Top Trade Ideas - February 19th
As markets move past the US inflation numbers, Nvidia's earnings call takes the spotlight for the market-leading AI and semiconductor name.
The US benchmark’s strong start to the year is sending analysts back to their notepads. Goldman’s 5,200 price target for the S&P 500 in 2024 is now among the highest on Wall Street, joining the ranks of Wall Street bulls, including Tom Lee of Fundstrat Global Advisors and Oppenheimer Asset Management chief strategist John Stoltzfus, who both hold a similar year-end outlook.
But the week ahead sees just a four-day week for US equity markets, as Washington’s birthday is a national holiday. Monday markets are closed.
Investors shook off a hotter-than-expected CPI print last week, but Friday saw a technical rejection of Monday’s ATH, potentially indicating a rangebound S&P 500 between 4920 and 5040.
The hottest event we’ll see this week will be Nvidia’s earnings on Wednesday after the market close. Expectations are high for Nvidia to hold its tremendous gains as the semiconductor and AI hype continues even higher in 2024.
In G10 FX, the rise in core inflation saw a strong USD bid on Tuesday. The gains were slowly unwound, with the DXY ending the week roughly where it started it, in the low 104s. Elsewhere, UK inflation continued to fall, but the country entered a technical recession.
Today, we start with currency markets, before moving into equities and commodity thoughts for the week.
FX
The US inflation print was clearly a USD positive. When we combine this with the strong NFP print from the week before, the US economy is robust and certainly not in the position to need a rate cut anytime soon.
We feel this translates into further USD strength in the coming weeks. In order to express this, we turn to short EUR/USD. The Eurozone has its own woes at the moment, with Germany in a recession and the ECB that look more likely to cut than the Fed (rightly or wrongly).
After breaking out of the uptrend back at the start of the year, the trajectory is now lower, with us eyeing up 1.0640 as the next resistance. After the pop higher on Friday, we leave an order close to market at 1.0800 to try and get filled.
TRADE IDEA - USD STRENGTH VIA LOWER EUR/USD
Entry: 1.0800
Stop Loss: 1.0850
Take Profit: 1.0640
Last week, we flagged up the potential for GBP/JPY to blow higher should it manage to break through the 188.90 resistance. This did happen, with the pair touching 190.00 on Tuesday afternoon.
Even with a retracement, the 188.90 now seems to be acting as a dip buying area, as noted on Friday.
Despite us being JPY bulls in the mid-term, we see no reason why JPY can’t weaken in the coming week, especially following the news about the country being in a recession.
Therefore, we look to get long, targeting 190.00 initially and then a push beyond.
TRADE IDEA - ROLL WITH GBP/JPY MOVING HIGHER
Entry: 189.25
Stop Loss: 188.65
Take Profit: 50% at 190.00, 50% runner to 192.00
As usual, the ideas (along with trade plans) continue below for currency, equity, commodity and indices markets.
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Let’s move on to the rest of the alpha, starting with the final currency play.