Corporate Earnings in Focus with Little Macro Data Scheduled for Today; Nikkei 225 Hits Resistance at 9715

By Richard Cox
Richard Cox
Richard Cox
July 25, 2014 Updated: April 23, 2016

The Euro is trading near it closing level from last Friday with the next regional event coming with today’s vote in Germany on the second Greek bailout package.  Weekend comments from the Governor of the People’s Bank of China were supportive, as he stated that the central bank is prepared to increase its loan availability to the International Monetary Fund (IMF).  For the most part, momentum is slowing in the markets as there have been no significant headlines in recent sessions to give traders guidance.

This will likely continue today in the UK, as there are no major macro releases but we will see corporate earnings from HSBC, Pearson, Cookson Group and Bovis Homes.  Stock indices in Asia are trading with mixed results, with positives seen in the Parco Company rally on news that it will be acquired by J. Front Retaling.  Tokyo Dome Corp. was also seen higher on strong profit results for the year (previously the company had forecast losses for the period).  The Nikkei 225 index is trading near its Friday close, with prices holding steady at 9,630.

In the US, the main data releases are the Pending Home Sales report and the Dallas Fed Manufacturing survey.  There will also be a few significant corporate earnings releases, with Lowe’s,, El Paso Corp., and Southwestern Energy on schedule for release today.  The main story in stocks on Friday focused on Metro PCS, which surged nearly 8 percent in the aftermarket session after it was revealed that Nextel no longer has plans to acquire the company.  Vocus, Idenix Pharmaceuticals, Sears, and EarthLink were also amongst the major gainers on the day.

Futures in both the DAX and CAC are suggestive of a lower open with today’s data seen with the French Producer Price Index (PPI) and Eurozone M3 Money Supply.  Earnings reports, however, are mostly second tier and not expected to do much to move equity markets.  The G20 meeting over the weekend did make comments relative to the debt situation in the Eurozone, saying that a “firewall” needs to be put in place in order for IMF loan limits to be raised

Technical Analysis:

Epoch Times Photo

The AUD/USD is starting to look top heavy after its latest rally as prices are now seen forming lower highs on the hourly charts.  A confirmation of this bearish bias will be seen with a break below 1.06, as this level marks critical support in the short term.  A break here will accelerate losses and send prices to the 38.2% Fibonacci retracement at 1.0390.  Traders can initiate short position on bounces after we have seen an hourly close below 1.06.  Stops should be placed at 1.0765.

Epoch Times Photo

The Nikkei 225 has staged an impressive rally in recent weeks but there is some evidence that prices have reached their exhaustion point.  On the dailies we can see a bearish engulfing candle after prices hit resistance at 9715.  This, along with overbought indicator readings suggests that we will need to see prices drift back to support, at lease in the 9420 region before we can see another run higher.  Short term longs can be initiated at this level, with stops below 9380.