US equities bounce back as yields retreat
The Japanese yen and the Nikkei 225 index rose today even after the relatively weak economic numbers from Japan. The Nikkei index rose to ¥20,050 while the yen rose by more than 0.25%. In an earlier report, the country’s statistics agency said that the overall GDP had expanded by 2.8% in the fourth quarter after rising by 5.3% in Q3. The economy rose by 11.7% on an annualised basis. Meanwhile, the average cash earnings declined by 0.8% while the household spending declined by 7.3% and by an annualised rate of 6.1%. All these numbers were worse than expected.
European stocks and American futures rose today after the US Treasury yields erased earlier gains. The 10-year yield declined from yesterday’s high of 1.594% to 1.535% while the 30-year yield fell from 2.319% to 2.24%. The 30-year tends to correspond with mortgage payments. Analysts and traders are now focusing on the US inflation numbers that will come out tomorrow. In general, analysts expect the numbers to reveal that the headline CPI jumped from 1.4% in January to 1.7% in February.
The euro recovered today mostly because of the bond market. In a report by Eurostat, the Eurozone economy contracted by 0.7% in the fourth quarter after it expanded by 12.4% in the previous quarter. Analysts were expecting the economy to have contracted by 0.6%. The economy contracted by 4.9% on an annualised basis. Focus now shifts to the upcoming European Central Bank (ECB) interest rate decision. The bank will start the meeting tomorrow and unveil its decision on Thursday.
The EUR/USD had a relief rally today as US treasuries calmed down. The pair rose to an intraday high of 1.1908, which was the highest level since Friday last week. On the hourly chart, the price managed to move above the descending channel shown in yellow. It also crossed the 14-day and 28-day moving averages. While the pair could continue rising, there is also a possibility that it will resume moving in a downward trend.
The USD/JPY declined from an intraday high of 109.25 to 108.58. On the hourly chart, the price managed to move below the 14-day moving average. Oscillators like the Average Directional Index (ADX) and the Relative Strength Index (RSI) have also dropped. Still, the price is slightly above the ascending yellow trendline that connects the lowest levels since February. Therefore, the upward trend may continue so long as the price is above this trendline.
The Dow Jones index rebounded today as US yields retreated. The index rose to an intraday high of $32,137, which is a record high. The price is also above the 25-period and 15-period simple moving averages (SMA) while the Relative Strength Index (RSI) has moved slightly below the overbought level of 70. Therefore, the pair may continue rising as bulls attempt to retest its all-time high at $32,137.