Options market

With a quieter economic calendar attention will be on earnings. Disney, BP, and Uber are among some of the companies reporting this week.

The suspected intervention from the BOJ this week has changed the game for USD/JPY, placing a rather large barrier in the way of further upside at a time when US bond yields were already looking toppy.

Earnings drove volatility last week and continue to roll in this week. Attention will be on Amazon, Apple and HSBC. Here we look at what to expect.

The US 2-year bond yield remains support, which is capping the yield at 5% and weighed on the US dollar. And that helped AUD/USD rise for a second day ahead of a key AU CPI report.

EUR/USD futures traders are on the cusp of flipping to net-short exposure, and managed funds are increasing their short exposure to gold and crude oil.

The US dollar has risen around 6% from the late December low. And with bond prices approaching support which could send yields lower, the US dollar rally could at least find some headwinds - if not a retracement.

While the Nasdaq 100 has broken its 2024 uptrend, traders continue to buy the dip, generating a bullish signal on Thursday. That points to possible upside not only for US tech but also Japan’s Nikkei 225.

Long bond bulls will not like the message coming from the recent price action in the TLT ETF, warning of the potential for higher yields and increased capital losses. With little technical support below where it currently sits, it places even more importance on the Fed chooses to signal this week.

Recent price action in Nikkei 225 futures points to upside risks this week, indicating confidence among traders that even with major events such as rate decisions from the Bank of Japan and Federal Reserve, along with Nvidia’s GPU Technology Conference, the bull market that helped propel the underlying index to record highs is anything but finished.

Gold traders have a decision to make with fundamental headwinds building from a stronger US dollar and higher bond yields with the price yet to meaningfully respond. What the Fed signals next week looms as crucial for directional risks.

Friday looms as an important day on the directional risks for Australia’s ASX 200 with futures puncturing through uptrend support overnight dating back to when the Fed pivoted away from rate hikes in early November. Recent history suggests it may pay to wait to see whether the break sticks.

Bull markets are born on pessimism, grown on scepticism, mature on optimism, and die on euphoria. The stealth rally in China's A50 and Hong Kong's Hang Seng is keeping to the script.

Longer-dated US bonds are threatening to break higher into what’s arguably the most important US CPI report in nearly a year. What happens next will be important for broader financial markets given the implications for global borrowing costs.

USD/JPY and Nikkei 225 futures have been heavily influenced by US bond yields recently, meaning Tuesday’s US consumer price inflation report looms as critical for how Japanese markets may fare over the short to medium term. The bias for all remains lower in the absence of another hot inflation number.

Especially for those traders who like to dabble in markets exposed to currency or interest rate risk.

Where US long bond yields have moved in 2023, USD/JPY and Nikkei 225 have tended to follow. Right now, the risks for each are building to the downside.