With the technology sector coming off fairly aggressively in US trade, Intel has hit my suggested limit. For traders who didn’t attach a profit target (or limit) I would suggest moving stops to break-even.
The various oscillators have moved to highlight a more bearish picture. However, I am cognisant of the sizeable gap on the daily chart and would be cautious here and would subsequently wait to see how price action develops around the $34.71 to $35.57 area. The December and January double bottom could be a good level to revisit shorts, but I feel we will need to see a real breakdown in sentiment towards the US equity markets to see strong downside in a quality corporation like Intel. When there simply isn’t a major structural corporate issue then a 7% profit is welcomed.
Australia Q4 CPI is due today at 11:30 AEDT and the market expects headline inflation to come in at 1.8%. A number towards 1.5% would clearly see the market ramp up its expectations of a rate cut from the Reserve Bank of Australia in February given they target the 2-3% band. As things stand the market is putting a 37% probability of easing and therefore a weak inflation print should see these expectations out to 60-70%, in turn putting a strong bid in the Australian bond market (this has a weakening effect on the currency).
Supply has been seen over the last two sessions just under the 38.2% retracement of the ¥97.412 to ¥92.179 move at ¥94.181. On the downside support is seen around the uptrend drawn from the 2013 pivot low at ¥92.30 and a break here could signal a deeper correction. It seems todays Aussie CPI is pivotal for rate expectations.
US 500 cash
The longer-term trend is up and as discussed before I think the monthly chart is key and therefore a monthly close below the 2012 uptrend (currently at 2,016) and even more importantly the 12-month moving average (currently seen at 1,964) could signal a major shift in traders behaviour. On the daily chart the 20-day moving average is tracking sideway and as such I would look at applying Bollinger bands, which are currently suggestive of playing a range of 2067 to 1993. Good buying seems to coming into the market (as we saw in overnight trade) at the 20-day average (2,025), so this seems to be fairly critical for the index.
On 23 January, I suggested going long USD/JPY on a daily close above the 20 January high of ¥118.87. After a number of attempts to break this level, it seems the pair lacks the momentum to really drive through this key level. A poor US durable goods report has taken some of the wind out of the USD's sails and could put some downside risks to this Fridays GDP reading, which at this stage is expected to show annualised growth of 3%.
Early tomorrow morning (06:00 AEDT) we get the FOMC statement and while no major news is expected they may set the scene for the March meeting. If the Federal Reserve are going to lift the funds rate this year then they will need to give a strong message for this in the March meeting. Stay neutral on the pair for now and let price dictate play.