The selling pressure on Wall Street continues as any sign of intraday rally seems to now be a chance to sell. Although US futures are off their lows this morning, there is nothing sustainable about a recovery yet, with the NASDAQ once more falling away. This sell-off is not only feeding into downside on European indices but across asset classes too. Pro-cyclical major forex such as the Aussie and Kiwi are feeling the pinch, whilst UK sterling is also under selling pressure after this morning’s weak UK retail sales data. It is also notable that having had such a strong run higher, the oil price is also now beginning to fall under the weight of the negative risk sentiment.
Once more there is little on the economic calendar that can change the narrative. Canadian retail sales and Eurozone consumer confidence are unlikely to push the needle as the focus remains on Wall Street.
Main drivers: Market sentiment deteriorates again; Wall Street sell-off continues; Japan core inflation lower than expected; UK retail sales miss forecasts; Bitcoin tumbles again; Economic calendar: Canada retail sales and Eurozone consumer confidence
Sentiment deteriorates sharply again: The sell-off on US equities continues and is breaking crucial support levels. This is infecting across major markets, with a risk sell-off on forex. Even oil is now falling too.
US yields fall sharply: With the risk aversion traders are moving back into US Treasuries with the 10-year yield falling sharply in the past 24 hours [Risk negative]
Japan's core inflation holds: Core inflation remained at +0.5% which was slightly below the +0.6% consensus.
UK Retail Sales big miss: Core UK retail sales (ex-fuel) fell -3.6% in December where the consensus forecast was for a decline of -0.5%. [GBP negative]
Bitcoin slumps again: A sharp fall below $40,000 leaves Bitcoin at a new four-month low as the sell-off continues [Bitcoin lower]
Central Bank speak: There are no Fed speakers scheduled for today but watch out for ECB’s Lagarde and US Treasury Secretary Yellen:
- ECB President Lagarde (at 1230GMT)
- US Treasury Secretary Janet Yellen (at 1630GMT)
- Canada Retail Sales (at 1330GMT). Monthly growth of +1.1% is expected for core sales in November (+1.3% in October)
- Eurozone Consumer Confidence (at 1500GMT). Confidence is expected to slip to -9 in January (slightly down from -8.3 in December)
Broad outlook: Risk negative sentiment across asset classes. Safe haven forex outperforming, indices sharply lower, and commodities also lower.
Forex: AUD and NZD are the big underperformers, with JPY, EUR, CHF, and USD performing well.
- EUR/USD has dropped back to test the support of a shallow uptrend channel. Support at 1.1300 will be watched, with 1.1270/1.1280 a key higher low. The importance of resistance at 1.1360/1.1385 is increasing again.
- GBP/USD fell sharply into the close yesterday to form a bearish one-day candle and another downside move today has breached 1.3570 support. This leaves 1.3660 as a key lower high. A close under 1.3570 increasingly looks like a corrective outlook forming near term. Subsequent supports at 1.3490 and 1.3430.
- AUD/USD has turned sharply lower since hitting 0.7276 yesterday and is now testing the support of the uptrend channel (currently at 0.7180). Reaction around the support at 0.7170 will be key now.
Commodities: precious metals have started to retrace their breakouts. Oil is also threatening to turn corrective.
- Gold is beginning to turn lower as a retreat to the breakout support at $1828/$1832 has been seen this morning. This could be another false breakout. A close under $1828 would open a bigger retreat which would then bring the $1805 higher low into view. The importance of resistance at $1848 is growing.
- Silver does not look as corrective as gold on the technicals, but this morning’s retreat is the first sign of pullback on the breakout. A move below $24.07 would open a much deeper retracement potentially towards the $23.25/$23.45 old resistance. Resistance is now at $24.70.
- Brent Crude oil has formed a “shooting star” one day candle which can be a powerful corrective candle at the top of a bull run. Reaction around $86/$87 breakout support will be key now as the uptrend is tested. Today’s intraday low at $85.75 will now be an important level.
Indices: Wall Street is tentatively higher in the past few hours after another sell-off yesterday. European indices are playing catch up on yesterday’s Wall Street move.
- S&P 500 futures fell sharply into the close and ended the session below the key support at 4491. This effectively completes a big medium-term top pattern and implies a move towards the 4270 October low could be seen now. How the market reacts to old support at 4491/4520 will be key as this is now resistance. Initial support is at 4429.
- DAX continues to trend lower and intraday rallies are being sold into. For now, the support at 15,623 is holding but if this fails then it could open the next bear leg lower towards an old pivot area around 15,400. Initial resistance is around 15,725/15,770.
- FTSE 100 a bearish engulfing one-day candle is a big warning sign that the bull run is over, at least for now. A close under 7490 would now open a correction back towards the old support area 7365/7400. The bulls need to start the recovery by holding back above 7540 consistently again.