Vantage FX | Euro falls, Aussie breaks uptrend as Europe still a mess | 28th March 2013

March 28, 2013 By

The Euro remained under pressure overnight as the concerns over Cyprus gave way to concerns over Italy as the impasse between the parties and the inability to form a Government saw the Italian bond auction attract less bids and higher yields then had been anticipated.

Bloomberg reports that the Italian 10 year spread to German bounds is the widest it has been this year. The back story is that putative Italian PM Pier Luigi Bersani said their was no chance of a broad coalition to end the deadlock in Italian politics at the moment and Italian retail sales were weaker than expected for January down 0.5%. The 5 year Italian bond auction went at 3.65% and the 10 year bond auction went at 4.66%. Hardly huge or punative rates but Spanish and Greek bonds were also under pressure relative to the rate of the core German markets.

Adding to this political tone and the inevitable Italian election that it suggests was the data out across the zone. German Gfk consumer survey was unchanged at 5.9 but French GDP for Q4 slipped to -3% from 0.1% last, Spanish retail sales are still down 8% YoY and Italian Industrial orders fell another 1.4% in January after December’s 0.5%. UK GDP for Q4 2012 was down 0.3% as expected and Bloomberg reports that the BoE said that British banks have a £25 Billion Capital Short Fall.

Not to mention the looming opening of the Cypriot banking system and the capital controls that comes with nor the weakness displayed in the Eurozone Business climate, consumer confidence economic sentiment, industrial confidence and services sentiment that were also released last night and paint a picture of a zone that is in dire economic straights.

So as you can see in the chart above the Euro remains under pressure trading down to a low of 1.2750 from the days high at 1.2867. It sits at 1.2771 at the moment. As you can see in the chart above there is nothing in this technical outlook that suggests the Euro is not going to trade down toward our target of 1.2650.

Also in FX Land overnight the Aussie and GBP were under pressure and USDJPY looks like it is trying to slip lower as it walks down through the uptrend line that has been driving this rally for a few months now. Sterling sits at 1.5126 this morning after trading through a 1.5181-1.05092 range. USDCAD had a positive day up 0.05% but it couldn’t hold the gains from earlier and still looks biased lower.

Looking at the Aussie Dollar we see a currency that is outdoing all and sundry. It is more than holding its own against the US dollar. It it smashing the Euro and Pound with EURAUD at 1.2235 its lowest level since November 2012 and GBPAUD is back near its recent lows. It is a good performance in context and does speak of money flowing into Australia to get away from Europe. We know the troubles of the European banking system and we know that the Dutch Finance Minister has put the onus back on the banks and their Governments now to fix their own back yards as a first port of call and with little chance of being bailed in in Australia the Aussie is the beneficiary, even if it is at margin.

But as you can see in the chart above that didn’t stop the Aussie from slipping down below the uptrend line that has been driving it making a low of 1.0415 before rebounding to 1.0442 with the recovery in North American stock markets late in the day. We’ll see how the Aussie goes over the course of the last 24 hours of trade before Easter but players may be reluctant to sell aggressive (at least to get short anyway) as it is an expensive carry over the Easter break as Australian banks aren’t back until next Tuesday. Based on our usual indicators though it does look like the Aussie is biased lower. Last nights low was just above the 61.8% retracement of the post employment rally and a break down through there would call for a full retracement back to the start of the rally at 1.0360ish and a usual pullback of 38.2% of the larger rally from the lows at 1.0110ish offers 1.0340ish as support.

So that is both our target and support zone for the moment.

Turning to USDJPY this continues to intrigue US with the persistence of strength but the  slow breakdown in the uptrend. We are targetting a move back toward this weeks lows at 93.55 and then we’ll see but 90.90 is not beyond the realms of possibility.

Looking briefly at US stock markets they opened weaker on the lead from Europe but recovered with Dow ending down 0.34%, the S&P 500 lost just 0.05% while the Nasdaq managed to rally 0.14%. In Europe the weakness abated around the middle of the day when the US markets entered the fray but that didn’t stop the Stock market being universally lower.   The FTSE fell 0.18%, the DAX was 1.15% lower, the CAC dropped 0.98% and Spain and Italy were under pressure once again falling 0.92% and 1.13% respectively.

Stocks could be interesting into the close of the week tonight given that 4 days of Easter holidays.

On commodity markets Nymex Crude was a little higher up 0.25% to $96.58 but off its highs. Gold is back aboe $1600 with the Eurozone troubles in the headlines again but its not exactly roaring is it. It sits at $1604 oz while Silver is at $28.54 oz. Corn and Soybeans were bouth up a little under 0.4% and Wheat rose 0.78%

Data

Obviously we’ll be having a few days off over easter and so will most markets – but not all.

Today in Australia we get TD inflation and Private Sector Credit. Retail sales and unemployment in Germany tonight before Italian business confidence. In the US GDP is out for Q4 along with jobless claims and the Chicago PMI

Happy Easter everyone.

Filed Under: March, Market Wrap

Vantage FX | Aussie closes in on target as Stocks in US rally | 27th March 2013

March 27, 2013 By

Another interesting 24 hours on FX markets with the Euro under pressure once again and the Aussie breaking higher and closing in on the target levels we set after the employment report around 1.0512. Stocks in Europe were mixed with the periphery still realing from the impacts of the Cyprus bailout while the UK and German markets did better.

