Vantage FX | Aussie reverses hitting 1.04, FOMC disappoints stocks | 31st January 2013

January 31, 2013 By

The release of the FOMC Statement this morning was much anticipated and it went to script with the Fed reiterating its, commitment to doing what it can to revive the economy through its bond buying program and super low rates – the Fed also highlighted once again that the economy,

likely to warrant exceptionally low levels for the federal funds rate at least through late 2014

They probably won’t be buying $45 billion worth of bonds till then but clearly in this statement we can see that if they need to they will. A fact that was reinforced when they said,

The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

We read the statement as fairly strongly dovish and reiterating the line that the Fed has taken for what is a pretty aggressive monetary stance that is currently being run. The fact that they say that the economy paused in the opening stanza of the statement clearly tells us they know their work is not done as does the above quote and the reference to the labour market.

Interestingly though stocks didn’t budge out of their slight losses for the day after the release and US 10′s are actually a little higher at 2.02%. As we near the close stocks falls have actually accelerated. Gold was already up strongly on the night but the Euro is pushing higher as the Fed’s announcement continues to underpin the current sweet spot for global markets. Indeed the fact the Aussie fell out of bed again post announcement reinforces that notion and the notion of the rotation away from safe harbours into markets where the chances of capital gains are higher in the minds of investors.

Also of note from the US last night was the release Q4 GDP which was a bit of a surprise with the preliminary estimate showing a contraction of 0.1% against expectations of a growth of 1.1%. Of course these numbers are annualised so the difference is nowhere near as wide as the numbers suggest. In terms of growth for the quarter what 0.1% and 1.1% actually reflect is roughly 0% growth as an outcome against expectations of growth in Q4 of 0.275%. Defense was one of the key contibutors to the fall in GDP. On a brighter note the ADP employment survey was much better than expected up 192k in January against 165k expected.

Stocks

In Europe waiting for the FOMC was the order of the day and stocks took a breather from recent strength with the FTSE down 0.26%, the DAX down 0.48% and the CAC fell 0.52%. Germany held a 30 year auction and like rates in the US its borrowing costs rose from 2.34% last time to 2.45% now which is reflective of the lifting gloom over Europe.

In the US with 18 minutes to go before the close the S&P 500 is down 7 points of 0.45% at 1501 but the intra day high of 1509.25 is the highest level since the first half of December 2007 so the market remains strong. The Dow is down .36% and the Nasdaq is off .53%.

In Australia yesterday the market managed to print higher for the 10th day in a row which is no big deal except that it hasn’t happened for a while. No doubt brokers and advisers are longing for the long forgotten days of the 1982 – 2000 bull market and perhaps we are on the verge of a new dawn for Australian stocks – from an economic point of view if Australians feel wealthier then it might help with the domestic economy and activity but on that note election campaigns normally dampen economic activity for the 4 or 6 weeks that they occur so we wonder if an almost 8 month campaign is too long to matter or so long that it can’t help but matter due to the uncertainty it might create.

The Australian Newspaper this morning reports Roger Corbett, RBA Board Member and Chairman of Fairfax, said

“What this has done is put the country into election mode,” Mr Corbett told The Australian. “Election campaigns are always destabilising for business, especially the retail sector. I really wonder what the benefits are.”

Add this to the floods and Australian growth might come under pressure in the next few quarters – only time will tell.

Global FX

The Euro shot up to a high of 1.3587 in the immediate aftermath of the FOMC decision which seems the right approach as the status quo was reinforced. Euro is now up 0.68% on the day and after another 100+ point range. The Aussie on the other hand struggled in the past 24 hours falling to a low of 1.0400 from yesterday’s high of 1.0475 for a loss of 0.64% at 1.0408 currently. The Yen is 0.50% weaker against the US dollar at 91.18 while the Pound’s recovery continued with it sitting at 1.5794 for a gain of 0.2% on the day. Last week’s USDCAD break out has reversed back below the pivotal 1.0060/65 region and this remains a key level for any further run higher in USDCAD. Watch out for Canadian GDP tonight.

Looking specifically at the Euro we see that it has technically now broken through the neck of the reverse head and shoulders at 1.35 and the way is now pointed higher. The most bullish forecast from this point would be for a run toward the 1.50 region. Euro is now above the 200 day moving average for the first time since October last year and the net target is 1.3820.

Looking shorter term suppport at 1.3475/85 needs to hold or this might be a false break.

Turning to the Aussie it was a story of weakness. Yesterday morning the market looked like it was going to head up toward 1.35 but during the day it simply couldn’t get through the 1.0475 region and we turned short term bears selling at 1.04675 – we took our money a little early at 1.0429 as the last 24 hours candle is as negative as yesterday morning’s was positive. Perhaps that is a warning but the Aussie looks biased back toward the recent base at 1.0380/85 which you can see in the 4 hour chart below.

If, and we stress IF, the 1.0380 region gives way the Aussie will look very weak technically.

Commodities

Gold and Silver continued their rallies up 0.95% and 2.75% respectively to $1676 and $32.01 an Oz. Crude was also higher 0.44% to $98.00 and satisfying our expectation from yesterday. Stuff that grows was on a tear with Wheat, Corn, Soybeans and Sugar all up well north of 1%. Frozen OJ had a huge 4% plus move. We love commodities and commodity trading – the ags and other non “money” markets offer superb diversification.

Data

In Australia we get the HIA home sales, import and export indices, and private sector credit. German retail sales, unemployment and price indices will be a European highlight tonight before Canadian GDP and US jobless claims.

 

Filed Under: January, Market Wrap Tagged With: , , , , , , , ,

Vantage FX | Stocks near all time highs, Aussie bounces strongly | 30th January 2013

January 30, 2013 By

Stocks were higher again in the US and Europe with US stocks in particular benefitting from better than expected reports by Pfizer and Oil refiner Valero combined with the strong rise in the Case Shiller home price index of 5.5% more than offset the very weak consumer confidence data for January which fell to 58.6 from 66.7 in December and against the expected level of 64.

But equally we could argue that the rally in US stocks is not only in spite of weak consumer confidence but also the poor results from Ford which was both concerned about volumes generally and its European operations specifically.

The best thing to say is that this is still a relief rally and the onus is on the bears to make the case. For me it is a simple case of pessimism fatigue – we see this in markets all the time and the fact the world didn’t end and the data has been printing a little better in Europe in particular aided and abetted by the Fed’s bond buying is driving stocks everywhere higher. I have done a piece this morning looking at all the stock market indices I follow and which in the run up to the FOMC announcement tomorrow morning might help tell if they are overdone – you can find it here.

