US TSYS: Yields Decline on Terming Out Comments, Policy High Uncertainty

US equities have sustained gains made through early afternoon, with small cap futures (Russell 2000 +1.7%) outperforming larger-cap counterparts. Dow futures (+1.1%) lead the rest of the pack, with S&P e-mini futures (+0.8%)  and Nasdaq (+0.6%) slightly lagging.

• All major sectors of the S&P 500 are in the green for the day, with energy (-0.7%) the only category in the red. Oil majors have performed poorly amid soft crude prices, reflecting promises by Pres Trump to boost US oil production.
• Utilities (Vistra up 9+%), Industrials, and Real Estate are each up 1.8-2.0%. Tech (and the NASDAQ), up 0.4%, is a laggard despite reports that President Trump will announce a major AI investment involving OpenAI, Softbank and Oracle. Attention is on this announcement which is due just after the cash close.
• Note that Netflix is higher (+1%) ahead of earnings anticipated after the close.
• Front S&P e-mini futures have traded in a large range, dropping to just below 6,000 (5994.50) overnight on Trump clarifying that tariffs on Mexico and Canada were still threatened, with the high of 6,086.50 remaining below resistance (6107.50 High Dec 26).

• RES 4: 165.43 High Nov 8 
• RES 3: 164.90 High Dec 30 and a key short-term resistance  
• RES 2: 164.55 High Jan 7
• RES 1: 162.31/89 High Jan 20 / High Jan 15 
• PRICE: 161.76 @ 16:21 GMT Jan 21 
• SUP 1: 159.73 Low Jan 17     
• SUP 2: 159.51 61.8% retracement of the Dec 3 - 30 bull cycle   
• SUP 3: 158.67 Low Dec 11
• SUP 4: 158.24 76.4% retracement of the Dec 3 - 30 bull cycle

A short-term bear cycle in EURJPY remains intact. Last week’s move down marked an extension of the current downtrend. The cross has pierced support at 160.04, the Jan 13 low. A clear break of this level would strengthen a bearish threat. The next price point to watch is 159.51, a Fibonacci retracement. The cross has recovered from its recent lows, a move above 162.89, the Jan 15 high, would reinstate the recent bullish theme.            

• Crude futures have lost ground today as the market assesses the potential impact of the new US administration, with Trump promising to boost US production further.
• WTI Feb 25 is down by 2.3% at $76.1/bbl.
• US President Trump declared a “national energy emergency” to be able to increase domestic oil and gas production and reverse Biden’s climate change policies.
• Trump also said that he planned to impose previously threatened tariffs of as much as 25% on Mexico and Canada by Feb 1.
• Platts expects a tentative bullish effect on oil prices from these tariffs, due to increased freight costs amid expected oil trade reshuffling.
• The trend structure in WTI futures remains bullish despite the latest pullback, which has allowed an overbought trend reading to unwind. Attention is on $79.48, the Apr 12 ‘24 high. Support to watch is the 20-day EMA, at $74.75.
• Meanwhile, Henry Hub has fallen as freezing weather over the long weekend failed to significantly curb gas output, while forecasts expect temperatures to rise, and thus cut heating demand, next week.
• US Natgas Feb 25 is down by 4.7% at $3.76/mmbtu.
• Spot gold has risen by a further 1.3% to $2,743/oz today, its highest level since Nov 6, driven by the possibility of tariffs on US gold imports.
• The yellow metal has pierced key short-term resistance at $2,726.2, the Dec 12 high, exposing $2,790.1, the Oct 31 all-time high.