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Dow recovers as EUR/JPY rises and US natural gas nears key support
Technical analysis of the Dow as it recovers while EUR/JPY rises and US natural gas futures prices near significant support.
Macro update
Wall Street rebounds:
US equities bounced back from Monday’s decline, with the Dow Jones up 0.76%, the S&P 500 advancing 0.77% and the Nasdaq 100 climbing 1.05% as technology stocks drove a renewed risk-on tone.
AI optimism resurfaces:
Semiconductor stocks outperformed and the S&P software and services index rose 1.3% after Anthropic launched new artificial intelligence (AI) plug-ins, easing disruption fears and lifting names such as Salesforce, FactSet and Thomson Reuters.
Mega chip deal lifts AMD:
AMD surged 8.8% after securing an agreement to supply up to $60bn of AI chips to Meta over five years, while Keysight jumped 23.1% on strong profit guidance and Home Depot gained 2.0% after reaffirming its annual outlook.
Fed highlights AI labour risks:
Policymakers expressed mixed views on AI’s employment impact, with Governor Lisa Cook warning of potential job losses, while Governor Christopher Waller downplayed the risk of significant labour market disruption.
Asia rallies on tech strength:
Asian markets tracked Wall Street higher, with Japan’s Nikkei 225 rising 2.7% to a record and South Korea’s Kospi up 2.6%, as investors increased exposure to chipmakers ahead of NVIDIA's earnings.
Yen softens, oil near highs:
The Japanese yen hovered around 156 per US dollar after Japan nominated perceived dovish candidates to the Bank of Japan (BoJ) board, while Brent crude oil traded near seven-month highs around $71 amid US-Iran tensions and elevated geopolitical risk.
Dow Jones recovers
The Dow Jones Industrial Average is seen bouncing off this week's 49,696 low and may revisit its breached November to February uptrend line - now because of inverse polarity a resistance line - at 49,424.
For the medium-term uptrend to resume, a rise and daily chart close above the 20 February high at 49,712 is needed. While this isn't the case downside pressure may prevail.
A fall through this week's low at 48,732 is likely to put the November peak, 20 and 30 January lows at 48,431 - 48,428 on the map.
Short-term outlook:
Bullish while above the 24 February 48,732 low.
Medium-term outlook:
Bullish while above the 20 January low at 48,428, targeting the 50,600 region and above.
Dow Jones daily candlestick chart
EUR/JPY continues to rise
EUR/JPY is seen heading back towards the ¥185.00 region, having recovered from its mid-February ¥180.81 low. En route lies minor resistance at ¥184.18-to-¥184.43, ahead of the December peak at ¥184.92.
Potential slips may find support around the 19 February high at ¥183.15.
Short-term outlook:
Bullish while above the 23 February ¥182.00 low.
Medium-term outlook:
Neutral with a bullish stance while above the 12 February low at ¥180.81 but a fall through it would change the outlook to a bearish one.
EUR/JPY daily candlestick chart
US natural gas futures near key support
US natural gas futures prices continue to decline and are about to hit key support at the 254.7-to-253.6 early September to mid-October lows. Further down lurk the 23 September low at 246.2 and the 13 August low at 242.3.
Immediate gap resistance sits at the 24 February 265.3 low which, together with the 269.8 mid-February low, is likely to cap any upside attempt in the short-term.
Short-term outlook:
Bearish while below 23 February high at 289.9.
Medium-term outlook:
Bearish, targeting the 250 - 240 region and below while below the 12 February 301.0 high.
Natural gas daily candlestick chart
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