In the US it was the strength of Durable goods that saw stocks accelerate higher from the get go with goods purchases up 5.7% in February against expectations of a rise of 3.8%. Interestingly though the ex-transportation number showed a fall of 0.5% versus expectations of a rise of half a percent. Other good economic news in the US was the Case Shiller house price index which is now up 8.1% yoy for January. This is better than expected and in a separate report I saw this morning the Fed said that home prices were up strongly last year with the increase in US home equity on aggregate rising 25% last year. This will no doubt contribute to the recovery in the economy but what the US needs is jobs which hopefully will be coming down the pipe sometime soon.

We say hopefully because as has been the case recently the data in the US is not universally positive nor too strong and last night the Richmond Fed Index printed at 3 down from 6 last month and 8 expected. But the good thing for stocks in this still uncertain outlook is that the Fed will be in no rush to take back stimulus.

So at the close the Dow was up 112 points or 0.78%, the Nasdaq rose 0.52% and the S&P 500 was 12 points or 0.78% higher to 1,564. In the context of the S&P 500 chart yesterday the highs are still being constrained by the top of the uptrend channel so we don’t expect the S&P to roar higher any time soon as this roof line resistance seems and has been quite strong for some time now.

In Europe it was a tail of the north and the south as it seems to be increasingly over the past few years with the Cypriot “bail out” putting more pressure on the Spanish and Italian stock markets. Spanish stocks slipped 1.84% while Milanese stocks fell 0.95%. In the UK stocks were 0.32% higher, the CAC rose 0.52% and the DAX rose 0.12%.

On the topic of Cyprus our 12 year old Eurogroup leader Jereon Dijsselbloem like a scalded child still trying to prove he’s right comment that there were no bank runs in the Eurozone overnight. That is not the point is it the money that leaves the Eurozone will do so electronically because it is the above €100,000 amounts that are decidely at risk. I’m not going to comment on his comments every day but this type of comment and the obvious need to be proved right is dangerous for markets and the Eurozone – he should be sacked.

Anyway Cypriot banks remain closed, capital controls will be in place and students are in the streets.

Looking to FX markets the Euro remains under pressure but has not yet broken wide open. Technically there was a chance that the move below the 200 day moving average could have been a subtle catalyst to further weakness. Euro is still around that level after trading down to a low of 1.2827 but sits midrange for the day at 1.2854 as we write.

The Aussie just keeps keeping on and while there may be no bank run in the EU at the moment whatever the reverse of that is is clearly pushing the Aussie, NZD and CAD higher as investors buy safety from any chance of EU haircuts. At least that is the dynamic that seems to us to be in play – otherwise Gold would be higher not back at $1600. Obviously also as we see in the spike over the past few days in Nymex Crude the durable goods data and perceptions about US growth are helping but we think its that Australia is the least ugly in the global beauty parade that is FX markets.

Looking at the 4 hour chart above you can see one of our favourite set ups has played out nicely in the past few days. That is a move, a pullback to Fibo support and then a break which runs to the 1.382 level of the original move. But the question of course is where to now? On the dailies there looks like there could be a little more upside yet the high of 1.0497 was only 15 points shy of the 1.0512 we tweeted as our multi week target after the employment data so we are getting close and we have also been suggesting the 1.0512/32 region should be solid support. On the shorter term charts we’d expect some sort of pullback unless or until last nights high gets taken out.

Elswhere USDJPY sits at 94.48 raising the spectre that the break of the trendline two nights ago was a false break. Break out traders will still be short but for the moment it is hanging in there. We are still targeting lower levels. USDCAD was poll axed overnight and it looks like it mght want to head back toward 1.0060 region.

On Commodity markets Nymex crude was sharply higher up 1.51% to $96.24 Bbl. Gold is struggling a little for traction and sits around $1596 oz while Silver fell 0.49% to $28.67 oz. The Ags aren’t trading as a bloc anymore the way they were for so much of the past 6-12 months. Wheat is up 0.58%, Soybeans up 0.68% but Corn fell 0.58%.

Data

RBNZ Business Confidence and the RBA Finsancial Stability review are out today. This evening the Gfk Consumer Sentiment survey is released in Germany before French GDP, Spanish retail sales and Current account. Euro area consumer and Business confidence is also out. In the US pending home sales is the focus.

 

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

Vantage FX | Mad Dutchman torpedoes Euro rally, USDJPY breaking lower | 26th March 2013

March 26, 2013 By

The Cypriot bailout euphoria that washed through Asia and into early European trade was torpedoed by the Eurogroup head and Dutch Finance Minister Jeroen Dijsselbloem overnight with some triumphalist but extremely loose talk about the success of the Cyprus bailout and the blue print it offers the rest of Europe.

Yep, the very fear we had about the specificity that some were claiming Cyprus being seen rather as a general plan for wider Europe was front and centre after our man Dijsselbloem managed to salvage defeat from the jaws of victory after the deal on Cyprus had seen stocks up and the Euro back above  1.30.

In an interview with Reuters and the FT Disjsselbloem opened Pandora’s Box by insinuating that what happened in Cyprus may now happen in Spain, Italy, Greece and even France. Of course we’ve been writing about this very thing for a week now but we never thought the bloke who is responsible for trying to support Mario Draghi’s efforts to stabilise Euro area markets would toss a hand grenade into the crowd. But he did – here is what he said,

What we’ve done last night is what I call pushing back the risks…If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders…

FT Alphaville has a great take down of Disjsselbloem and even though his underlying message that both investors and depositors need to look at the financial institution and their strengths and weaknesses before they invest or deposit is sound the delivery lacks any finesse at all. Perhaps he meant to hit markets, there is no telling and we do expect this type of doctranaire thinking from the Dutch Finance Minister in private but in public a bit more caution is warranted.