But lets look at what is going on in Europe because it is both instructive insofar as explaining market psychology for stocks and the Euro’s recent outperformance to the US dollar. The chart below is of the Citibank European Economic Surprise index from Bloomberg and the database we share with our colleagues at MacroBusiness.

You can see the sharp rise in the red line on the right hand side of the chart which reflects the fact that European data has recently surprised sharply to the topside. In November the Euro Eco Surprise low was -34.4 while as of last week it was +66.5. So it’s not hard to understand the Euro’s bid tone or the continuing relief rally in European stocks and for European sentiment.

The Fed is a big risk to this rally however tonight if they hint at a withdrawal of stimulus or if there are too many dissenters from whatever decision they make. But this is also the first meeting of the 2013 FOMC membership which on the face of it appears more dovish than the FOMC membership was in 2012. So we’d be surprised if there is any deviation from its bond buying program just yet – or even any hint.

Stocks

Turning to stocks the FTSE hit another mulityear record which from where we sit watching the UK economy sink into the mire, watching the Citi Eco Surprise index sink from +80 in November to -27.6 last week we wonder how this is occurring but then again the Fed’s buying and the Euro relief rally are lifting all boats.

At the close the FTSE was up 0.71% to 6,339, the DAX rose 0.20%, the CAC was up 0.14% and Milan and Madrid were roughly unchanged.

In the US as discussed competing company reports were resolved in the favour of the bulls in the blue chip sector with the Dow up 0.48% to 13,949 and the S&P 500 up 0.45% to 1507 and within striking distance of the all-time high. Is it stretched or are we on the verge of the new bull market – my trend following systems are long but as noted in this morning’s other piece it might be cheap to buy some puts at the moment.

In Asia yesterday the Nikkei was up 0.39%, Shanghai rose 0.53% but the Indian and Singaporean markets were both lower falling 0.56% and 0.42% respectively.

Global FX

Euro rallied again overnight but has not been able to push through the 1.05 region just yet making a high of 1.3496 from the low of 1.3413 to sit up 0.26% at 1.3489 this morning. GBP had a better night of it as well up 0.4% to 1.5756. This is a very good performance after a low of  1.5683 and the rally of 90 points roughly to 1.5772 suggests that GBP is trying to base. A move through 1.5785 is however needed to confirm.

The Aussie had a good bounce after a rough ride last week and candlestick aficionados will just love the pattern for a base from Monday’s trade. Having made a low at 1.0401 the Aussie sits up 0.45% at 1.0461 and just below the high of the past 24 hours of 1.0470. USDJPY had a 70 point range and sits at 90.68 down 0.17% on the day.

Looking specifically at the Euro it feels like the next 24 hours are going to be make or break for the rally that is currently underway. The flow of economic data is in favour of the Euro at the moment and all that might be needed is a dovish statement from the Fed to kick it sustainably through 1.05 and through the reverse head and shoulders pattern – this would be very bullish for Euro.

Shorter term support for the Euro is 1.3460 and then 1.3404/14.

The Aussie has based nicely as noted above and yesterday’s reversal was a very strong one technically with what looks to us like a morning Doji star but also yesterdays price action completely reverses Friday’s weakness. The 4 hour charts likewise suggest further topside with a run toward 1.0492 and probably through 1.05 in the next 24 hours.

Commodities

Crude was up again rising 1.02% to $97.46 and only 58c Bbl below the September high. Gold bounced, kind of anyway it was up 0.50%, an old trendline we have on our charts and which has given support on a closing basis since the lows in late December. Silver continues its role as the high beta precious and rallied 1.31% overnight to $31.06 oz.

Cotton rallied hard again up another 1.67% but Sugar reversed falling 2%. Corn, Soy and Wheat were within 0.2% up and down of flat.

Data

Building permits in New Zealand and then Japanese retail sales today before Spanish GDP tonoght in Europe. Business confidence in Italy is to be released and then Mortgage approvals and Consumer Credit in the UK before the Portugeause and Eurozone confidence data is released. But in truth nothing matters until the Fed and the US preliminary GDP data is released.

Could be an interesting night.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: January, Market Wrap Tagged With: , , , , , ,

Vantage FX | Euro hits resistance, Aussie finds support, Loonie breaks out | 29th January 2013

January 29, 2013 By

US 10 year Treasuries hit 2% for the first time since April last year as the fear grows, at least for the bond vigilantes, that the US is on the verge of a 1994 style recovery and bond rout. Off course the corollary of that is Stocks should do ok, the Aussie Dollar and Swiss Franc will be under pressure from the reduction of the safe harbour bid and stocks will continue their unrelenting strength.

The key for the US 10′s was the Durable goods report which printed 4.6% against 1.8% expected with the ex-Transports number a stellar 1.3% against the 0.7% expected. This more than balanced out the weakness in pending home sales which fell -4.3% against the 0.3% fall expected with the Dallas Fed manufacturing index up to 5.5 from 2.5 also helping.

No doubt a little bit of disquiet in the Treasury trader ranks is the upcoming Fed meeting this week after the last meeting plus the minutes send mixed messages to the markets.

As you can see in the chart above the recent sell off has accelerated from the six month or so uptrend so the Fed meeting, its announcement and ultimately its minutes are going to be very important for the Bond gurus.

But then of course they are also going to be important for the Stock market as well. We know that the Fed’s balance sheet growth is highly correlated with the rise and not rise of stocks since 2009 so any hint that the Fed might be moving toward thinking about the withdrawal of its bond buying programme will hurt stocks – it has to happen eventually if the US economy is healing it is just a question of when.

This is going to be the year of ranges then breakouts I reckon ans as I highlighted in the 2013 outlook that we posted a week or so back, (webinar now attached thanks to FXStreet)and the Canadian dollar is another case in point with the combination of the Bank Of Canada continuing to push back its monetary tightening plans and turning Dovish as inflation undershoots.

As can be seen in the chart above the USDCAD rally of last week broke through the top of what through time, going back to 2011 has been a fairly important pivot level for USDCAD defining periods of USD weakness and strength. One day does not a trend make but traders should be looking at this – our system is long.

Stocks

HSBC upped German stocks to overweight over the weekend but that didn’t stop the DAX from falling 0.32%. The FTSE was up 0.15% however and the CAC rose a little up 0.08%. Milan was on a tear though with a rise of 0.96% in contrast to the 0.59% fall in Madrid.

In the US it has been an up and down session with Caterpillar and Boeing down but Apple being lifted by punter buying after the recent acute weakness. With 40 minutes before the close the S&P 500 is basically flat at 1502, the Dow is up just 4 points at 13,900 and the Nasdaq is 0.29% higher.

