Market sentiments continue to sway in the aftermath of the recent Federal Reserve (Fed) meeting, with major indices showing mixed performance (DJIA -1.08%; S&P 500 -1.64%; Nasdaq -1.82%). The US 10-year Treasury yields surged to a fresh 17-year high, nearing the 4.50% mark, reflecting a prolonged period of higher rates. Despite this, the US labor market demonstrated resilience with lower-than-expected jobless claims, providing the Fed with further support for its hawkish stance.
Currently, while Fed funds rate futures express some skepticism about the Fed’s final rate hike this year, the timeline for rate cuts has been pushed back to the second half of 2024. The US dollar experienced a slight pullback (-0.1%) overnight, while gold prices remained under pressure (-1.3%). Conversely, crude oil prices managed to recover slightly after initial oversold conditions.
In the US, major indices find themselves at a crucial juncture. The S&P 500 is testing a key support level at 4,330, while the Nasdaq 100 faces a significant test at 14,680 for dip-buyers. Rate-sensitive growth sectors have borne the brunt of the recent sell-off, with the SPDR S&P Semiconductor ETF seemingly breaking below a head-and-shoulder formation on the daily chart. While there’s potential for a bullish divergence to form on the daily relative strength index (RSI) if the index turns higher in the coming days, reclaiming the neckline resistance will be essential. Failure to do so may lead to a retest of the May 2023 low around the 174.00 level.
Asia Market Outlook
Asian markets are poised for a subdued opening, with Nikkei -1.16%, ASX -1.13%, and KOSPI -0.90% at the time of writing, following the negative lead from Wall Street. The focal point of the day is the Bank of Japan (BoJ) meeting. With BoJ Governor Kazuo Ueda hinting that the central bank might have sufficient data by year-end to decide on ending negative rates, markets are considering the possibility of an early-2024 rate hike. Consequently, all eyes will be on the Governor’s comments during the press conference for any hints of hawkishness that may support this timeline.
USD/JPY has reached a new year-to-date high this week, trading above the 145.00-145.80 range where the BoJ intervened with yen-buying in September 2022. The upcoming BoJ meeting will also scrutinize how policymakers address the weak yen and their tolerance for Japanese 10-year bond yields advancing to levels last seen in 2013.
A bearish divergence on the daily RSI suggests near-term exhaustion, but maintaining position above its Ichimoku cloud pattern and various daily moving averages (MA) suggests an ongoing uptrend for USD/JPY. The increasing yield differentials between US and Japanese government bond yields, which have reached a new 10-month high, may continue to exert upward pressure on the pair.
Silver’s Resilience in Focus
Silver prices have displayed resilience, with dip-buying evident following a post-Fed sell-off, as indicated by a bullish pin bar formation on the daily chart. Prices have risen after testing an upward trendline support since August 2022, with higher lows on the Moving Average Convergence/Divergence (MACD) suggesting upward momentum.
Further upside may target the $24.50 level for a retest, where the upper boundary of a months-long consolidation pattern is located. On the downside, the immediate support is the upward trendline.
Disclaimer: This analysis is for informational purposes only and should not be considered financial advice.