The 15 minute chart above of the Euro tells the story and FTAlphaville says that “the immediate result on Monday was six per cent off the price of Intesa Sanpaolo stock, six per cent off Unicredit, five per cent off SocGen and so on.”

Looking at the daily chart of the Euro it is apparent that it has now slipped down below the 200 day moving average for the first time since November 2012. Our long held 1.2650ish target remains

In Other FX markets USDJPY broke our trendline making a low of 93.53 and we would now be short USDJPY targetting 93.05 then 90.73. But if you like Fibonacci levels the way that I do a “usual” retracement within an uptrend would see a move back to the 38.2% level which is 89.97.

The Aussie has been fairly stable over the past 24 hours, breaking up through last week’s high at 1.0457 and trading up to 1.0480 before pulling back a little with the Euro but it is still sitting at 1.0465 this morning and still targeting a push toward 1.05. The Pound was volatile overnight in line with the Euro trading up to 1.5267 with a low of 1.5141 and it sits at 1.5177 this morning.

Looking at the stock markets of Europe having opened up strongly slipped lower with the Italy and Spain hardest hit losing 2.50% and 2.26% respectively. France with its weak economy was knocked 1.12% while the DAX fell 0.51% and the FTSE was 0.23% lower. The Euro Group has already tried to hose down Disjsselbloem’s comments but the cat’s out of the bag, Pandora’s Box is open.

In the US stocks were off following the lead of Europe with the Dow Jones Industrials down 0.44%, the Nasdaq dropped 0.31% with the S&P down the same amount or 5 points to 1,552. These moves aren’t too bad and nothing too large but as you can see in the chart of the S&P 500 continually bumping into the top of its uptrend channel – the roofline as my son likes to call it – which continues to provide solid resistance.The rally is fading and a period of consolidation/pullback looks likely.

In commodity markets gold rally continues to fade and it has slipped back below $1,600 sitting at $1,596 at the moment. Crude oil rose 0.93% to $94.58 Bbl. Copper fell 0.49% and the Ags were mixed.

Data

RBA Governor Glenn Stevens speaks today with little else out before Durable Goods, Case Shiller house prices and the Richmond Fed manufacturing index out in the US tonight.

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

Vantage FX | Yen approaching support as we wait on Cyrpus, watch 93.98 | 25th March 2013

March 25, 2013 By

FX Markets were more positive into the close of the week with hopes that there would be a Cyprus deal over the weekend but as markets awaken in Asia this morning so far all we know is that the President of Cyprus has jumped on a plane and is headed for Brussels – no doubt to tug his forelock, and prostrate himself in front of the great sages of the Euro project.

Ok so I’ve already gone off into rhetoric but is almost impossible to understand how the Euro Project is going of the rails for what is a tiny amount of money by European GDP standards. We have heard from many that Cyprus is just 0.2% of the EU’s GDP  while Greece is 2% as the reason behind the differing treatment of the two nations. We also know it is unpalatable for Germany and no doubt Finland to be bailing out Russian Oligarchs and money launders but the knock on effects of potentially bailing in Guaranteed depositors and by imposing capital controls within the EU seem not worth the angst that could be avoided by helping out the cypriots.

We agree the Cypriot offshore banking model should never have been allowed to grow inside the EU – but the same team that is punishing Cyprus now let it happen or at least let Cyprus into the Zone knowing what they were up to.

Anyway we don’t yet know how this is going to end but new €100 per day limits on ATM’s suggest the capital controls are likely so as we wrote over the weekend to us the EUro project is now terminal. Sure a lot rests on the fact that once in the monetary union exit is not an option but capital controls are just exit by another name. We think the EU should cut the cancer to try to save the project and let Cyprus go the way of Iceland. Of course who knows where that will end but if there is no appetite to save the little island then half measures risk reigniting fears put to bed mid 2012 by Mario Draghi’s intervention.

So to the markets.

Stocks in the US closed on a better note in what was a data free day’s trade. The Dow closed up 91 points or 0.63%, the Nasdaq rose 0.70% and the S&P 500 was up 11 points or 0.72% to 1,557.

In Europe it was more mixed with the FTSE up slightly for a gain of 0.07%. The DAX however was knocked by the weaker than expected German IFO business survey which fell to 106.7 against 107.4 last and the expected rise to 107.6. Current assessment and expectations were also lower. Milanese stocks rose 0.69% while the CAC fell 0.13% and Spanish stocks dropped 0.25%.

The FTSE is at a really interesting level on the charts worth watching. Friday’s low was the third touch on a trend line that goes back to the lows late last year. This is a good sign but equally worth watching as our set up suggests it is going lower.

In FX markets the Euro rallied as you can see in the Chart below and it has moved away from the 200 day moving average again but as yet has not taken out our fast moving average. The chances are building however and while we believe this Cyprus mess means Euro goes substantially lower in time more aggressive traders who think that there will be some sort of positive resolution in the Euro’s favour could use the 200 day moving average as the stop on any longs. Euro is sitting at 1.2957 this morning with the 200 day moving average at 1.2864. If this level gives way it is 1.2650 here we come.

The Aussie continues to benefit from the obvious message that Cyprus is sending to get your money out of bank deposits in the crisis hit EU nations – indeed abstract Germany and Finland deposits are probably no longer “safe” in the sense of haircuts at some point in the future in any continental European jurisdiction in the longer term. So money will flow to safe harbours like the Aussie.