In Asia yesterday Shanghai leapt 2.43% but the Nikkei was 0.94% lower.

Global FX

Just to recap on Friday’s price action the Euro busted up through the top of the box after the better than expected IFO release Friday and the Aussie busted down decisively through the bottom, or at least continued recent weakness. Over the past 24 hours Euro rallied up to a high of 1.3477 and sits up 1.3454 down 0.07% on the day. USDJPY hit a high of 91.25 before also retreating a little back to 90.71. The Aussie was calmer as we were out for the Australia Day holiday making a high of 1.0430 and a low of 1.0382 and it sits down 0.03% at 1.0412 on the day. The biggest movers were the Pound and the Loonie both of which are starting to look acutely weak. Sterling fell another 0.69% and now sits at 1.5691 with the 1.60 level looking a long forgotten dream. CAD is actually up a smidge versus the USD on the day at 1.0058 but as we showed in the chart above the current level is crucial for the medium term outlook.

We’ve used the chart above of the Euro reverse head and shoulders and it is clear that so far the Euro has not been able to push up through resistance. Already in Davos we have heard protestations from European policy makers about the Euro’s recent resurgence and it is clear they don’t support a move higher but there is scant little they will be able to do about it if this neck line breaks. Some will be looking for a run toward 1.50.

Shorter term support is 1.3419 and resistance 1.3480/90 then 1.3500.

For the Aussie it is recovering a little from being oversold on the 4 hour charts as you can see below. The break of our Darvas box has rewarded handsomely and support is now 1.0380/85 and resistance 1.0425/35 then 1.0455/65.

Commodities

Gold has been lower for a few days now and fell another 0.24% last night to $1652. In truth this is no big deal as gold is simply following its multi-month downtrend we have identified for a while now. Further weakness could be afoot. Silver has likewise followed Gold lower and its high beta precious metal status has seen it lose 1.36% overnight. Crude remains strong rising 0.59% to $96.45 Bbl.

Corn was up 1.18%, Sugar rose 2.18%, Cattle rose 1.9% and Cotton was on 1.02%.

Data

In Australia today its the one piece of data, well series, that you need to know what is going on in the economy when the NAB Business survey is released. Tongiht we get German confidence, Spanish retail sales and US Case Shiller House index.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: January, Market Wrap Tagged With: , , , , ,

Vantage FX | Wild night in FX land, Yen tanks, Aussie down | 25th January 2013

January 25, 2013 By

Data in Germany and the US was positive for markets overnight giving European markets a stronger close but the US markets have pulled back off their highs from around 11am their time with the Nasdaq under heavy pressure from Apple.

Apple shares got absolutely smashed overnight down 12% at one stage and there is little doubt now that the combination of technicals and fundamentals are pointing the stock lower still. The weaker than expected earnings was the catalyst for the sell off but the technical picture for Apple has looked weak for some time. The last nights move has now finally broken the uptrend from 2008.In a purely technical sense the $350/360 region looks like it is the key level that Apple might head toward. Now of course if the rest of the market is heading higher as it is presently this might temper Apple’s fall but the break of a multi-year trend line is no small event – we’ll see where it closes in Friday trade for confirmation.

Looking at the PMI data that was released there is much to feel positive about in an economic sense. The HSBC Manufacturing PMI for China was higher as was Germany, the EU and the United States. The key for us is the fact that China and the US are above the 50 expansion mark and with the exception of France are all headed in a more positive direction.

Jobless claims in the US were also positive and while a small 5,000 fall in a nation the size of the united States is small bikkies the reality is that after the big fall last week many thought that there would be a reversal – so once again its not necessarily the data print but what expectations of the data print are that drive markets. The market expected 355,000 yet the print was 330,000. This is positive for the US equity market as is the 4 week moving average which is falling also. For the record Jobless claims are the lowest they have been in 5 years.

Stocks

The East coast of the United States is 5 hours behind Britain and 6 hours behind the Western part of the European continent. So the highs at 11am in New York either at or after the close for Europe’s bourses and so at the close European markets were close to their highs. The FTSE was up 1.09% or 67 points at 6265, the DAX was more subdued up just 0.52% and the CAC was 0.69% higher. Stocks in Milan rose 1.01% and in Madrid they were 0.61% higher.

In the US the early strength has given way to less ebullient trade as the troubles with Apple wash through the market and the Nasdaq is down 0.56% with 20 minutes to trade. The S&P 500 is up 0.15% and the Dow is up 0.49%.

In Asia yesterday the Nikkei was up 1.28% as the Yen reversed its recent strength after comments from a Japanese minister hinted at 100 as the target for the Abe Administration. The rest of Asia was more mixed but the ASX was up 0.45%.

Global FX

A big night of ranges for Global FX markets overnight with the Euro trading 1.3285 up to 1.3392 and rests currently at 1.3370 for a gain of 0.40%. Sterling had a big figure range as well 1.5850 down to 1.5753 and sits at 1.5789 for a fall of 0.35%. But it was the Yen which was the big mover trading 88.40 up to 90.14 and its rests at 89.98 presently for a loss of 1.56% against the USD – that is a huge move for FX markets. USDCAD reversed some of yesterday’s weakness and the Aussie Dollar came under pressure with it too trading a range of more than 1 big fugure with a high of 1.0555 giving way to a low of 1.0448 and it sits presently at 1.0463 for a loss of 0.86%

It’s not usual for markets to be a bit risk on and the Aussie to break the bottom of its trading box and head lower but this price action does support the view that a rotation away from the Aussie and Aussie dollar denominated assets is occurring. Our hypothesis for the Aussie has been that it is a safe harbour in a storm not a safe haven. The price action overnight in the face of a better economic performance from the PMI’s of China, Germany and the US is a case in point. Money seems to be rotating out of the Aussie and into markets that are once again offering the chance for profit.

We’ll see – it could just be that the US dollar is stronger because its economy is healing – but then again that’s the point of a safe harbour isn’t it – port in a storm awaiting sunshine. The economic sun seems to be shining a little brighter than at any time in the past couple of years in the US. At least for the moment.

Looking technically at the 4 hour charts we see the AUD broke an old trendline and then the bottom of the box to head to an overnight low of 1.0448 before rallying a little in the last few hours. The daily charts suggest further losses and the Aussie would need to break back above 1.0480/85 to turn the short term outlook more positive once again.

The huge range and reversal in USDJPY was fuelled by the comments of Junior Economi Minister Yasutoshi Nishimura who said,

The current level around ¥90 can be said to be a correction in the strong yen, but it isn’t over yet

This comment coupled with with the large amount of buyers still unsatisfied in the market and the fact, well we think it is a fact, that the fall in USDJPY crossed our fast moving average but couldn’t get through the middle of the Bolly bands meant that the bulls were still in control – even though we desperately wanted a pullback to cleanse the market.

