Yesterday, major indices across the globe ended their trading sessions mixed as the media continued to report on the ongoing geopolitical tensions in the eastern part of Ukraine. However, the Fed minutes managed to ease off the tension slightly, but traders were still worried about future rate increases. In Europe, the main gainers were IBEX 35, FTSE MIB and the Euro Stoxx 50. DAX, FTSE 100 and CAC 40 closed slightly in the negative territory.
Fed Minutes Help Markets Recover A Bit
In the US, after a negative start of the trading day yesterday, the top three indices managed to recover some of their losses and end the session somewhat flat. The boost came after the Fed released the minutes from its last gathering, where they have noted that rates could be increased already in March, but not with the same aggressiveness as it was anticipated earlier.
This helped boost investor morale, allowing them to take advantage of the situation when the rates are still lower. As we understand, higher interest rates are not seen as positive for the equities due to higher borrowing costs.
The first increase by 25 bps is already expected in March, with further hikes expected during May and June meetings. However, how drastic would further hikes be? Only time will tell.
DJIA – Technical Outlook
Dow Jones Industrial Average is now seen trading above a newly-established short-term tentative upside support line drawn from the low of Jan. 24. That said, the index seems to be struggling with a resistance area between the 35055 and 35142 hurdles, marked by the highs of February 15th and 16th, respectively. We prefer to wait for a decisive break above that resistance area to aim for slightly higher levels.
If eventually, the index pops above the above-discussed resistance area, this will confirm a forthcoming higher high. More buyers might join in and drag the price towards the 35438 hurdle, marked by the high of Feb. 11. If that obstacle cannot slow down the bulls, the next potential target could be at 35870, which is the current highest point of February.
On the downside, a break of the previously discussed upside line may open the door to some lower levels. DJIA could then drift to the current lowest point of February, at 34302, where the index might receive a temporary hold-up. If that hurdle breaks, this could open the door to the next possible support target, at 33733, which is the low of Jan. 28.
Australia’s Employment Numbers Come Out On The Modest Side
During the Asian morning, we have received the Australian jobs numbers for January. The participation rate improved by a tenth of a percent from the previous one, showing up at 66.2%. Although the employment change number came out at 12.9k, which is better than the initial forecast of -15.0k, the previous reading was at 64.8k. The unemployment rate remained at the same level, at 4.2%. Overall, the report was not bad, which may keep RBA away from raising rates for a while.
AUD/CHF – Technical Outlook
Currently, AUD/CHF is trading between two short-term trendlines, an upside one taken from the low of Jan. 28 and a downside one taken from the high of Feb. 10. A break of one of those lines is needed to consider the next short-term directional move.
A push above the aforementioned downside line might strengthen the idea of seeing a further rise, especially if the rate climbs above today's current high, at 0.6650. Such a move could attract a few extra buyers into the arena, potentially leading the pair towards the current highest point of February, at 0.6691. AUD/CHF may stall there for a bit. However, if the bulls don’t stop, a hurdle break would confirm a forthcoming higher high and might lead the pair towards the 0.6731 level, marked by the high of Nov. 25.
Alternatively, if the previously discussed upside line breaks and the rate falls below the 0.6549 hurdle, marked by the current lowest point of this week, that might spook some bulls from the field temporarily. AUD/CHF could drift to the 0.6517 obstacle, a break of which may open the door for a move to the 0.6492 level, marked by the low of Jan. 28.
US Data In Focus
Later on, the US will release a few data sets for market participants to digest today. January’s building permits will be released, and the current expectation is for a decline from 1.885mln to 1.760mln. If so, this would be the first month that the figure would be below forecast, after three straight months of gains.
The initial and continuing jobless claims are on the agenda as well. Both readings are expected to decline slightly. The initial claims are believed to have dropped from 223k to 219k. The continuing ones are forecasted to slide from 1621k to 1605k.
As For The Rest Of Today’s Events
Another piece of economic data from the US that will be delivered today will be the Philadelphia Fed Manufacturing index for February. The current expectation is for the reading to show up at 20.0. If so, this would be lower than the previous 23.2.
Since March of last year, the figure has been steadily declining. To beat the March 2021 number, we would need to see the actual figure coming out above 51.8. However, for now, it seems unlikely, as current higher inflation reduces the variety and quantity of goods that a household can purchase, forcing the consumer to choose one good over another.
This means that production levels in specific sectors might slow down a bit.