Pre-Market: Stocks Bounce on Chinese Data as US Retail Sales Miss Again

After yesterday’s smooth inflation report, and the following risk sell-off, today the focus has been on Chinese industrial production and the US retail sales report. The Chinese release was much better than expected, causing a rally off yesterday’s lows in global equities, but interestingly not in Chinese mainland stocks.

Shanghai Composite, 4-Hour Chart Analysis

The US retail report, on the other hand, was worse than expected yet again, showing another decline in the crucial measure after last month dismal reading. On o positive note, the January release was revised slightly higher, but that didn’t change the overall picture of the weak report.

The producer price index came in higher than expected in the data-heavy pre-market session, and if last week’s employment report was perfect for bulls, then we have to say that today’s numbers are quite the opposite, as they signal margin pressures on producers with less than stellar demand.

Dow Futures, 4-Hour Chart Analysis

The reaction of the market is mixed so far, as although the Dollar and Treasury yields are higher in line with the message of the releases, stock futures are trading just below their overnight highs before the opening bell. That said, as the technical picture deteriorated yesterday, bulls shouldn’t jump back just yet, as the overbought readings in the readers are not yet cleared and the negative divergences still persist.

Forex Markets Mixed with USD and AUD in Focus

EUR/USD, 4-Hour Chart Analysis

The Dollar’s uptick is muted so far against its main peers, s the EUR/USD is holding up above its overnight lows, while the Yen remained strong across the board despite the risk rebound today.

AUD/USD, 4-Hour Chart Analysis

The Australian Dollar and industrial commodities are the main beneficiaries of the Chinese industrial strength, while crude oil also produced a weak bounce before the afternoon’s US inventory report, which usually causes volatility in the commodity.

The Aussie continued its oversold rally after yesterday’s pull-back but the momentum of the move is now weakening, and we wouldn’t be surprised if another downswing would be just around the corner.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.