As you can see in the chart above the USDJPY has once again hit the high of the run and while it is still overcooked it’s a bull market so be bullish.

Euro is still trading within the box we have identified and it needs to break either 1.3404 or 1.3250ish to get us overly excited. But that’s a big enough range to trade shorter term as you can also see in the chart.

Commodities

Gold was down $16.80 an oz. or 1% to $1668 and Silver was off 2.20% to $31.75 oz. Crude on the other hand managed to rally another 0.81% even thought the EIA data showed an increase of 2.813 million barrels in storage after last week’s unexpected draw. The Ags were mixed with corn up 0.38%, wheat fell 0.81% and soybeans fell 0.10%. Copper was off 0.18%.

Data

China has its MNI Business sentiment index out today then the focus turns to Europe where the German IFO and UK GDP will give traders plenty to get excited about.

Please note that even though the 26th of January is Australia Day the Public holiday is next Monday in Australia so there will be no Morning Report – have a great weekend and Happy Australia Day, Happy Birthday to my son Hamish and Happy Republic Day to our Indian Friends.  

Filed Under: January, Market Wrap Tagged With: , , , , , , ,

Vantage FX | Stocks up and Yen stronger again | 24th January 2013

January 24, 2013 By

Politics and pronouncements were the key drivers in a macro sense overnight. In the US the House voted to suspend the debt ceiling for 3 months forestalling problems for the stock market and opening the way for the economy and earnings to continue to drive prices higher. David Cameron announced an In or Out referendum for Britain’s inclusion in the European Union.

The IMF was also out with its latest forecast for growth which it downgraded by 0.1% to 3.5% and 4.1% for 2013 and 2014 respectively. Europe continues to be the laggard with growth expected to fall 0.2% in 2013 from the previously expected 0.2% growth,

Downside risks remain significant, including prolonged stagnation in the euro area and excessive short-term fiscal tightening in the United States

Elsewhere the UK’s employment data was better than expected which helped European shares initially. The claimant count fell by 12,100 against expectations of no change with the unemployment rate falling to 7.7% from 7.8% expected. These numbers in the context of an economy the size of Britain are small change but to the extent that they were better than expected then we get a reaction.

Equally interesting was the release of CPI in Australia yesterday. There has been many column inches written already but the 0.2% quarterly rise in headline CPI were a good number for the economy and the RBA. It does not guarantee a rate cut, not even close, but what this and the 2.4% annual rate do is make inflation a non-issue should the RBA feel it needs to cut at some point this year. For mine they are unlikely to cut in February and we’ll have to see how things progress in the months ahead.

In the US the data took a back seat to the earnings result that were released yesterday. Chip maker AMD didn’t lose as much as expected when it announced its earnings after the bell yesterday morning and was up 10% last night. Google shares were up 6.4% with strong profit and advertising revenue. Ibm was up 5% reporting its earnings in Q4 were up 6.3%.

Stocks

So with 21 minutes to go before the end of trade the S&P is up 2 points or 0.16% for another post 2007 high of 1495. The tech news has driven the Nasdaq up 0.54% and the Dow is up 0.38%.

In Europe a bout of profit taking on bank and financial shares limited the markets move higher. Like the US however some results of banner companies were not too bad with Unilever up 3.1% to a record high Reuters says after its results beat expectations. Novartis jumped 4.1% after its sales forecast.

In the end the FTSE was up 0.30% to 6198 to another multi-year high and the DAX rose 0.15%. The CAC however fell 0.40% with Milan and Madrid also lower falling 0.77% and 0.22% respectively.

In Asia yesterday the Nikkei lost 2.08% as investor fret over the Yen’s resurgence. As we note below USDJPY looks like it is going to have a meaningful retracement which would bias the Nikkei lower as you can see by the relationship between the Nikkei and the USDJPY moves recently.

Elsewhere the Hang Seng fell 0.10%, Shanghai rose 0.25% and the Straits Times in Singapore rose 0.35%. The ASX was up 0.19% yesterday after the CPI and BHP’s results and should rise again today.

Global FX

Lots of dancing on the spot in currency land over the past 24 hours. Euro stayed inside our box but traded a range of 1.3354 to 1.3263 but is closing roughly unchanged down 0.05% at 1.3312. It was a similar story with the GBP trading 1.5892 to 1.5800 but closing up just 0.03% at 1.5840. The Aussie Dollar is off 0.16% but up a little on the lows soon after the release of the CPI which was 1.0524. At present the Aussie is sitting at 1.0547.

USDJPY crossed my fast moving average yesterday but pulled up right in the middle of the Bollinger bands which is a signal to reduce positions but not yet exit. The Yen’s strength is clearly a result of two things. First it is always difficult for policy makers and central banks to live up to the hype if they conduct open mouth policy prior to the release of the actual policy or announcement. The second thing is that the crossing of the fast moving average highlights that we might finally be having the correction that we have to have.

My usual minimum correction would be to expect a pullback to the 38.2% retracement level of the recent up move which sits at 85.95. In this instance we have a couple of other levels to watch which 86.86, my slow moving average and 86.48 an old trendline. We have been waiting for the reversal for some time and it feels like it is upon us when I look at my indicators.

The Euro remains inside the box and it should be a good run when it eventually breaks out. The 1.3404 region is very difficult for the moment but equally 1.3255/60 is solid on the downside. We continue to think this is a small range to trade until it breaks.

The Aussie has its own trading range or Box in our terms for the moment with the parameters of 1.0480 on the down side and  1.0580/1.06 on the topside. The catalysts for a break seem absent at the moment so like Euro that forms the trading range but a break might reward for a run.

Commodities

Crude was 1.23% lower overnight falling back to $95.49 Bbl. Gold was off a little pulling back 0.38% but Silver continues to do its own thing rallying 0.82% to $32.21 oz. Copper fell 0.47% and it is being wedged by a big old down trend line and a short term but not insignificant uptrend support – ceiling and floor as my 10 year old says.

The Ags were lower with Wheat down 0.55%, Corn off 1.06% and Soybean down 1.02%. Sugar rallied a stellar 2.43%.

