DOW falls out of bed as EUR/JPY slips, US natural gas futures bounce back

Macro Update

Nasdaq suffers worst selloff in 18 months: The Nasdaq Composite plunged 5.5% on Thursday, confirming a correction as the Democrats’ midterm sweep fuelled concerns over tighter AI regulation and slower data centre construction. The Nasdaq 100 tumbled 6.4%, wiping $2.5trn from market value, while the S&P 500 fell 4.4%.

Chipmakers and neocloud stocks plunge as AI fears intensify: The Philadelphia semiconductor index dropped 12% to its lowest level in more than six months, with Nvidia falling 9% and AMD 17%. CoreWeave slid 10% as its five-year credit default swap spreads hit a record, while UBS estimated that around 30% of expected US data centre capacity additions in 2028 could be at risk.

Asian equities extend global technology selloff: Japan’s Nikkei sank 6% to 57,434.77, its worst weekly performance since March 2020, while Taiwan’s benchmark ended 4.5% lower after plunging more than 8% earlier, bringing its weekly loss to 12.2%, the largest since 1991. Authorities in Taipei and Seoul moved to contain the selling.

Investors seek shelter in bonds and traditional havens: US, Japanese and Chinese government bonds rallied, with the US two-year yield falling around 10 basis points to its lowest since 10 September and China’s 10-year yield hitting a record low. The yen climbed to a one-week high of 157.27 per dollar, while the dollar index rose 0.25% to 101.76.

Oil rebounds on Hormuz supply fears but remains set for weekly plunge: Brent crude rose 1.3% to $99.58 a barrel after briefly topping $100, as renewed tanker attacks in the Strait of Hormuz revived concerns over supply. However, prices remained on track for a 12% weekly decline on hopes that the Democratic victory could help de-escalate the Iran war.

Gold retreats as investors raise cash ahead of US jobs data: Spot gold fell 1.1% to $4,044.09 an ounce as stronger oil prices fuelled inflation concerns and investors sold positions to meet margin calls. Bullion remained on track for its strongest week since late August, while markets priced roughly a 70% probability of a Fed rate hike in December ahead of Friday’s non-farm payrolls report.

Dow Jones forms bearish engulfing pattern

The Dow Jones Industrial Average swiftly came off its two-month high and wiped out 15 days of gains within a day, ending Thursday at a three week low.

The US stock index remains under pressure and nears its mid-October low at 51,370 which, together with the mid-September-to-5 October lows at 52,179-to-50,868 may offer support. If not, the 200-day simple moving average (SMA) at 50,670 and early October 50,552 low may be revisited.

Minor resistance sits in the 51,677-to-51,880 region and further minor resistance at the 23 October low at 52,060.

Short-term outlook: bearish while below the 28 October high at 52,639

Medium-term outlook: neutral with a bearish undertone while below the 5 November high at 53,716

Dow Jones daily candlestick chart

EUR/JPY comes back under pressure again

Earlier this week EUR/JPY briefly made a one-month high before slipping to its early October low at ¥176.22. In case of a daily chart close below this low being made, the October lows at ¥175.10-to-¥175.08 would likely be back in the frame.

Minor resistance sits at the mid-September ¥177.37 low, followed by the ¥177.96 mid-October high.

Short-term outlook: bearish while below the 4 November ¥178.48 high

Medium-term outlook: bearish while below the 18 September high at ¥181.555

EUR/JPY daily candlestick chart

US natural gas futures bounce off support

US natural gas futures are seen bouncing off their recent 271.8-to-270.9 lows but need to overcome their 285.7-to-286.5 August-to-September highs and 1 October low on a daily chart closing basis for further upside towards the late October high at 296.2 to become possible.

A currently unexpected slip through the 271.8-to-270.9 support zone would likely push the 10 September low at 264.7 to the fore and perhaps also close the price gap with the 27 October high at 257.9.

Short-term outlook: bullish while above the 30 October 270.9 low

Medium-term outlook: neutral while above the 24 April 235.1 low but below the 9 March 322.9 high

US natural gas daily candlestick chart