Looking at the 4 hour chart the outlook for the day is fairly clear. A break of the high from last week at 1.0457 should see the Aussie kick toward resistance in the 1.0512/32 zone and the 4 hour uptrend bottom from the lows around 1.01 comes in at 1.0392. Unless something catastrophic happens and risk goes off undermining even the safe harbour attraction of the Aussie this is likely to find solid support.

USDJPY is also looking interesting on the charts. The uptrend line from the start of the rally comes in 93.98 which is also around the level of our slow moving average – a break of this level would open a much deeper retracement and it is worth noting the outlook for the Nikkei with 12184 the key level to watch on the downside in MT4 terms.

On Commodity markets Gold is losing momentum from its rally and although we have been short term bullish our indicators are suggesting that last week’s high around the $1,616/17 region and just below our target of $1619 might be it for now. We’ll have to see how things pan out but only a break of the highs, which our indicators still suggest is more likely than not, would open up further topside.

Elsewhere on commodity markets Nymex crude rallied 1.36% to $93.80 Bbl, gold was 0.47% lower the more volatile precious, Silver, fell 1.76% to $28.65 and copper was up a little less than 1%. On the Ags corn fell 0.91%, wheat rose 0.14% and soybeans fell 0.59%.

Data

Cyprus is the key over the next day or so so watch that closely – might be a time for small positions.

Economic data wise the Chicago and Dallas Fed manufacturing indices are out and Ben Bernanke is talking.

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

Vantage FX | Aussie roars through 1.04 targetting 1.0512/32 | 22nd March 2013

March 22, 2013 By

The Australian dollar roared higher overnight taking out 1.04 with ease and trading up to a high of 1.0458 below which it just sits as I write at 1.0451. We here at Global FX have a hypothesis that what has happened in Cyprus this week, and possibly Italy and Spain and so on, has reinforced the Aussie’s place in global investors portfolio as a hedge against catastrophe. Thus as we have said many times in the past the Aussie is a safe port in a storm, a safe harbour not a safe haven.

What Cyprus has done is shon a light on the fact that there is this big land mass down between the Indian and Pacific Oceans where the chances of getting a haircut on your investments, whether a bond holder or a depositor, are so close to zero at the moment as to be not worth worrying about. Some might like to characterise the Aussie as a safe haven given that with equities down overnight, with commodity markets off and with gold and the US dollar the big winners the Aussie looks like a safe haven but we think this a misnomer because the Kiwi dollar was also higher last night as was Sterling and the Loonie. If anything what the markets did in buying the Commonwealth Currencies is give a vote of confidence to style of Central Banking that is common in these 4 nations – that is an inflation targeting regime but one that is not so doctrainare as to put the central banks concerns before the overall outlook for the country whose economy they are managing. These 4 nations have the most flexible and adaptive approach to monetary policy and seem to also have government’s that support their central bank’s approach.

So yes the Aussie did well but it was not alone – safe harbour not safe haven.

Looking at the technicals for the Aussie we had targetted a move to 1.0512 since the outsized labour force data a few weeks agon and even though the Aussie has been dancing on the spot for a few days and the low yesterday was right on the uptrend line from the lows of early this month at 1.010ish.

Looking at the chart above the last 4 hours seems to have slowed the Aussies rise but when we look at the daily there is still some room for a further rally. Worth noting is the 1.0532 level which is a trend line from the highs back in 2011 as you can see in the weekly chart below.

Looking at what happened overnight aand why it was the Aussie and the Commonwealth stood out as reasonable bets it was clear in the Eurozone PMI data was weak and that growth in the zone is going to be weak going forward. German PMI came in at 48.9 for manufacturing and 51.6 for services down from 50.3 and 54.7 last month respectively and well below expectations for an improvement month on month. French manufacturing PMI was 43.9 which is not much better than Greece and the Services PMI was 41.9. manuyfacturing was the same as last month but services fell from 43.7.

The overall EU PMI’s were 46.6 for manufacturing, and 46.5 for Services and the composite down from 47.9 for all three last month and against expectations of all three to rise to 48.2 – truly weak result.

Adding to concerns in Europe is the seeming escalation of tension in Cyprus. Reports on Reuters are that the Troika is now playing extreme hardball and Cyprus has till Monday to get its act together or default. Equally there are reports that the banks will be broken into good and bad banks with all deposits under the guarantee threshold of €100,000being hived off into the good bank and all deposits above this limited frozen and put into the bad bank awaiting asset sales.

This will keep the population of Cyprus a little happier no doubt but Russia may not be so keen – markets will keep on eye on how things develop over the next 24 hours.

In the US the data was pretty good with the Markit Manufacturing PMI rising to 54.9 from 54.3. Existing home sales climbed to 4.98m which is the highest level since 2009 and jobless claims came in up 336,000. Talk in the US is that this data is consistent with non-farmpayrolls this month of more than 200,000 reinforcing that the economy is healing.

But market’s seem to be more worried about Cyprus and even though all were off their lows the European lead in for Wall Street was negative. The FTSE fell 0.68%, the DAX dropped 0.86%, the CAC – with the very weak PMI – fell 1.42%. In Spain and Italy stocks fell 0.78% and 0.50% respectively.

So at the close the Dow was 91 points or 0.63% lower. The Nasdaq fell 0.96% as Oracle’s earnings disappointed and its stock fell 10% on the day. This is one reason I trade currencies – 10% on a day, gee whiz! The S&P continued its retreat from its recent highs with a fall of 13 points or 0.82% to 1,546.

It’s not terminal by any stretch but is 1,528 gives way then a deeper retracement is in the offing.

