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Dow heads towards record high as EUR/JPY retraces, natural gas futures drop
Technical analysis of the Dow as it heads towards its recent record high while EUR/JPY retraces and natural gas futures trade in 2 ½ month lows.
Macro update
Yen back in focus:
The Japanese yen firmed slightly after Japan’s finance minister said intervention, including potential coordination with the United States (US), remains an option, though the currency is still trading near 160 per US dollar after recently hitting an 18-month low.
BoJ tightening speculation:
Reports that some Bank of Japan (BoJ) policymakers see scope to raise rates earlier than expected, possibly as soon as April, supported the yen, even as political uncertainty linked to possible snap elections continued to weigh.
AI trade regains momentum:
Asian equities advanced as enthusiasm around AI returned, with strong results from Taiwan Semiconductor Manufacturing Co (TSMC) pushing MSCI Asia ex-Japan to a record and lifting tech-heavy markets in Taiwan and South Korea to new highs.
Dollar steady, Fed bets pared:
The dollar hovered near a six-week high as robust US data prompted markets to scale back rate-cut expectations, with investors now pricing a 67% chance of no Federal Reserve (Fed) move in April and a 37.5% probability of rates staying unchanged in June.
Commodities retreat:
Oil prices extended their recent declines, while gold and silver paused after President Trump struck a more cautious tone on unrest in Iran, easing fears of supply disruptions.
Global equity backdrop mixed:
Wall Street closed higher overnight, led by banks and chipmakers, while European equity futures edged lower after record highs as investors weighed artificial intelligence (AI) optimism against tighter financial conditions.
Dow Jones nears record high
The Dow Jones Industrial Average is seen heading back up towards last and this week's record highs at 49,621 - 49,633, just shy of the psychological 50,000 mark.
Immediate upside pressure should remain in play while Thursday's low at 48,852 holds on a daily chart closing basis.
Short-term outlook:
Bullish, targets the 50,0000 mark while above 48,852.
Medium-term outlook:
Bullish while above the 2 January low at 47,853, targeting the 50,000 region.
Dow Jones daily candlestick chart
EUR/JPY comes off multi-decade high
EUR/JPY is on track for its third straight day of falling prices, having come off its multi-decade ¥185.57 high to its November to January uptrend line at ¥183.45. This may well hold as support.
If not, last week's ¥182.64 low may be revisited.
Good resistance now sits between the late December to early January highs at ¥184.43. A rise above this resistance level would put the December peak at ¥184.92 back on the map, ahead of this week's ¥185.57 peak and the (synthetic) December 1981 low at ¥186.41 as well as the January 1983 low at ¥187.57.
Were a fall through last week's low at ¥182.64 to be seen, though, the 19 December low at ¥182.26 could be tested as well.
Short-term outlook:
Neutral while between ¥182.64 and ¥185.57
Medium-term outlook:
Bullish while above the mid-December low at ¥181.58
EUR/JPY daily candlestick chart
Natural gas futures trade in 2 1/2 month lows
US natural gas futures' slide from the 5 December 494.9 record high has now taken it below the 200-day simple moving average (SMA) at 309.8 to Thursday's 272.5 low. Below it beckons the 1 September high at 271.0.
A fall through 271.0 would likely put the mid-October low at 254.7 on the cards.
Minor resistance can be spotted along the 200-day SMA in the 310.0 region.
Short-term outlook:
Bearish while below the December-to-January resistance line and 200-day SMA at 306.5-to-309.8.
Medium-term outlook:
Bearish while below the 8 January 326.6 high.
Natural gas daily candlestick chart
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