Asian Open: VIX rises to a 4-week high, AU employment at 11:30

Wednesday US cash market close:

The Dow Jones Industrial fell -534.34 points (-1.51%) to close at 35,028.65
The S&P 500 index fell -44.35 points (-0.97%) to close at 4,532.76
The Nasdaq 100 index fell -162.916 points (-1.07%) to close at 15,047.84

Asian futures:

Australia's ASX 200 futures are up 30 points (0.41%), the cash market is currently estimated to open at 7,362.50
Japan's Nikkei 225 futures are up 60 points (0.22%), the cash market is currently estimated to open at 27,527.23
Hong Kong's Hang Seng futures are up 244 points (1.01%), the cash market is currently estimated to open at 24,371.85
China's A50 Index futures are up 19 points (0.12%), the cash market is currently estimated to open at 15,249.69

Bond yields eased, dollar bulls took a step back

Selling across bond markets saw yields ease form their highs and break a 3-day winning streak. The US10-year reached a high of 1.9% before closing -21 bps lower, whilst the 2-year reached 1.077% before effectively closing flat. US indices all closed in the red as they extended their declines with the Nasdaq falling over 1%. The S&P 500 was down just under 1% and the VIX rose to a 19-day high. Short-term volatility is also rising relative to longer-term volatility as the 30-day VIX is approaching levels similar to VIX futures contract 6-months out. It’s not in backwardation yet but volatility will likely spike if it does (this is where near-term VIX is higher than future VIX contracts).

Direction for USD/JPY remains on a knives edge

USD/JPY remains beneath trend support and prices breached the bearish pinbar low to warn of a near-term reversal. Yet prices also holding above key support around 114.26 which is a bullish hammer high and 50-day eMA. Should prices break below 114 then we need to take trend resistance a bit more seriously, otherwise the bias remains for an eventual upside break of trend resistance / 115 as USD/JPY tracks yield differentials higher. Take note that Japan’s trade data is scheduled for 10:50 AEDT.

AUD firms ahead of today’s employment report

The softening of the dollar saw AUD/USD as the strongest major, but the Aussie also rose against all of its major peers. AUD/CAD rose from key support to delay it potential break of the December low. Over the near-term the March 2020 highs could either be a bullish target or area for bears to fade into. 82 remains a key level for AUD/JPY and price action from the Jan high appears to be corrective. We therefore suspect it is building a base above 82 and looking for evidence is bullish trend from the

December low resumed. Employment data is scheduled for 11:30 AEDT, although as Tony Sycamore noted, the report doesn’t capture the pr-Omicron surge (which will not be revealed until the Jan and Feb reports). Unemployment is expected to fall to 4.5% and 60k jobs are expected to have been printed in December.

Read our guide on the Australian Dollar

Clear break of trend support on the ASX 200

The ASX 200 fell to a 3-week low yesterday and cleared several levels of support, including the December trendline, January 6^th low and 61.8% Fibonacci level. We therefore prefer to fade into rallies whilst prices remain below the monthly pivot point. Next major support is the 7257 low with 7300 making a likely interim support level.

ASX 200: 7332.5 (-1.03%), 19 January 2022

Energy (0.59%) was the strongest sector and Information Technology (-2.56%) was the weakest
2 out of the 11 sectors closed higher
9 out of the 11 sectors closed lower
7 out of the 11 sectors outperformed the index
140 (70.00%) stocks advanced, 49 (24.50%) stocks declined

Outperformers:

+2.97% - Harvey Norman Holdings Ltd (HVN.AX)
+2.83% - Premier Investments Ltd (PMV.AX)
+2.54% - Virgin Money UK PLC (VUK.AX)

Underperformers:

·-16.1% - Megaport Ltd (MP1.AX)
·-9.7% - Novonix Ltd (NVX.AX)
·-6.8% - Allkem Ltd (AKE.AX)

Up Next (Times in AEDT)

How to trade with City Index

You can easily trade with City Index by using these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.