Indices Monthly Trade

USD/JPY is clinging to 150 despite the weaker US dollar on Tuesday, as there seems little reason for traders to bid the yen. And unless we receive a compelling reason to buy then yen via a surprisingly hawkish BOJ or broad risk-off environment, it becomes difficult to construct an overly bearish case for USD/JPY whilst the Fed remain quiet about rate cuts.

Attention shifts the today’s US CPI report, which is arguably the biggest event of the week. So we crunch some numbers on the US dollar, S&P 500, Nasdaq and gold to see how they have performed around it.

We're seeing early signs that the US dollar rally could be losing steam and indices such as the DAX are finding stability. Whilst too early to pick out trend reversals, it does suggest that sentiment of this week is quietly changing.

The 4-month winning streak on oil prices is on track to be snapped, with October having erased all of September’s gains. And this flies in the face of current news flows, of the potential for the Middle East conflict to escalate and send oil prices higher (alongside food, energy and inflation expectations).

If we take a step back to admire the view, the Nasdaq 100 appears defiantly bullish with the clout of net-long asset managers fully behind it. Yet with so many headline risks, earnings season, and Fed members speaking this week, it could struggle to break key resistance nearby if geopolitical risks intensify amid calls of 'higher for longer' interest rates.

The bond rout and sharp rise in yields continue to take centre stage for sentiment. And the longer this trend persists, the greater the odds appear for indices to finally roll over. Given three key US indices are showing signs of stability around their respective support levels, it brings the potential for a minor bounce over the near-term. But if bond yields keep rising, any such bounce could prove futile for bulls.

The Fed delivered their hawkish hold, sending the US-JP 2-year yield differential to fresh cycle highs ahead of tomorrow’s BOJ meeting. And whilst the risk of verbal intervention remains from the MOF/BOJ, they may not actually intervene if the trend remains orderly. And price action on the USD/JPY daily chart suggests that it is.

We are now in the second full trading week of September, a month which has averaged negative returns for the Nasdaq 100. However, the market looks buoyant ahead of a key US inflation report, which has the potential to extend the Nasdaq's gains just as easily as it could send it sharply lower when the data arrives.

The DAX may have reached a record high on Friday, but a knock to sentiment and caution ahead of Jerome Powell’s testimony has seen it pull back to a three-day low.

Nvidia (NVDA) remains the best performer of the Nasdaq with a YTD gain of ~170%, yet a classic technical price signal suggests there could be further gains to follow as the year progresses.

Whilst there are some bets that the BOC could hike, we suspect recent data continues to point to another pause with the risk of a slightly hawkish statement. Either way, we remain bullish on CAD pairs overall.

Two contradictory reports wreaked a bit of havoc on AUD/USD today, with hot-CPI gains quickly evaporating upon the release of weak China PMIs.

AUD/USD is potentially within 1-2 trading days of testing its YTD low and the ASX 200 is in risk of falling further within its range, as debt ceiling talks weigh on sentiment.

Debt ceiling talks have been rolled over for another week, but if a resolution is found we expect the Nasdaq to continue outperforming Wall Street given its strong gains this year.

Today we look at the Dow Jones which has seen momentum turn swiftly lower, in line with appetite for risk.

With sentiment having improved, a soft inflation report form the US tomorrow could potentially support a breakout for Wall Street indices and extend a rally for the ASX 200.

US treasury secretary Janet Yellen has arguably stolen the show from the FOMC meeting, thanks to her comments on banking deposits which saw Wall Street slide into the close.