0865, which would be a level I’d be looking to fade longs on the week.

Nvidia brings focus to NASDAQ

While we saw the S&P500 0.4% lower on the week, we saw the prior week’s low of 4918 (and the 5-week EMA) holding firm, with traders selling the VIX index above 15%. While US cash equity will be closed on Monday for Presidents Day, I’m expecting choppy trade through to Thursday. So the intraday environment for day traders could get a little messy and it will pay to be nimble.

The Nasdaq100 was the underperformer last week but should attract good attention from clients this week with Nvidia’s [NASDAQ:NVDA] earnings due out on Wednesday (after the cash close), and where the market eyes some punchy numbers in reaction to the headlines, which could spill out into AI names more broadly.

Chinese equities off to a solid start

The Year of the Dragon got off to a solid start as China equity outperformed, notably in the small-cap space (the CSI500 closed +10% WoW) and we see the CN50 index looking compelling for further upside. I see 12,000 coming into play. While National Team flows and Peoples Bank of China (PBoC) liquidity have supported China/HK equity, economics do matter, so put the China Prime rate decision and new home sales data on the radar to potentially influence this week.

On the China proxy theme, Copper etched out a solid move on the week although we have seen selling interest into $3.80. Crude Oil is also getting attention from traders, with price gaining 3.4% WoW and testing the 29 Jan pivot high. Moving in a bullish channel we see upper trend resistance into $80.50. A level to put on the radar.

Staying in the commodity theme, Silver (XAGUSD) has found good buying interest off $22 and has closed above the double bottom neckline and the 200-day MA. Upside into $24.00/50 looks possible. On the agri-commodities, Cocoa and wheat come on the radar as short set-ups, while corn has seen a solid bear trend since October but indecision in Friday’s price action suggests traders are on notice for a small reversal this week.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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