Turning back to FX land the Euro is down 0.22% at 1.2902 off the lows of the day at 1.2879 but still holding in above the 200 day moving average. As noted above GBP had a better day rising 0.51% to 1.5174 and the CAD had a broad range but managed to finish 0.17% stronger against the USD at 1.0242.

On Commodity markets  crude fell 1.18% to $92.40. Copper fell 0.36%, silver was up 1.38% to $$29.15 oz with Gold at $1,611 oz. The Ags were mixed with corn flat, wheat down 0.95% and soybeans surged 1.92%.

Data

IFO biz climate is out in Germany but nothing really matters except Cyrpus in the next day or over the weekend it seems – at least in Europe.

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

Vantage FX | Fed to keep buying bonds, Euro up | 21st March 2013

March 21, 2013 By

Well, the Cypriot vote against the bail out happened more than 24 hours ago and the world didn’t end. This fact seems to have buoyed traders in the northern hemisphere who pushed stocks higher and took the Euro and Sterling up and pushed gold down. Of course any one days trade is just noise and the emotional roller coaster may just be at a high point once again but for the moment the glass is half full not half empty.

The rally started in Asia with some strong results in Shanghai which was up 2.64% with this better tone helping drag the Australian market off its lows and gave the Aussie dollar a little nudge higher also. As Europe entered the fray it felt like traders looked around the room and saw no panic so decided to hit the green buy button not the red one to sell with stocks up from the get go. At the close the CAC and stocks in Milan finished on their highs up 1.44% and 2.2% respectively but the DAX and Spanish stocks finished mid range up 0.68% and 1.14% respectively.

In the UK stocks were lower after Chancellor of the Exchequer George Osborne releases his budget where the outlook for growth was downgraded for 2013 to 0.6% from 1.2% previously. He did however urge that his government was “slowly but surely fixing” the economy, although cutting his 2013 growth forecast to 0.6% from 1.2% estimated as recently as December 2012. Also of note was the fact that his changes for the BoE’s role in the economy were not as radical as some feared with the inflation target remaining at 2% but with a little more leeway around the central tendency.

Of course that is just a reflection of what current BoE Governor Meryn King has been doing since 2008 so it was no big deal. At the close the FTSE was down 0.13% and Sterling was up to 1.5185 at one stage but sits at 1.5110 as we write. Another wild night it was with a range of 160 points for a mid range close which we think is still positive if not a little indecisive as you can see in the candlestick in the chart below.

Stocks in the US added to gains after the Fed reiterated its commitment to the $85 billion of monthly asset purchases for the foreseeable future. Indeed in forecasting that the recovery is under way but that risks remain while not expecting the unemployment rate to hit 6.5% until 2015. So the Fed will be, or is at least expecting to be, buying lots of bonds for a couple of years yet.

This is kind of like the perfect world for stocks if that is the case, a recovery that is modest enough to stay the Fed’s hand but strong enough to give stock investors hope of further capital gain. It doesn’t mean that stocks will roar necessarily but it makes it much harder for the preconditions for weakness to become apparent. Unless of course Fed Ex’s earnings report is a precursor to disappointment.

At the close the Dow was up 0.39% to 14,512. The Nasdaq rose 0.77% and the S&P 500 was 11 points or 0.69% at 1,559. Fed Chairman Ben Bernanke said on Cyprus that he was watching it, hope the Europeans would come up with a “sufficient and equitable” solution but at the moment it didn’t pose any threat to the US economy. Our emphasis obviously but one would hope that the Europeans got the message.

On FX markets the lack of Cyprus induced panic let the Euro off the hook and it is up 0.48% to 1.2942 this morning up almost 100 points from yesterday’s low around 1.2850. Euro is a bit messy at the moment and our view it was headed to 1.2650 is being challenged by last nights rally. We will be wrong if Euro can trade up and through the 1.3000/25 region.

The Aussie dollar was higher on the day but is off its high of 1.0404 sitting at 1.0377 as we write. The Aussie is dancing on the spot at the moment and has been in a 4 hour uptrend from the lows above 1.01 back in early march. A break of this trendline at 1.0353, so give it 7 points and call it 1.0346, opens the way for a deeper retracement. Don’t forget though as we always say respect the trend until it breaks.

On commodity markets Nymex crude was up on the back of a big draw in stocks with the price rising 0.87% to $93.24. Gold was lower with the Euro up but at $1606 it still looks strongish.

Data 

Kiwi GDP is out today, HSBC Manufacturing PMI for China before a raft of preliminary PMI data in Europe tonight. In the US its jobless claims, Existing home sale and the Philly Fed index.

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

Vantage FX | Cyrpus knocks Euro and Stocks lower, Gold heads toward $1639 | 20th March 2013

March 20, 2013 By

Politicians in Cyprus voted down the package to bail in depositors and bail out Banksters and bond holders which is the entirely appropriate thing for them to do given the undemocratic nature of this “rescue” package foisted on the tiny Mediterranean nation. We’ll not get too rhetorical on this again as we have said our piece in the past day but this increase in tension is important in a trading sense because it is reinforcing some of the trades we have been highlighting over the past couple of days and it it seriously driving our Euro and Gold views.

But before we get to those lets have a look around the grounds.

Stocks were lower which is a bad sign for the Australian market which broke an important trend support on the close below 5000 yesterday. It looks weak and has a substantial pullback coming particulalry because broker down grades hit BHP in overnight trade offshore. In Europe the ZEW business survey in Germany was stronger than the punditry expected but with Cyprus dominating no one cared.  Spain was hammered 2.20% lower, Italian stocks dropped 1.59% and in France where the Finance Minister has some issues to deal with stocks dropped 1.29%. The DAX was more subdued falling 0.78% and the FTSE was positively positive compared to the rest of Europe falling only 0.26%.

