Robinhood unveiled as the Sheriff of Nottingham

It wasn't supposed to be this way, but the Reddit army discovered their favourite broker for taking from the rich, Robinhood, was secretly the Sheriff of Nottingham. That dominated business news overnight as the Sheriff and his band of merry online brokers put a stop to the peasants' rebellion by restricting trading in GameStop, AMC and some other pimp up my price favourites. The resulting price plunge had the media wailing that $11 billion of value was wiped out in a single day; however, I would argue that there was never $11 billion of value in the first place. 

All the noise from the market's discount circle seats drowned out the US data releases overnight. US GDP rose 4.0% QoQ, slightly lower than expected, but not enough to set off a double-dip panic. Weekly Jobless Claims outperformed at 847,000 jobs lost. It's a strange old world where 847,000 new jobless claims from Americans in just one week, is perceived as good news. If nothing else, it reinforces the Federal Reserve’s dovish mantra from the day before.

That was enough to stop the mini taper tantrum of the previous day in its tracks. US equities clawed back some of the earlier days’ losses, the US Dollar edged lower, and US Treasury yields rose slightly. With the Sheriffs of Nottingham burning the peasants' crops, markets can now get back to the bigger issues at hand. US Personal Income is expected to rise 0.10% in December with the closely watched PCE Price Index rising 1.10% YoY. Only a substantial deviation is likely to be market-moving though with December data rapidly becoming old news.

Johnson and Johnson were expected to release preliminary data on their one-shot Covid-19 vaccine by the end of today, according to Dr Fauci. That is likely to be more market-moving, should if appear, then the US data releases. Positive news could spark a mini-rotation rally aka November into the end of the week.

Asia has a packed data calendar today, but trading in the region has a sedate "its Friday" look about it. South Korean Industrial Production rose by 3.40%, more than expected. Japan Unemployment remained steady at 2.90% with Industrial Production edging lower to -1.50%, possibly distorted by the US and European holiday seasons and Covid restrictions. Tokyo CPI revealed that inflation in Japan is still missing in action after 30 years. Australian PPI rose 0.50% QoQ, but was flat YoY, giving the RBA no inflationary concerns in the near term, especially as Private Sector Credit was also flat. 

The story will be much the same when Singapore PPI is released this afternoon, Vietnam Inflation fell to -0.97% with the Trade Balance outperforming at $1.3 billion. Malaysia releases its trade balance later today. The overall picture is one of a continuing recovery in exports by Asia, but with little to no sign of inflationary pressures emerging, as domestic demand remains muted. With interest rates at record lows across the Asia Pacific, central banks will be feeling no need to adjust ultra-easy policy and the region will continue to march in lock-step with the Federal Reserve in the first half of the year at least.

China releases official January Manufacturing and Non-Manufacturing PMI's on Sunday. Both headline numbers are expected to ease slightly to 51.5 and 55.4 respectively from December. A larger pullback could see some risk reduction in Asia on early Monday. Conversely, a surprise to the upside will probably boost Asian markets as they start the week.

US futures retreat in Asia

Wall Street rebounded overnight after US GDP and Initial Jobless Claims sprung no surprises. The S&P 500 rose 0.97%, the Nasdaq climbed 0.50%, and the Dow Jones jumped 0.99% with investors happy to buy the previous days dip. Momentum has faded in Asia though, with the futures on all three indexes retreating, notably the Nasdaq futures, which have fallen 0.65%.

That has led to a mixed day in Asia after the region tracked higher in early trading. The Nikkei 225 is 0.25% lower, with the Kospi falling 0.80%. In China, a 98 billion Yuan injection vis the repos by the PBOC has alleviated funding squeeze fears. That has lifted the Shanghai Composite 0.15% higher, and the CSI 300 0.10% higher. The Hang Seng has rallied by 0.55%, with IPO fever and Mainland investors notable. 

