Dow nears record high as EUR/JPY recovers and natural gas probes support
Technical analysis of the Dow as it nears its record high while EUR/JPY recovers and natural gas probes support.
Macro update
Markets tread cautiously:
Asian equities edged lower and the United States (US) dollar firmed as investors adopted a wait-and-see approach ahead of the US jobs report and a potential Supreme Court ruling on Trump-era tariffs, due around 3pm, which could spark volatility.
Tariff ruling a key wildcard:
Markets are braced for a Supreme Court decision on the legality of global tariffs, with traders warning that overturning them could push Treasury yields higher, trigger up to $150bn in refunds and unsettle risk sentiment.
Jobs report in focus:
December non-farm payrolls (NFPs) are forecast to increase by around 60,000 after November’s 64,000 gain, reinforcing the “no hire, no fire” narrative and keeping expectations for the Fed firmly on hold this month.
Rates and dollar steady:
Despite Federal Reserve (Fed) officials signalling only one cut, markets continue to price at least two rate reductions this year, with the dollar index near a one-month high and 10-year Treasury yields hovering around 4.18%.
Equities mixed across regions:
Japan’s Nikkei 225 jumped 1.5% on strong Fast Retailing results, European futures edged higher, while US markets closed mixed as weakness in tech was offset by defence stocks hitting record highs on expectations of higher military spending.
Mining M&A in the spotlight:
Rio Tinto and Glencore confirmed talks on a potential all-share merger that could create the world’s largest mining group with a combined market value of around $207bn, adding a corporate catalyst to an otherwise cautious market backdrop.
Dow Jones aims for record high
The Dow Jones Industrial Average is seen heading back up towards its Wednesday record high at 49,621, just shy of the psychological 50,000 mark.
Immediate upside pressure should remain in play while Thursday's low at 48,792 underpins on a daily chart closing basis.
Short-term outlook:
Bullish, targets the 50,0000 mark while above 48,792.
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 bounces off support
EUR/JPY is seen bouncing off this week's ¥182.64 low towards its 26 December and 2 January highs at ¥184.43. A rise above this resistance level would put the December peak at ¥184.92 on the map.
Further up lie the (synthetic) December 1981 low at ¥186.41 and the January 1983 low at ¥187.57.
Were a fall through this week's low at ¥182.64 to be seen, the 19 December low at ¥182.26 may be revisited.
Short-term outlook:
Bullish while above the mid-December ¥181.58 low.
Medium-term outlook:
Bullish while above the 21 November low at ¥179.78.
EUR/JPY daily candlestick chart
Natural gas futures trade in two-month lows
US natural gas futures have rapidly come off their 5 December 494.9 record high and slid to a two-month low at 301.9 around which they found short-term support. It is also where the 200-day simple moving average (SMA) at 311.0 can be seen.
A drop through 301.09 would likely engage the 24 October low at 281.0.
Minor resistance can be spotted at Thursday's 326.6 high and along the December-to-January resistance line at 338.5.
Short-term outlook:
Bearish while below the December-to-January resistance line at 338.5.
Medium-term outlook:
Bearish while below the 30 December 376.60 high.
Natural gas daily candlestick chart
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