In the US the data was pretty good with Housing starts and Building Permits both stronger than expected but Cyprus weighed on sentiment and even though the S&P is only down 3 points just near the close for a lose of 0.2% it was off as much as 13 or 14 points earlier. The ECB announcement that it would provide liquidity to Cyprus buoyed things a little and has actually managed to push the Dow just into the black and it is up 6 points or 0.03% just near the close. The Nasdaq is down 0.27%.

On FX markets the Euro is under pressure again against the USD making a low overnight of 1.2843. It just held trendline support against the GBP and EURGBP looks to us like it is headed substantially lower if 85.15 gives way. USDJPY had a down day but is still holding the uptrend – the big level to watch remains the trendline which comes in at 93.36 today. The Australian dollar was weaker and is 0.39% down on the day at 1.0361 after making a high at 1.0405 yesterday around the time the RBA minutes were released.

On Commodity markets Nymex crude fell 1.65% back to $92.19 Bbl. Corn and Wheat rose more than 1% but soybeans were 0.3% lower. Silver was down 0.11% to $28.91 oz while gold rose to $1615 at one stage.

Looking more closely at Gold we turned bullish a week or so ago and noted Monday that we thought it  should get to $1619 at a minimum but the set up on our charts suggest that is has more in it then just that with the high overnight of around $1615 almost but not quite there. Adding to the bullishness is a report on the seasonality of Gold that we picked up from the gurus at The Stock Traders Almanac - they said,

gold has enjoyed a period of seasonal strength since 2001 that begins toward the end of March and lasts until late May (yellow shaded box). Last year this trade did not work. However, it has worked in nine of the last twelve for a theoretical cumulative single contract gain of $43,630

That is some one contract return and while seasonal patterns aren’t guaranteed it is worth keeping in mind. Also worth keeping in mind is the set up of the Gold Chart.

Below is our VantageFX chart and you can see that gold has taken out our fast and slow moving averages and is now back in the middle of the down trend. If the $1619/22 region can be breached then Gold is headed toward Fibo resistance at $1639 and if that gives way $1661.

Turning to the Euro we have had a target around 1.2650 for some time now but as we noted yesterday morning while it is above the 200 day moving average then the outlook is not dire. Last night saw the Euro test but it is closing above the 200 day moving average. But the downtrend remains firmly entrenched as you can see in the chart below.

The way we look at charts and the system we use subjectively says that there is a very high probability that Euro will trade down to the 1.382 Fibo extension of the recent move before the multi day consolidation.

The Aussie chart is interesting as well given that it had a down day but has managed to hold above the old trend line support with last nights low. It has been a very messy time for the Aussie lately and we thought it was set up for a run toward 1.05. What the price action seems to suggest for the moment is that Aussie is in aband where buyers and sellers are happy. Sure it might be 2-4 cents wide but Aussie remains very stable which means we are trading smaller positions and shorter time frames as opposed to the bigger picture stuff for some of the other markets. Same system, just different time frame.

Data

Kiwi current account and then the Westpac Leading Index in Australia. Eurozone Current Account tonight might be interesting and the German 10 year bond auction is bound to get plenty of bids and then the Fed decision is out tomorrow morning.

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

Vantage FX | Markets recover from Cyprus lows,a look at the key levels | 19th March 2013

March 19, 2013 By

There are some really interesting set ups in the market after the price action of the past 24 hours so this will be a chart heavy post this morning but before we dive into how the charts are set up in many markets let me just say that the moves by the Cypriot government to re-evaluate the depositor tax to look after the smaller depositors a little better perhaps even entirely is a welcome move. Equally while we could view the EU stance that they don’t care how Cyprus gets the cash as long as they get the cash, implying it is OK to tax Russians more if that’s what the Cypriots want to do, as pretty weak at least they have given Cyprus some wriggle room.

Overnight there was no evidence that there bank runs in Spain or Italy and markets have clearly taken on board the size of Cyprus relative to Europe and the globe as something to focus on rather than the longer term potential human and behavioural costs that worry us here given that is our bent an a key driver in our trading approach. But longer term issues matter and I am reminded of a time when studying for my Master of Applied Finance in 2002 when we were addressed by a senior investment banker who said that while the human cost of the September 11 attacks was appalling and the changes this would bring to international travel were going to be long lasting the size of the market sell off relative to the economic impact meant the sell off was a chance to buy. Perhaps it was the consequences have been very long term and costly.

We continue to view the approach taken by the Troika and the bully boy approach to a tiny nation as having longer term impacts on European politics and its banking system – remember anyone now is fair game for the Troika in bailouts and if that is the case populations might want to bolster their position by putting nationalists in Parliament who will defend their interests more aggressively. But for the moment markets aren’t overly concerned and this is probably right at present as our Investment Banker pointed out back in 2002.

This view held then seems also to have permeated markets overnight and if we quickly go around the grounds we see that European stocks were off their lows but still closed in the red. The DAX fell 0.40%, the FTSE 0.49%, the CAC 0.50% while in Italy stocks were down 0.85% and in Spain stocks were 1.29% lower.

In the US at the close the US stock market is off its lows but swooned late in the day. The Dow is down 0.43% to 14,452, the Nasdaq is off 0.34% and the S&P 500 has dropped 0.56% to 1552.

Now to the charts:

Check out the candlesticks on these babies…big drop but very positive rallies everywhere. the question is whether this is just Gary Gap Filler or they are heading lower.

