January 12 2023
The Nasdaq 100 rallies for the 5th day, buyers rush in ahead of CPI data. US dollar index falls to six-month lows
The major US indices had another positive days, on speculation that the US inflation report on Thursday will support the Fed’s downshift in rate hikes. The Nasdaq 100 (USNAS100.I) rose for the fifth session, rising 1.8%, also closing on the high of the day which is a technical bullish sign as it suggests there are more buyers than sellers right now. The Nasdaq 100 also closed above a key level, its 50 day moving average. Meanwhile, the S&P 500 (US500.I) rose for the second day, also closing at the high of the day, 3969.61, while breaking above a possible key technical key resistance level. What’s also supporting the risk on rally is the that US dollar against the Euro, fell for the fourth day, remaining well under its 50-day moving average, which can be seen a glum sign for the dollar. While the dollar index, (DXY) fell back to six month lows with the dollar range bound ahead of US CPI. All in all, the next few days are pivotal, there is still a lot of caution in the air, until the CPI day can prove US inflation is cooling as some prior data has shown
Tesla and Amazon shares trade at key levels; but caution is thick in the air
Indeed these were some of the standouts share on Wednesday with Tesla shares up 3.7% after failing to move above a key resistance level. It appears there is some skepticism about the rally give copper and lithium prices, among other metals, are charging ahead, which makes Tesla’s batteries a heck lot more expensive, at a time when Tesla’s selling less EVs than its making. Amazon meanwhile, gained 5.8%, closing near its high of the day, and moved further above its 50-day moving average. These are positive signs. But Amazon is also touching another resistance level ahead of CPI data, which means traders may have to be on alert. Meanwhile, Apple rose 2.1%.
What to watch in Australia and Asia: Oil rises for 5th day, Iron ore clears $120, copper rises to six month high entering a bull market
The Australian share market (ASXSP200.I) opened 0.9% higher with Hong Kong’s market futures in the positive, as well as Japan’s futures. A major focus will be on resources, with the oil price jumping 3% to $77.41, as well as focus on industrial metal equites, that will likely rally again on optimism of China’s reopening, which has pushed some commodities into bull markets. The Copper price rose to $4.18 on the Comex market, rising 2.5% in New York, taking its rally off its July 2022 low to 29%. With copper at $9000 per tonne for the first time since June, Goldman thinks it could hit $11,500 by year-end. Copper remains Saxo’s preferred metal for its use in electrification and urbanization (for more click here). Popular copper equities include BHP, Oz Minerals, Rio Tinto. Meanwhile, iron ore (SCOA) cleared $120 for the first time in 6-months, with the iron ore price up 54% from its October low. BHP is trading at its highest level in history. It makes 48.7% of its revenue from iron ore, 26.7% from copper and the remainder from coal. It has a PE of 8 times earnings, and a dividend yield of 13.8%. Rio Tinto also trades near its all-time high and it’s also involved in the key metals mention too; making 58% of its revenue from iron ore, 11% from copper, and the rest from aluminum and others. Rio’s PE is 6.8 times earnings, its dividend yield is 8.6%.
FX watch; Australian trade data ahead, followed by US CPI
Australia’s trade balance data released today, rose well beyond expectations, with the trade balance surging to $13.2 billion, when consensus expected exports and imports to have fallen considerably in November, with the market expecting the surplus would fall from $12.2 billion to $11.3 billion. This data shows that trade has been improving, well ahead of China’s easing of restrictions – which is a positive sign. The AUD rallied to 69.18 US, which is a level it hit yesterday after Australian inflation and retail data came out hotter than expected. All data sets theoretically support the AUD, while the extra likely support is to come from China’s reopening, which supports buying of the AUD. The next resistance level is a psychological one, 0.700 for the AUD vs the USD. However, if core US CPI comes out hotter than expected (5.7% YoY), then a hotter USD may pressure the AUD back down. Our Head of FX Strategy suggests if that happens the AUD could drop back to another support level. However the next few days are pivotal. Click for more on FX.
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