Markets Seem To Be Reversing In Beginning Of 2014

The markets seemed to be reversing the year moves in the first two days of trading in 2014. The Dow dived sharply by -135 pts to close at 16441.35, just after making record high of 16576.66 on January 2. S&P 500 also tumbled by -16.38 pts to close at 1831.98. Asian equities followed and are broadly in red while Japan markets are still on holiday. Hong Kong HSI drops over -400 pts, or -1.83% while Singapore Straits Times drops -24 pts, or -0.76%. In the currency markets, yen rebounds strongly on risk aversion with USD/JPY heading back to 104 handle for the moment. European majors are generally weak as the pull back against dollar extends. Meanwhile, Aussie also reversed some of year end's fall and breaches 0.90 handle. Technically, we'd be cautious on whether the reversal in markets would build up momentum.

In US, the Senate is set to vote on Janet Yellen's nomination as next Fed Chairman on Monday. The current vice chairman Yellen is expected to pass the vote easily and would become the first woman to chair Fed. She will take the reins on February first as Bernanke steps down on January 31. Before that, focus will be on the speeches of a number of Fed officials in an economics conference in Philadelphia. That include Philly Fed Plosser, Fed governor Stein, and chairman Bernanke. Richmond Fed Lacker will also speak today.

On the data front, Swiss will release KOF leading indicator and SVME PMIs today. Eurozone will release M3 money supply. UK will release PMI construction, mortgage approvals and M4 money supply. US will only release crude oil inventories and natural gas storage.

As noted above, Aussie and yen are both reversing last year's move. Comparing them, AUD/JPY is mildly bullish for the moment as it's staying above a flat 55 days EMA. Also the current development argues that the consolidation pattern from 95.67 might be completed at 91.05 already. Near term focus is on 94.22 resistance. Break will likely extend the medium term rebound through 95.67 resistance towards 61.8% retracement of 105.42 to 86.40 at 98.15.
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