Data

Nothing here in Australia of note today but we see Chinese, French, Spanish, German, Italian and European manufacturing PMI data tonight. In the US jobless claims and Marki PMI and then the EIA crude oil stocks report.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: January, Market Wrap Tagged With: , , , , , ,

Vantage FX | Euro has a wild night, BoJ disappoints, Yen stronger | 23nd January 2013

January 23, 2013 By

Euro was absolutely smashed in early trade last night as it and the Dax were sold heavily it seems on talk that the commercial and retail arms of Deutsche Bank are to be split up but it was then rescued in part by the ZEW survey and the strong Spanish bond auction. Equally however, in the case of the Euro at least it might have also been pressure from EURJPY selling as the BoJ failed to deliver anything fresh or new for the market after all the hope and hype in the run up to the announcement over the past month or so.

And so it is that the old market axiom of “buy the rumour - sell the fact” is once again reinforced. The reason that this this axiom often works is rooted in human and market psychology. When the rumour hits  markets react to news, or the hint of news, and price accordingly. Then the hint or rumour is either true or not but the key is for the trend that the rumour started to kick on or extend the actual  release of the information has to be even more bullish or bearish than what is priced into the market.

The BoJ did not go beyond the Governments hype. Indeed some market players that it didn’t even seem to live up to the hype even though it is going to conduct “open ended” bond buying operations and set a target of 2% for inflation. The Japanese Prime Minister Abe said yesterday,

“In terms of making a bold review of monetary policy, I believe [the agreement with the bank] is a ground-breaking statement… A macroeconomic regime change clearly is under way.”

That is so – but markets seem to have been looking for more.

The Nikkei wasn’t so keen on the outcome falling 0.35% which isn’t much really and its performance is going to continue to be tied to the outlook for the Yen. We are on record as saying we believe the USDJPY is headed toward 100 and that remains the case. But not for a moment do we expect it to be a straight line run – there is certainly a chance that USDJPY could be like apple or gold were on their big runs and on that basis whatever happens out positioning will remain net long until our trend signals reverse.

But for the shorter term amongst us the question is whether or not the USDJPY is finally going to have a meaningful correction. The key for us is our short moving average. Since the rally started in November USDJPY has not crossed our fast moving average at any point which tells us the strength of the trend and belies attempts to sell it in the short term. Last night’s low of 88.35 was  just a point above the fast moving average at 88.34. Now our usual indicators suggest that USDJPY is going to head lower short term but a push below the fast moving average would be a sign and then should USDJPY cross down through the middle of the Bollinger Bands at 87.83 would signal a deeper retracement. Short term we’ll be going with a break of last nights low if it occurs.

Elsewhere in the past 24 hours as noted above the Euro and DAX tanked at one stage but the release of the ZEW survey for Germany which showed a huge improvement in the economic sentiment index in January to 31.5 from 6.9 last and 12 expected while at the same time the current situation rose to 7.1 from 5.7 last and better than the 6 expected. The broader Eurozone economic sentiment survey was also sharply higher at 31.2 from 7.6 last and against 14.1 expected.

Also positive, and a big indication of how the fears about Europe are receding from market players minds, was the Spanish bond auction. Spain issued €7 billion in 10 year notes at 5.4% but the big news was the bids it recieved for the notes which totalled €24 billion. Spain’s Economy Minister Luis de Guindos said overnight,

“Never in the history of Spain’s Treasury has there been such a volume of demand, whether in an auction or a syndicated sale,”

Data in the US was a little disappointing with Existing home sales falling 1% against expectations of a rise of 1.2% in December and the Richmond Fed manufacturing index was also weaker than forecast at -12 from 4 expected.

Stocks

The DAX recovered from its lows at 7634 to finish at 7696 but still down 0.68% at the close. The CAC fell 0.59%, the FTSE was essentially flat dropping just 0.03%. Italy was up 0.48% while Spain fell 0.39%

All in all after a poor start to the day the US markets has spent the rest of the day clawing back its loses and then moving into the green. With 35 minutes to go the Dow is up 0.30%, the S&P up 0.27% and the NASDAQ is flat.

Earnings season is upon us and some individual moves are helping drive Stocks. Boeing was sold down more than 1% after it announced over the weekend it was to stop delivering the Dreamliner, Jounson and Johnson lost 0.7% after the full year forecast was down graded while Du Pont rose almost 2% with better than expected 4th quarter profits.

Global FX

A wild ride for Euro overnight for no gain other then frayed nerves for traders. Euro traded to a low of 1.3266 and a high of 1.3371 before sitting roughly unchanged at 1.3314. Sterling also had a bit of a wild ride although not so bad as Euro trading in a 1.5808-1.5883 range before resting at 1.5835 up 0.04% on the day. USDJPY did actual move as noted above with a rise of 0.93% against the USD to 88.75 but well off the days low and important technical level of 88.35, The battler is also up a little at 1.0558 rising 0.40% on the day.

Even for all the volatility last night Euro remains captured inside its Darvas box and as we have been saying the past few trading days – either trade inside the box or trade the break.

 

The Aussie is also trading in a box which you could probably define as 1.0480/1.06 and unless or until we get a catalyst for a break then short term trading inside the parameters of with a break is the way to go it seems. Today’s CPI release will inform the question of whether or not the RBA is going to cut at the meeting the week after next but it seems increasingly unlikely given the healing in the global economy. A wait and see approach with rates at 3% would seem more like the RBA’s usual modus operandi.

Commodities

Gold rose 0.37% as it continues its quiet rally and it sits now at $1693 oz. and closing in on the top of the downtrend channel it has been in since late last year. This little rally looks like it still has some legs technically so we might see if this level of $1708/10 oz. offers decent resistance or not. Silver was up 1.09% as it too closes in on downtrend resistance.

Crude rose to $96.13 bbl of 0.71% while the Ags were mixed with wheat falling 1.40% but Soybeans gained a similar amount.

Data

Westpac Leading Index today and then Australian CPI with the market looking for 0.4% qoq and 2.4% yoy. Chinese leading economic index is out later today and tonight in Germany we have a Bond auction and a raft of secondary European, particularly UK, data. Given last night’s housing data Mortgage Apps in teh US will be important tonight as well.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: January, Market Wrap Tagged With: , , , , , , , ,

Vantage FX | All eyes on BoJ today | 22nd January 2013

January 22, 2013 By

Wall Street was out overnight for both the Martin Luther King holiday and the inauguration of US President Obama for his second term. Europe had a positive tone however with the Bundesbank putting out a report saying that the recent weakness is likely behind the German economy.

Bloomberg report that the Bundesbank said in its report,

“The largely stable labor market and a better outlook for output suggest that the economic weakness won’t last all that long,” the Frankfurt-based central bank said in its monthly report today. A recovery “is already appearing in the first quarter of 2013,”

Regular readers know that we see a strong relationship between the Chinese and German economy and have been saying that the fact that  China seems to have a soft rather than a hard landing glide path points to an improvement in the outlook for Europe’s biggest economy in the months ahead.

