Dow Jones Futures, 10-Year Treasury, Vaccinations, ASX 200 – Asia Pacific Indices Briefing
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Monday Wall Street Trading Session Recap
Wall Street may have been closed for the Presidents’ Day holiday, but that didn’t prevent global equities from extending gains over the past 24 hours. Futures tracking the Dow Jones, S&P 500 and tech-heavy Nasdaq 100 climbed to start the week. In Europe, stocks rallied with the Euro Stoxx 50 gaining 1.04%. The UK’s benchmark FTSE 100 was a notable standout, soaring 2.52% on Monday.
A lack of major economic event risks meant that the focus for investors largely remained on broader fundamental themes, like fiscal stimulus expectations and vaccine rollouts – as expected. The UK hit 15 million Covid-19 vaccinations, prompting calls for Prime Minister Boris Johnson to ease lockdowns, contributing to strong gains in the FTSE 100.
In the US, about 78% of shots delivered have been administered – according to Bloomberg. Now, more citizens have been vaccinated with at least one shot than there have been confirmed cases since the pandemic began. Crude oil prices and energy shares got a particular boost as extreme cold weather in Texas and power outages prompted concerns about supply.
Still, the reflation trade has been picking up momentum. As Treasuries opened for trading after the holiday, the 10-year rate soared by 4 basis points, climbing to 1.25%. The 30-year yield also joined in on the action. Despite rising longer-dated government bond yields, equities have remained on their broader upward trajectory, supported by loose policy from central banks and aggressive amounts of fiscal stimulus.
Dow Jones Technical Analysis
Dow Jones futures are climbing deeper into record highs, with the Tuesday candle aiming to close above the 38.2% Fibonacci extension level at 31551. However, negative RSI divergence does show that upside momentum is faltering. This can at times precede a turn lower. There may be room for sharp losses that take the index towards rising support from March 2020, which may reinstate the focus to the upside.
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Dow Jones Futures – Daily Chart
The 10-year Treasury yield is climbing deeper into peaks achieved back in March 2020. A close above the 1.1882 – 1.2756 resistance zone would expose the former 1.4280 – 1.5065 support zone which may come into play as new resistance. There is also the presence of negative RSI divergence, which can precede a turn lower. In such an outcome, keep an eye on the pair of rising trendlines noted on the daily chart below.
10-Year Treasury Yield – Daily Chart
Tuesday’s Asia Pacific Trading Session – Nikkei 225, ASX 200, RBA Minutes
With futures tracking Wall Street pointing higher, Asia-Pacific equities may extend gains on Tuesday. The Nikkei 225 recently topped 30k for the first time since August 1990. This followed upbeat Japanese GDP data over the past 24 hours. Australia’s ASX 200 may also climb after RBA minutes highlighted that the country still needs significant support. Chinese stock exchanges are still offline for the new year, creating lower-than-usual liquidity conditions which raise the risk of volatility on breaking headlines that drive price action.
For more data, check out the DailyFX economic calendar.
ASX 200 Technical Analysis
The ASX 200 is aiming to push above the 6893 inflection point from December 2019. But, price gains may be slowed by rising resistance from November. The midpoint of the Fibonacci extension is also above at 6979 as prices climb towards the 2020 peak. Negative RSI divergence does warn that upside momentum is fading. A turn lower may place the focus on rising support from March on the daily chart below.