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JP Morgan to kick US earnings into gear

Five markets in focus today.

JP Morgan (JPM)

JPM report Q4 earnings pre-market and good numbers is clearly needed for the stock to resume its trend higher. The medium and longer term moving averages are still headed higher, however the five-day has started to roll over and the MACD has fallen below the signal line, showing momentum is marginally lower. The daily chart highlights very strong support around $50; however a good report should mitigate a move to $50. The market is anticipating adjusted EPS of $1.37, on revenue of $24 billion. Interestingly JPM has fallen four of the last five earnings quarters, so its earnings pedigree (or at least against expectations) isn’t brilliant of late. IG clients can now trade this stock in pre-market trade.

Japan 225

The Japanese cash market re-opens today, although IG clients have been able to trade the market as the futures have remained open. USD/JPY continues to pullback and is now under 103.00 and could be headed to 102.19 (the 38.2% retracement of the October to December rally). Today’s data needs to support or perversely we could see the JPY strengthen and the Nikkei fall. On the docket (at 10:50 AEDT) we get the November current account and trade balance and I specifically will be most interested in the adjusted current account which has been in a deficit for the last two months.

GBP/USD

Cable has started pulling back a touch, with traders feeling the BoE are likely to strengthen its forward guidance for raising the cash rate, especially with its jobless rate falling to 7.4%, 40 basis points above its threshold for hiking. There is a belief that the central bank will lower (or I could say strengthen) this guidance at its next inflation hearing (on February 12) to perhaps 6.5%, however with inflation on a downward trajectory they will still be keen to keep an eye on this metric. At 20:30 AEDT we get December CPI and RPI and in terms of CPI the market expects the inflation rate to remain at 2.1%. A weaker number here should send sterling lower.

Spot Gold

Spot gold is on an upwards trajectory and given it has closed above the 38.2% retracement of the October to December sell-off (at $1250.9), the metal could be headed to $1272 or even the 100-day moving average at $1290. In late US trade we get narrative from regional Fed presidents Charles Plosser (speaks at 04:45 AEDT) and Richard Fisher (05:20 AEDT). The narrative from these two individuals will be important as this year they get a chance to vote. If they detail that the recent weak payrolls report was a ‘one-off’ and that QE should be terminated sooner-rather-than-later we could see USD strength and gold weakness.

Western Areas (WSA)

WSA and a number of nickel producers rallied with real strength yesterday on news Indonesia was banning the export of certain mineral resources. With record levels of short interest in a number of nickel names and another solid night of gains on the LME (for nickel) , further gains could be seen here today.

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