Assuming that the Bundesbank is correct then this is another way in which 2013 is shaping up as different to 2012 and if Germany can drag the rest of Europe with it, even if it is only at the margin, then we will see more risk seeking and less safe haven flows in the months ahead which will be important for traders to note and remember.

Last rights data calendar was light but in the UK the Rightmove House price index was stronger than last month rising 0.2% this month after last month’s big fall. Swiss industrial production was however weaker than forecast at -0.7% from +2% expected. Just another reason to buy EURCHF.

Stocks

So with US markets out Europe was able to do its own thing. The FTSE rose 0.43% to close at its highest level since mid-2008 of 6181. The DAX rose 0.61% to 7749 and the CAC was up 0.57%. In Italy stocks rallied 0.44% and in Spain it was 0.72%.

In Japan yesterday it was not the best day ever as the Nikkei came under pressure from profit taking in it and the yen as the Bank of Japan began its two day meeting. Losing 1.51% the Nikkei was simply a reflection of the old trading axiom “buy the rumour, sell the fact” and all yesterday’s price action tells us is that there is a subset of traders who are wary that today’s announcement from the BoJ could disappoint markets. As we noted in yesterday morning’s note rumours are rife that the deal has been done and the BoJ has acquiesced to the prime Minister’s demands for an explicit inflation target of 2% and more unconventional monetary policy but there is always a chance of disappointment.

Today’s announcement is the key in Asian trade.

GlobalFX

And it will be all about the Yen today after the Euro did nothing overnight with traders putting their feet on the desk and taking the opportunity for a relaxing days trade. The EUR traded only 34 points since trade opened in Sydney yesterday morning which is a very quiet days trade. The Euro remains constrained in the box we have highlighted over recent days and we await the next catalyst to knock it out of its recent range. Sterling on the other hand remains under pressure and fell further as the UK economic outlook and the Government are continuing to look under pressure and we think the safe Haven flows that have been going into GBP over the past couple of years are reversing.

GBPUSD broke lower again overnight but what is also driving this weakness, which we think will continue, is the rally in EURGBP which you can see in the chart above. With Euro unable to break up and hold through 1.3404 even with GBP breaking lower it might be time for a short term reversal given EURGBP has hit the top of this uptrend. The Aussie is also becalmed trading only 42 points of range over the past 24 hours although it did manage to push up a little and now sits at 1.0516.

The key thing for the short term trade outlook is that the 1.0480/85 region held firm. A break of this level would open the way for a short term fall although it can also be considered support in the first instance.

Commodities

Citibank has put out a note on gold overnight according to Market Watch in which they said,

“Indeed, gold’s recent struggle to sustain itself beyond the $1,800 technical resistance level despite seemingly conducive conditions such as record low interest rates and fiscal uncertainty has cast doubt onto the bullish case for gold among the investor community,”

This is analogous to my technical view and if you read it carefully it is actually a technical view written as if it’s a fundamental view. What it really says is gold’s upside is losing momentum and as such there is a chance of a pullback. Which remains my base case over many quarters even though gold looks not too bad in the short term and rose a smidge overnight to $1687 per oz.

Data

It is all about the Bank of Japan today in Asia – anything unexpected or disappointing is going to be felt hard by in the Nikkei and USDJPY and by extension the Yen crosses. So that must be watched and is due at 3 GMT today. Tonight we have the release of some important Tech earnings reports in the US and the ZEW survey in Germany as well as the Chicago index in the US. So we could get a few catalysts for trades.

It’s a good day to watch your levels.

Thoughts, comments, queries together with frank and fearless feedback all welcome. I’m happy to answer questions or comments on the comment stream wherever I can

NB: Please note all references to rates above are approximate and should not be used for trade reference.

Catch us on Twitter @gregorymckenna

Filed Under: January, Market Wrap Tagged With: , , , ,

Vantage FX | Stocks close higher again, GBP crunched, Yen awaiting BoJ| 21st January 2013

January 21, 2013 By

It looks like there is not going to be a Debt Ceiling debacle as US lawmakers seem to moving toward conciliation and compromise which when combined with GE’s earnings report saw stocks in the US set their highest weekly close since 2007 as the unconventional policies of the Fed and Chairman Bernanke continue to work their magic. As we showed in the outlook for trades in 2013 the growth in the Fed’s balance sheet has been synonymous with a rising tide in equity markets and prices.

s&p 500, spx, s&p 500 weekly chart

The interesting thing about this rally in the S&P has been that it has been a stealth rally, not too sharp, not too fast and certainly no where near technically stretched or overbought when I look at my usual indicators. So until notions that the Fed is going to start withdrawing stimulus take hold or the data prints poorly this rally has legs.

But there are always risks in markets and late last week Soc Gen put out a piece talking about the end of the paradigm we know as the new normal – low growth, low rate and high unemployment. Soc Gen suggest that Q1 2013 growth in the US is going to move along a fairly healthy clip and that as the economy improves the Fed will move toward the withdrawal of its unconventional monetary policy by year’s end.

Of course the market will pre-empt the actual withdrawal and react and the question is will stocks be able to hold up under their own steam – it is a question for another day but a question worth remembering as the markets climb higher.

Turning to currency land the big question for us is whether or not the US dollar can break the negative correlation with equities that has so characterised the last couple, few, years of trade.  It is our underlying belief that at some point this should certainly happen in a sustainable manner as it is looking like it is the US economy that is going to be consistently outperforming the European and other currencies – but for the moment even though the US data is better than Europe the dampening impact of Fed policy is still working. Having said that Euro has some short term technical challenges which we will discuss below.

So looking forward to this week there is a holiday in the US today for Martin Luther King’s birthday and then the ceremony for the 2nd term of US President Obama takes place Tuesday. Tuesday also kicks off  the heart of Earnings season with the focus turning to the big cap Tech stocks with Google, IBM and Texas instruments reporting Tuesday before Apple reports Wednesday. Microsoft will also be reporting this week. Other stocks reporting are Starbucks Corp. , Procter & Gamble Co. , Union Pacific Corp.  and McDonald’s Corp.

The other big story this week, probably the biggest story of the week, is the decision by the Bank of Japan on monetary policy due for release tomorrow. The meeting is a two day meeting starting today and press reports were already floating around over the weekend that the BoJ had agreed to set an explicit inflation target of 2% and that they will no longer pay banks anything for deposit left with it.