Global FX

If Euro can stay above 1.2850 which is both the bottom of the Bolly Band and also the 200 day moving average then there is a set up for a decent rally coming – but it is a rally I want to happen so I can sell into it because the EURUSD downtrend is firmly in place.

USDJPY like Euro had a big fall but then rallied hard. As you can see here there is a trend line support coming in just below the market at 93.14 which although it seems a long way away is less than 2 times the ATR of 115 points a day from spot. A break of this level is huge as it would take out both our moving averages and the trend and signal a deeper retracement. remember though we always respect trends until they break.

I saw something on Twitter saying that one of the Big IB’s, perhaps Morgan Stanley had revised their year end target for GBPUSD to 1.43 from the 1.50′s. As readers know we believe that GBP is headed toward 1.42 but like Heisenberg suggested we can’t know both the level and the time so year end before or after, who knows. As you can see in the chart above though GBP couldn’t get through the 23.6% retracement and while the MACD would suggest a period of strength coming the downtrend persists. This is a sell on rallies market.

The Aussie chart is very interesting three up days but oh so different. The break out after the employment data Thursday, the continuation as the US dollar weakened last Friday and then a very strong recovery from the gap lower yesterday. This looks bullish from where we sit and the 1.0512 target remains in place.

Stocks

The Nikkei is still holding above the key support zone. A breach would signal a deeper move and perhaps be a sign that USDJPY is on the move lower as well.

The Australian market pulled up right on important support as you can see and while it looks like this market is turning only a break of this trend line would signal a deeper move.

Turning to the bellwether global equity market of the S&P it is at a very interesting point. Last night saw it break our fast moving average, have a low on the middle of the Bolly Bands and have a set up which suggests that it is going to at least test the slow moving average that sits at 1524. A break of this level is a sign that the S&P and perhaps equity markets everywhere are headed lower.

Gold looks like it is going to rally from here. While it didn’t exactly go ballistic after the Cyprus thing yesterday and indeed spent most of the Asian day back below $1600 it’s test of the slow moving average and the set up when we look at our usual indicators suggests that it is going substantially higher. Of course if the S&P breaks lower and or the Euro’s trend also bust then we’ll get a big move.

There are a lot of potential big moves coming so watch your levels.

Data

A couple of interesting speeches from RBA gurus today. Guy Debelle the Assistant Governor (Financial Markets) is talking on Some Recent (And Not So Recent) Trends in Australian Debt Markets while Philip Lowe the Deputy Governor is talking on Internal Balance, Structural Change and Monetary Policy. Might be something in either of those for us wonks today :)

Of course the RBA Minutes are also out and Chinese FDI and Leading Index will be important as well. Also out is the ZEW survey in Germany

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

Vantage FX | Cyprus bailout knocks Euro and Aussie rally for six| 18th March 2013

March 18, 2013 By

The Cypriot bailout which is really an undemocratic bail in of depositors has knocked the Euro and Aussie lower this morning as the markets try to grasp with the implications of the haircut on depositors of 9.9% will be for the wider European markets. We have looked at Cyprus in a special note this morning which you can find here.

The whole Cyrpiot thing casts a pall over the positivity with which markets closed the week.

Already the Euro and Aussie are lower than the close on Saturday Morning. The Aussie closed above 1.04 at 1.0415 which is its best daily close since February 5th while the Euro ended the week at 1.3073 right on our fast moving average. Reuters is showing this morning that the Aussie is changing hands at 1.0352 and the Euro at 1.2928 which is a huge drop and a clear result of the Cypriot bailout and while it is early doors Sydney trade with Asia not even up yet there is likely to be some pressure on the Euro today.

Equally the Aussie has come under pressure but if we assume that this Cypriot concern grows then the Aussie and the US dollar are the two “Major” currencies that should benefit the most. The rationale for that assertion runs as follows. If you are a depositor or any kind, private individual, small company, multinational, Financial Institution or Global oligarch you are now at risk in the EU banking system with the possible exception of Germany and Finland both nations are the clear beneficiaries of the Euro as otherwise the Deustchemark and the Markka would be through the roof and losing competitiveness by the second.

So if you are a depositor in Greece, in Italy, in Spain, Portugal or even the UK possibly is your money safe from the long arm of the doctrinaire Finnish and German technocrats.

So the Aussie might actually get a genuine safe haven bid against the Euro and some other currencies. Safe Haven in the sense that your deposits in Australia are safe from hair cuts regardless of what happens overseas. So EURAUD could be headed substantially lower.

The set up for this cross was for a rally back toward the fast moving average but should it take out the recent low then a move toward the 200 day moving average at 1.2385 is in train and if that breaks then 1.2290 and then the low of last year at 1.2150 opens up.

The Yen is also likely to get catch a bid against the Euro and perhaps against the US dollar as well on the back of safe haven flow although it is worth noting the Doves have been appointed to the BoJ as expected which might slow things down a little. The GBP is likely to come under pressure as well given it has some of the same problems that Cyprus and the rest of Europe has with regard to its banks and banking system.

Looking at the stock market performance Friday saw a weaker end to the week in the US with the Dow down 0.17% to 14,514, the Nasdaq fell 0.30% and the S&P missed the all-time high closing at 1,561 down 0.14%. The Reuters Michigan Consumer Confidence data fell to 71.8 from 77.6 but Industrial Production rose 0.7% versus the 0.4% expected and capacity utilisation was higher than expected.

In Europe stocks were also lower with falls across the board. The FTSE fell 0.60%, the CAC dropped 0.71% but the DAX only dropped 0.19%. Both Italian and Spanish stock markets fell 0.45% and 0.43% repectively.