Singapore has risen by 0.45%, while Kuala Lumpur and Taipei have fallen by 0.25%, with Jakarta falling 0.75%. Australia's All Ordinaries is up 0.40%, with the ASX 200 rising by 0.25%. 

The retreat by the US index futures in aftermarket trading, has raised doubts among Asian investors about the longevity of the main session rally overnight. That has led regional markets to adopt a more cautionary stance into the end of the week, leading to flow driven mixed performances.

US Dollar falls after US GDP release

The US Dollar gave back some of its previous day’s gains overnight with the dollar index falling 0.21% to 90.46. Some risk reduction is evident in Asia today after the US equity index futures fell in Asia this morning. That has sent the dollar index higher to 90.67 this morning, almost completely unwinding yesterday's falls. The dollar index remains marooned between 90.00 and 91.00, and until either side is convincingly broken, noisy range trading will be the order of the day.

That has left the EUR/USD and GBP/USD also marking time. USD/JPY has broken out of its 7-month down-channel at 104.20 and is testing its 100-day moving average (DMA) at 104.45 this morning. A weekly close above the 100-DMA signals further gains to 105.70, although I would prefer to see a couple of daily closes above it to confirm.

AUD/USD and NZD/USD tested support zones yesterday at 0.7600 and 0.7100 respectively, before bouncing convincingly. Although they have edged lower today as the US Dollar has strengthened, both remain comfortably above support, hinting that their correction lower has run its course for now. Only the loss of the above levels changes that outlook.

USD/CNY was fixed slightly higher at 7.4709 by the PBOC today. However, the Yuan has strengthened this morning with USD/CNY falling to 7.4600. Although the PBOC injected 98 bio CNY via the repo market today, the squeeze higher in Shibor rates has continued. That funding squeeze is continuing to support the CNY, despite the US Dollar rally this week elsewhere. By default, that has also supported regional Asian currencies and explains by they have been immune to Dollar strength this week. Until Shibor rates ease, that is likely to be the continuing state of affairs. 

Oil's range-trading continues

More lightening of speculative long positions was evident overnight, with both Brent and WTI retreating modestly. Despite that, we remain in a range-trading market, a situation that has been in place for nearly three weeks now. Brent crude fell 0.35% to $55.50 a barrel, and WTI fell 1.0% to $52.10 a barrel. In Asian trading, both contracts have added 20 cents a barrel in quiet trading.

Yesterday marked the third day in a row that oil has tested the upside, only to retreat by the end of the session and trace out modest losses. With the rectangle formations on both contracts now three weeks old, the inability to break out higher has increased the odds of a downward correction before the longer-term rally resumes. An increase in doubts about the timing of the vaccine-led recovery could produce the directional push lower.

Brent crude is bound by resistance at $56.60 and $57.40 a barrel, with support at $54.50 a barrel. WTI has resistance at $54.00 a barrel, and support at $51.60 a barrel. Clearance of those levels, either way, will signal oil's next directional move. 

Gold staid while Silver soars

The Robinhood Reddit-massive appear to have put Silver in their sights overnight as it soared by 4.80% to $26.4740 an ounce. I would suggest the Reddit army reads about Bunker Hill before trying to GameStop the silver market; it is an altogether different beast. Given the rally's artificial nature, I will comment no more and watch from the side-lines.

Gold reflected the precious metals markets' true nature overnight, closing almost unchanged at $1843.00 an ounce, but below its 200-DMA at $1849.00 for the send day in a row. Although notionally a bearish signal, the series of almost unchanged finishes over recent days raises doubts over momentum, and it could be a false signal. Gold has tested support near $1830.00, and resistance near $1865.00 an ounce numerous times this week but has failed to break out either way. That probably tells us that patience from the side-lines is the most sensible strategy for now. 

Gold has resistance at $1875.00 an ounce, followed by the 100-day moving average (DMA) at $1880.00 an ounce. It has fallen through the 200-DMA at $1849.60, which becomes an intra-day pivot point. Support is at $1831.50, followed by the January 18th spike to $1802.50 an ounce.