The key for traders this week is what the BoJ does relative to expectations – USDJPY closed the week above 90 and as you can see in the chart below “the force is strong in this trend” so is all the good news priced into the Yen’s weakness and Nikkei’s strength or is there room for further surprise – we’ll see tomorrow but after a run like this stops might want to be dragged up a little.

jpy, usdjpy, yen, dollar yen, dollar yen quote

Stocks

UK Retail sales were weak falling 0.1% in December against expectations of a 0.2% rise but the FTSE was unmoved by the fall and managed to rise 0.35%. This was in contrast to European bourses which were on the nose with the DAX down 0.43%, the CAC roughly flat at -0.06%, Milan down 0.19% and Madrid down 0.29%.

In the US as noted above further gains were had with the S&P 500 up 5 points or 0.34% to 1486. The Dow was up 0.40% and the Nasdaq was a little lower down just 0.03%.

Asian markets were a sea of green Friday with every single market I follow higher. Certainly the Chinese data slightly beating expectations was a boon for the region but it has been interesting to see how some media outlets wanted to portray it – I saw a couple which assiduously kept saying it was the slowest growth since 1999 but Asia stocks didn’t care rather preferring to accept that a hard landing has been avoided. In Japan the Yen’s acute weakness helped push the Nikkei up by 2.86% while the Hang Seng rose 1.12% and the Shanghai exchange 1.40%. In Australia a much smaller gain of 0.30% was had.

Global FX

Sterling was the big mover Friday night after weaker than expected retail sales data. The set up was a perfect technical break of a range bottom and then projection. I said last week I thought GBP was heading lower and the 2 big figure sell off I was looking for and tweeted Thursday was largely satisfied with the sell off Friday night.

gbp, gbpusd, gbpusd price quote, gbp chart

The question of course is where to now but given that GBP is below the 200 day moving average for the first time in a couple of months and given the policy making in the UK and the economy seem to be floundering a little further downside is highly possible.

The Euro on the hand remains constrained within the box we identified last week – we’d either trade the box or do nothing until it is clear it is stepping up or down from the box. The big range and down day in EURCHF might have helped Euro stall on Friday but the move away from the Swissie is a big signal of what is occurring in markets at the moment.

eur, eurusd, euro, euro (eur) price quote

For the Aussie more volatility and a greater risk that it is being left behind as traders and investors focus on where they are going to make money in 2013. As last year’s and the year before’s trade the risk is high that the Aussie dollar completely underperforms and gradually slides a little due to these allocations away from Australia – time will tell for the moment as you can see in the chart below a break below 1.0480/85 will open further downside.

aud, audusd, australian dollar, australian dollar price quote, audusd

Commodities

Crude was up only a little but has been in an uptrend for a little while now and also closed the week above the one year down trend line closing at $95.25. Gold too didn’t do much down 0.22% to $1688 oz while Silver was up 0.36% to $31.87 oz. Wheat was up another 1.28% as well.

Data

Holiday in the US tonight and the BoJ’s meeting starts today. There is a Euro Group and EuroFin meeting over the next two days which might be interesting given press reports about Greece needing more money over the weekend. The first big economic release is the German ZEW survey tomorrow night.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: January, Market Wrap Tagged With: , , , , , ,

Vantage FX | Stocks hit highest levels since 2007, Euro up Yen down| 18th January 2013

January 18, 2013 By

Stocks hit their highest level since 2007 overnight as a combination of continued Fed buying and better than forecast US data saw traders focus on the positive. The US dollar came under pressure again as a result which saw the Euro and many commodities including gold and silver rally and the tone was overall more positive as risk tolerance seemed to improve.

I have written a piece on the US equity market separately this morning.  My rhetorical self doesn’t like nor trust the rally but for the moment the trader and trend follower in me has the upper hands as the market continues to push higher. Indeed I really like the comment I saw on the Wall Street Journal this morning,

“The S&P 500 is at a five-year high, transports sit at record levels and small caps are within spitting distance of all-time highs. Junk-bond prices are also hovering around record territory and the market’s so-called fear gauge sits near a five-year low.”

We hate this phrase more than anyone, but it sure seems tempting to wonder if maybe, well, the stock market just wants to go higher.

Sure we can and will worry about the debt ceiling and sure we will find other things to worry about but it seems that the Draghi shock and awe threat and the Fed’s money drop have really done their job for sentiment. Hasn’t helped the unemployed in Europe yet might it might be finding traction in the US with Job Claims dropping to the lowest level in a few years.

Elsewhere the Philly Fed data were appallingly weak printing -5.8 in January against 7.1 expected but this was overshadowed by better than expected housing starts and building permits data in the US for December. Both these data are the best in around 4 years.

Stocks

So with 30 minutes to go the S&P 500 is up 11 points or 0.77% to 1484, the Dow is up more than 100 points or 0.80% and the Nasdaq has risen 0.72%. Worth noting on individual stocks is that Boeing is still under pressure from its Dreamliner woes and the financial sector is also off a little after the earnings reports from Bank of America and Ctigroup disappointed.

In Europe it was also a positive night with the FTSE up 0.46%, the DAX up 0.57% and the CAC up 0.96%. Milan rose more than its bigger market rivals after recent weakness to close up 1.42% while Madrid was up 0.56%.

In Asia yesterday the Nikkei was roughly unchanged after a volatile day’s trade where it fell sharply before recovering. The weakness in the Yen which re-emerged overnight will however take it higher today and add to the positive tone coming from Europe and the US. The rest of Asia should benefit as well.

Global FX

Dollar Yen – my goodness – this is certainly a bull market if ever I have seen one. Every time USDJPY looks like it is going to have a reasonable retracement it simple gets bought back hard and with gusto. Over the past 24 hours the Yen has weakened 1.74% against the USD to sit at 89.90 and just below the nights high of 89.92. The Euro was also higher up 0.68% to 1.3378 and it too is just below the high of 1.3387. The Aussie has missed out on the rally after the employment data yesterday and my sense is that we are seeing a rotation away from last years safe harbour and safe haven trades. Indeed EURCHF is up at 1.2475 this morning – what a rally.

eur, eurusd, euro, euro (eur) price quote

Euro didn’t breach the lows of the previous night yet neither did it break the highs of earlier this week – so on the 4 hour chart above we have a Darvas style box with the parameters of 1.3404 to 1.3255. Waiting for a break a break is probably the best strategy for the moment.

It was a poor performance for the Aussie all things considered but the low overnight was just above some minor support of the recent uptrend as you can see in the chart below. If we are genuinely seeing traders and investors turn their minds to the trends that might emerge in 2013 as it seems they are for the moment we expect the Aussie to lag. Not get sold heavily but becalmed is probably the best way to think about it relative to other moves – crosses are the play.

aud, audusd, australian dollar, australian dollar price quote, audusd chart

Commodities

There is no way my sell off in gold is going to happen in the ebullient mood of the market at the moment. I note that my bearish outlook has been joined by Goldman Sachs who are reported to be calling it down to $1200 by 2018. That is one heck of a long term forecast and one I have great sympathy but for the moment the US dollars weakness is dominating.