On Commodity markets Nymex Crude was up again to $93.45 with a gain of 0.45%. Gold is at $1594 and if Cyprus doesn’t kick it toward $1619 nothing will. Silver is at $28.77 oz and likely to also increase.

Data 

This week the Fed meets and we find it hard to believe they won’t make some reference to the improving US economy and thus their discussions around stimulus withdrawal. We’ll know on Thursday.

Today in Australia we have the miracle number of new motor vehicle sales. This data has persistently amazed us with its strength but surely it has to slow soon????

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

Vantage FX | Jobs data drives stocks and currencies, GBP surges| 15th March 2013

March 15, 2013 By

Jobs Jobs Jobs – that is the mantra for the past 18 hours or so and that was the driver of markets overnight.

Of course the big rise in Australian employment was the key driver in Asia yesterday but overnight the fall in jobless claims in the US both at an initial and then also at 4 week moving average level was another sign that the US economy is healing. But in Europe the economies went further backwards in Q4 2012 with the qoq number of -0.3% worse than the -0.1% expected and the year on year growth for 2012 was -0.8% versus -0.6% expected.

Now of course when you see numbers like that it would be easy to think that the Euro should have lost ground against both the US and Australian dollars but while the EURAUD rate did fall to the lowest levels since January 10 this year the EUR actually managed to rally. After a low of 1.2910 Euro managed to rally to 1.3032 and sits at 1.3002 as we write. Perhaps its back to the US dollar being pressured when stocks have a good night as they did across the board last night. It is hard to tell – big ranges and changing relationships make it hard to know from one day to the next exactly what is driving markets at an individual cross or asset level.

One thing that is certainly happening though is that the apparent recovery in the US economy is pressuring bond prices which in the end may be part of the transition from crisis to something more normal in terms of bond pricing and in time will eventually lead to a change in the Fed’s stance.

It is clear that US 10 year rates are on the rise. It is equally clear that unless the US economy turns tail and the ECRI’s long held view that the US is in recession comes to pass that the lows for the cycle are in place. Indeed at auction last night of $13 billion of 30 years which went off at a rate of 3.248% which is still an amazing low rate at which to borrow for 30 years but is now the highest level since April last year.

Bond traders, unless they were short, may not have liked the better jobs data but the stock market clearly did because at teh cloe the Dow extended this little run to 10 days straight with a rise of 0.58%. The Nasdaq is up 0.43% and disappointingly the S&P closed a couple of points shy of its all-time high up 8 points or 0.55% at 1,563. MarketWatch reports this morning however that the volumes on the NYSE and associated with this run of wins is is below the average of the past 49 days. Nasdaq volumes are also below their recent averages as well. Interestingly MarketWatch juxtaposes the volumes that were in the market the last time the Dow had a run like this back in 1996 and says that volumes increased as the run extended.

Clearly this is a rally that is long in the tooth which may account for the falling volumes but the old futures trader in me says that this is a warning sign.

In Europe the weak data didn’t matter but the Spanish 30 year bond auction which saw yields fall from the last auction certainly helped as did the US jobless claims. thinking about it if the US is truly in recovery then Europe’s future, all other things equal, is actually brighter because the world’s biggest and second biggest economies are now both moving forward which just might – at least in the minds of some traders not necessarily here – mean that Europe’s troubles will wash away with time and the recovery. So European stocks rallied hard with Spain up 1.88%, Milan up 2.45% (Beppe who?), the CAC was 0.94%, the FTSE was 0.73% higher and the DAX rose 1.09%.

As you can see in the chart above the DAX is trying to break back up through and into the uptrend from last year. It is looking a little overcooked but time will tell.

Turning back to FX Land it wasn’t only the Euro that had a huge range with the Pound churning through more than 200 points in the past 24 hours. Making a low of 1.4909 the GBP rallied to 1.5118 and sits up 1.07% at 1.5079 as we write. That is a huge range for any Major currency but as we noted yesterday GBP’s sell off looked a “little long in the tooth”.

GBP has now traded up and to our fast moving average for the first time since early Feb and we would be now targetting a move back to the slow moving average which comes in at 1.5324 today. Even just a normal garden variety retracement to the 38.2% Fibo level would suggest a move to 1.5418. Certainly the down trend is still intact but for the moment we’d rather be long than short.

Looking at the Aussie dollar yesterday’s huge surge in employment in Australia has a scent of unbelievability about it which might account for why the Aussie didn’t kick on as much as might have been expected with such a “strong” number. To put this increase in perspective the US labour force is about 13.4 times the size of the Australian Labour force as measured by the Department of Labour and ABS respectively. So the increase of 71,500 in total employment might be likened to an increase in non-farm payrolls in any given month of something like 960,000 Americans. Not impossible but certainly a couple or a few standard deviations to the right. And ultimately that is the key to why the Aussie couldn’t get to 1.04 under its own steam but needed the US dollar to weaken and Euro and Sterling to rally. The number was just too big to believe, +35,000 jobs might have actually been better for the Aussie bulls.

Looking at the chart though you can see that our moving averages are very close to crossing over from downtrend to up trend and we tweeted yesterday that we think 1.0512 is now in the frame. That remains our view based on our usual indicators and the set up.

on commodity markets crude was a little higher up 0.69% to $93.16 Bbl, Natural gas was through the roof up 4.16% while gold is roughly unchanged at $1587 while Silver lost 0.52%. Corn and soybeans both fell more than 1% while wheat rose 0.99%.

Data

A quiet night with CPI in the US, Empire manufacturing and Capacity Utilization. Can the S&P get there???

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