Dow consolidates as EUR/JPY rallies and US natural gas futures prices stabilise
Technical analysis of the Dow as it consolidates and EUR/JPY rallies while US natural gas futures prices stabilise.
Macro update
US equities rebound:
Wall Street finished higher as softer-than-expected inflation data boosted expectations of rate cuts and triggered a technology-led rally, with the Nasdaq 100 up 1.38%, the S&P 500 gaining 0.79% and the Dow Jones adding 0.14%.
Inflation and rates:
Annual US consumer price index (CPI) rose by less than forecast in November, strengthening the case for Federal Reserve (Fed) easing, with markets now assigning a 58% probability to a dovish policy shift by March.
Tech momentum:
Micron surged 10.2% after projecting a sharp increase in profits on robust AI-related demand, lifting semiconductor peers and driving the Philadelphia SE Semiconductor index up 2.6%.
Stock-specific moves:
Trump Media jumped 41% following the announcement of a $6bn all-share merger with TAE Technologies, while Lululemon advanced 3.5% on reports of a sizeable activist stake.
Asia reacts positively:
Asian markets tracked the US technology rally, with Japan’s Nikkei 225 climbing more than 1% after the Bank of Japan (BoJ) lifted rates to 0.75% and signalled further tightening, while the Topix rose 0.8%.
Japan rates in focus:
Japanese government bond yields climbed to around 2%, the highest level since 2006, as investors weighed the outlook for additional BoJ rate increases.
Dow Jones comes off record high
Last week the Dow Jones Industrial Average made a record high at 48,886, just shy of the 49,000 mark, before retracing lower.
The 47,857-to-47,850 recent daily lows may offer interim support but the 12 November high at 48,431 would need to be exceeded for a new all-time high to be made. Further up beckons the psychological 50,000 mark.
Minor support below the 47,857-to-47,850 area may be spotted at the 28 November high at 47,750.
Short-term outlook: potentially toppish but only a fall through the 10 December low at 47,463 would let this scenario play out
Medium-term outlook: bullish while above the 14 October low at 45,452, targeting the 50,000 region
Dow Jones daily candlestick chart
EUR/JPY trades in multi-decade highs
EUR/JPY is seen pushing towards the (synthetic) December 1981 low at ¥186.41.
The next technical upside target is the January 1983 low at ¥187.57.
Immediate support sits around the ¥183.15 mid-December high.
Short-term outlook: bullish while above the November-to-December uptrend line at ¥181.99 and, more importantly, the ¥181.58 mid-December low
Medium-term outlook: bullish while above the 21 November low at ¥179.78
EUR/JPY daily candlestick chart
Natural gas futures trade in six-week lows
US natural gas futures have rapidly come off their 5 December 494.9 record high and slid to a six-week low at 345.9 around which they may find short-term support.
If not, the 200-day simple moving average (SMA) at 311.4 may be next in line.
Minor resistance sits between the November lows and mid-December high at 372.5-to-381.3.
Short-term outlook: bearish while below 372.5-to-381.3, targeting the 200-day simple moving average (SMA) at 311.4
Medium-term outlook: bearish while below the 420 region
Natural gas daily candlestick chart
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