Techincally gold is climbing into the upper half of the down trend channel it has been in for a few months with last nights small rise of 0.37% to $1689 oz and as you can see my usual indicators suggest some further strength is in store.

gold, gold price quote, xau, xauusd

Silver is looking like it might rally a bit further as well and it rose 0.86% to $31.74 oz. Crude spiked through two trendlines last night after the Algerian rescue operation went badly and even though it is off its highs it is up 1.22% to $95.39 in WTI terms. Corn was down 0.92% while wheat and Soybeans both fell around 0.3%.

Data

China China  China, Oi Oi Oi. For the Aussie dollar as well as global markets it is going to be about Chinese Q4 GDP to be release today with expectations for 2.3% qoq and 7.8% yoy. Industrial production and retail sales are also released for China today as is industrial production for Japan. Tonight is fairly quiet in the US and then a holiday Monday.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: January, Market Wrap Tagged With: , , , , ,

Vantage FX | Who’s afraid of a stronger Euro? Not Nowotny| 17th January 2012

January 17, 2013 By

Sleepy is a word one of my old colleagues Richard Franulovic of Westpac in New York used to describe the market’s trade overnight and it seems apt at least from an equity market point of view.

But sleepy is not a way we would describe trade on global FX markets as the Yen consolidates some of its recent weakness and European officials get zero out of ten for consistency with their proclamations on the the recent Euro moves. You’ll remember that yesterday we reported that Juncker had voiced his disquiet about the recent Euro strength. Overnight however Austrian Central Bank Governor Nowotny said the level of the Euro wasn’t a major concern. Importantly though as the Wall Street Journal reported Nowotny,

told journalists on the sidelines of a conference that he doesn’t see any long-term prospect of an upward trend in the euro’s exchange rate.

“I think one should not overvalue short-term fluctuations of the exchange rates,” he said, adding “it’s a not a matter of major concern.”

Mr. Nowotny added that the ECB doesn’t have a target exchange rate for the euro.

Germany’s Economics Minister Philipp Roesler also disagreed with Mr. Juncker saying, “we absolutely can’t speak of an overvaluation [of the currency] at this point.”

The Euro’s move recently, the Yen’s move and the Fed’s unconventional monetary policy and its dampening effect on what would, given the relative economics, be a rallying trend in the US dollar is but the thin end of the wedge in what is a stealth currency war. We know that the Japanese are not acting by stealth with their aggressive weakening policies but many other nations are.

Indeed the Wall Street journal reported this morning that,

Earlier Wednesday, the first deputy chairman of Russia’s central bank, Alexei Ulyukayev, entered the fray, warning that budgetary policies were leading to major global imbalances that could lead to currency wars, saying “we are on the verge of very serious and confrontational actions in the sphere.”

If Japan is successful in reinvigorating the economy with the Yen weakness even if only for a small time or short period then look for other nations to follow.

On the data front overnight the key outturns were the flat result for US CPI, US industrial production at +0.3% was right on the money and the Fed’s Beige Book showed that the economy was growing at a “modest or moderate pace”

Stocks

Boeing is under pressure with something like half its Dreamliners now grounded and this is weighing on the Dow while Apple is staging a bit of a recovery helping the Nasdaq. The S&P is around flat even after some good reports from the Goldman Sachs and JP Morgan which had pretty decent results in Q4 at least relative to analysts expectations.

With 30 minutes to go before the close the S&P 500 is up just 1 point at 1473 while the Dow is down 0.19% while the Nasdaq is up 0.39%.

In Europe mixed results with the FTSE down 0.22%, the Dax up 0.20% and the CAC up 0.29%. Milan was under pressure falling 0.73% while Madrid fell 0.23%.

In Asia yesterday the Nikkei was absolutely poll axed falling more than two and a half percent as the Yen recovered some lost ground and it became apparent that the Nikkei rally was not and is not a one way bet.

jpy v nikkei quote, usdjpy, yen, dollar yen, dollar yen quote, nky, nikkei

What you can see in the chart above of the 4 hours USDJPY v Nikkei performance since December is that the Nikkei trade IS the Yen trade.

Global FX

USDJPY is down 0.41% over the past trading day at 88.44 but off the low of 87.77. The Euro is down just 0.09% at 1.3291 mid range for the past 24 hours which saw a low of 1.3256 and a high of 1.3324. GBP was under pressure again and looks to us to be slowly slipping lower but in a sustainable and trend manner. Off 0.38% on the day GBP sits at 1.6002 at the moment. The Aussie remains roughly unchanged at 1.0563.

Looking at the USDJPY even with the sell off over the past two days from the high USDJPY has still not had what might be called a “meaningful” consolidation of the 10 big figure uptrend. The break of 87.90 overnight I thought might precipitate a deeper move but it hasn’t come yet although when I look at the set up for my indicators in the chart below it still appears that lower levels beckon.

jpy, usdjpy, yen, dollar yen, dollar yen quote

The Euro pulled up at the lows of the previous day as you can see in the 4 hour chart below. A break of last nights low is likely to be a signal that it is headed a big figure or so lower.

eur, eurusd, euro, euro (eur) price quote

 

The Aussie is too boring for me at the moment as it dances on the spot becalmed by a lack of drivers. Of course today’s employment data could get things going and Chinese GDP data tomorrow. A break of of 1.0580 or 1.0520 might reward short term.

aud, audusd, australian dollar, australian dollar price quote, audusd chart

 

Commodities

Crude was up after a surprise draw in stocks shown in the EIA data overnight (-913000 Bbls versus +2000000 expected) as well as the attack on the BP/StatOil facility in Algeria.

wti, nymex crude, crude oil, oil, oil chart, nymex crude oil chart

I thought that Nymex crude was going lower on the basis of the chart above, indeed I still do, but with Crude up 0.98% to $94.19 overnight the chance that I am wrong is growing.

Gold and Silver are roughly flat with the yellow metal mid range within the 3 month down trend it is in. Silver is still wedging itself toward some sort of break but we are not there yet.

Data

Unemployment in Australia is out today and I learnt over 20 years ago never to try to predict the outcome of this one. The market is however looking for unemployment to rise to 5.4% and a ridiculously tiny rise of 2300 on average according to FXStreet. Tonight we’ll be watching the Philly Fed and jobless claims in the US.

Filed Under: January, Market Wrap Tagged With: , , , , ,
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