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FTSE off all-time highs, USD softer

FTSE

Demand in oil and commodities retreated in Asia. WTI futures bounced lower after hitting $54.57 (£44.52) in New York, the highest level since July 15.

Asian traders handed over a risk-off market. FTSE futures slid 0.31% in Asia, after the FTSE 100 index closed at an all-time high on Wednesday.

A combination of profit-taking and risk-off is weighing on UK’s 100 largest caps in London.

All FTSE sectors opened in the red, except basic materials (+0.59%). Randgold (LON:RRS) (+1.39%) and Fresnillo (LON:FRES) (+2.14%) consolidate gains on the back of firmer gold prices. Softer US yields and broad based USD depreciation remain supportive of a further rise above the $1150/oz (£938.24/oz) resistance, hence gold miners have further room to outperform their peers at today’s session.

The pound tested the 1.2200 mark, before the USD headwinds hit the market in New York yesterday. Decent put options trail above 1.2300 at today’s expiry and could cap any positive attempt in Cable moving into the year-end.

The USD/JPY stepped into the bearish consolidation zone, after slipping below the critical 116.55 level (major 38.2% retracement on Dec 8th to Dec 15h rise). Softer US yields, combined to the short-term bearish reversal could encourage a deeper technical correction toward 105.90 (Fibonacci 50% level). Light put options trail below 116.25 at today’s expiry.

In the mid-term, the USD/JPY bias remains positive. The divergence between the US and Japanese yields remains comfortably supportive of a weaker yen. Hence, mid-term JPY-bears could find interesting dip-buying opportunities to strengthen their mid-term short positions in yen. Yet, it could be cautious to wait until signs of exhaustion on the buy side.

The US dollar depreciated against all of the G10 and the majority of the emerging market currencies on the back of an unexpected 2.5% month-on-month drop in pending home sales in November. The data pushed the exhausted US bulls to the sidelines and triggered a sell-off in both the US dollar and the US stocks.

S&P 500 closed yesterday’s session 0.84% lower, Dow Jones and Nasdaq wrote-off 0.56% and 0.89% respectively.

US futures were flat in Asia. The appetite in Asian and global equities dropped after Toshiba Corp. (T:6502) recorded its biggest intra-day drop on record, losing up to 26% in the session. Japanese stocks slid the most in more than a month.

The US’ November trade balance and the weekly jobless claims are due today. Any disappointment could cause a further disillusion regarding the US recovery and encourage a deeper correction in the US markets, given that there is room for significant pullback following the relentless, two-month rally in the US stock markets following Donald Trump’s appointment as the US’ next president.

The US stocks are set for a softer open. The Dow Jones is called thirteen points lower at 19820. The S&P 500 is expected flat at the US open.

Paul

The author Paul