The XJO is expected to rally on open this morning following a strong move higher in the U.S overnight. Their core CPI came it slightly weaker than expected, but it was enough to help quell fears of a pause in interest rate cuts – for now.
Their market practically returned to their 50 day MA, and our market should do the same on open this morning. We should open just above 8,300 key resistance, with 8,350 a reasonable target today.
Last week our own weighted CPI came in mixed, but it was enough for our market to rally to 8,350. It was short-lived thanks to an uneasy and falling U.S. However now that the U.S has rallied strongly, we could be reinvigorated to continue to that level and perhaps beyond.
Of course, we will continue to follow the U.S for the most part. Their futures are only marginally in green and they have Retail Sales numbers tonight. They also need to contend with key levels of resistance and their downtrend line.
We have local unemployment numbers today, which could either help push our market higher, or suppress the intraday move. It is expected to come in at 4%, slightly weaker than the last reading of 3.9%, but as a whole, still stronger than what it was for most of last year at 4.1%. This has been a major battleground for the RBA, which wants to see unemployment increase to help battle inflation.
Markets have mean reverted, and though it sems a fire has been lit underneath them, this move could be short-lived. Both our market and the U.S have key levels to contend with now, and may not want to move too far away from the comfort of the 50 day MA with more data and Trump’s inauguration around the corner.
US Markets
The U.S rallied strongly overnight following a slightly weaker than expected core CPI release. November came it at 0.3%, and they were expecting the same for December, however core CPI only grew 0.2% – helping to quell fears of an interest rate pause sparked by the last hawkish Fed statement.
Prior to the announcement, the SP500 had been flirting with key support at roughly 5,860, holding on by its fingertips. The announcement reinvigorate them to push higher and finish just shy of the downtrend line and the 50 day MA. Both come in at roughly 5,950.
U.S futures are only marginally in the green. There still may be some hesitation as the reading last night may not be enough to completely extinguish the fear of a rate pause. They have Retail Sales numbers tonight, and Trump’s inauguration early next week. Last night’s move could easily prove to just be a simple and quick mean reversion back to the comfort of the 50 day MA. The SP500 will also need to contend with the downtrend line, key resistance at roughly 6,000, and key resistance at 6,050 before it can set its sights on all-time highs. Last night’s announcement isn’t likely to be enough to get them there, but it is a good start, and they could enjoy another session or two in the afterglow.
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