Vantage FX | AUD reverses from range top – biased lower | 30th November 2012

November 30, 2012 By

Stocks in Europe raced out of the gates and were in positive territory all day following on from the better tone across most of Asia but the US had  a more volatile session after Republican House Leader was less optimistic then he had been the day before about the Fiscal cliff.

When its all said and done its all said and done – the problem is we still have 32 days of this Fiscal shuffle and it continues to be frustrating because nothing is done. But there is little anyone can do about it other than what we noted yesterday which was essentially to be careful with trades.

On the data front there was a revision to the Q3 US GDP data from 2.0% at the advance estimate a month ago to 2.7% released overnight. Much of the revision was however an increase in the contribution of inventories to growth which changed from -0.1% at the first estimate to a contribution of +0.77% to last nights 2nd update. So on the face of it the higher number looks good but then we note that personal consumption was revised down from 2% to 1.4%. These are big revisions and it is easy to see why the Australian Bureau of Statisitics waits an extra month or two after the end of the quarter before it releases our GDP so that it can have a reasonable stab at GDP growth and hope to be somewhat close to the real growth number.

Elsewhere on the economic front German unemployment rose 5000 with an unemployment rate of 6.9%. Eirozone business climate was better than expected at 1.19 versus -1.60 but industrial confidence although better than expected was still negative 15.1 and services sentiment -11.9. Turning back to the US data jobless claims were marginally worse than expected at 393000 last week but pending home sales jumped sharply up 5.2% in October month on month against expectations of 0.8% so housing certainly looks to be continuing its recovery although the Kansas Fed manufacturing index was -6 versus expectation of -3.

Stocks

In Europe it was a positive day from the outset as the better tone in most of Asia filtered through to Europe and every one of the European markets that I follow ended up and for the most part strongly higher. The FTSE was up 1.15%, the DAX was the worst performing market I follow but even it rose 0.78% and the CAC was 1.53% higher. Madrid rose 1.68%.

In the US with 35 minutes to go the S&P 500 is up 0.34% to 1414 which is about mid range for the day’s trade. The Dow is up 0.19% and the NASDAQ is up a much stronger 0.62%.

In Asia Shanghai continued to fall dropping another half a percent as its technical outlook remains negative.  The Nikkei was 0.99% as was the Hang Seng while the Kospi and the Straits times were 1.15% and 1.13% respectively.

FX Markets

Interesting night last night with the Euro climbing over 1.30 again but finding sellers up there  again. Euro made a marginal new high for this run at 1.3013 versus the 1.3009 recently. The pullback has not been too deep though as the Euro sits at 1.2971 up 0.16% on the day.

Technically it is very interesting as the Euro has now tried for 5 days in a row to close above the trendline that goes all the way back to early 2011 so tonights close will be very important for the longer term technical outlook being a week’s end.

Elsewhere on Global FX markets the USD did slighthly better against the Yen and USDJPY sits at 82.12 this morning up 0.06% after trading an 81.89-82.21 range – yawn! Sterling is up 0.16% to 1.6038 and it is starting to look more positive technically and a weekly close above 1.6063 would signal a run higher next week. The Canadian dollar is slighthly weaker against the US with USDCAD up 0.08% to 0.9925 but USDCAD is at risk of closing the week below its recent uptrend – so another important weekly close.

Australian Dollar selloff

Turning to the Australian Dollar it was a more interesting night’s trade than probably most people expected given that stocks were up but the AUD was down sharply. Having made a high  of 1.0479 near the top of the range again AUDUSD sits this morning at 1.0425 down 0.48% against an S&P 500 that is up 0.50% as I write. Correlations are hardly ever constant but the performance of the Aussie dollar needs to be thought about.

I would make a couple of observations:

  1. If you cant break a range or hold a range break as happened this week in the AUDUSD then prices often naturally reverse as counter trend or range enforcers sell
  2. The expectation of an RBA rate cut next week has increased after this week’s data with about 77% implied expectation (I hate this metric but it is observable)
  3. RBA Board member John Edwards in the WSJ overnight made the obvious observation that there is an upper limit on how much offshore investors can buy of Aussie assets given portfolio limits which might also have knocked Aussie a little lower

Technically on the 4 hour charts it looks biased back toward 1.0405/10

Commodities

Silver is closing above the trendline we have been watching this week. Tonight is the important close given that this is a 15-16 month trendline so we’ll see. At the close Silver is sitting at $34.27 oz up 1.74% while Gold is higher at $1726 up 0.60%. Crude is off its highs for the day but still up 1.68% at $87.94 bbl – Crude is in a sideways trade at the moment even if the moves are large ones inter-day but it bears watching to see if thre is a break out sometime soon.

Datawise In New Zealand we get building permits this morning before a raft of Japanese data which could be market moving. Highlights are CPI, Industrial Production, PMI, housing starts, vehicle production and household spending. At 11.30 we’ll get the latest update on Australian private sector credit and then tonight German retail sales, French consumer spending and CPI. In the Americas Brazil is releasing its GDP  and budgetary position and in the US personal consumption data will be important.

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 me on Twitter @gregorymckenna or @FX_Global

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

Vantage FX | Stocks and Aussie up, USDJPY lower | 29th November 2012

November 29, 2012 By

Markets in the US did better overnight recovering from early losses after Republican leader and House Speaker John Boehner said that he is willing to put revenue on the table and is hopeful that a deal can be done over the fiscal cliff. This helped stocks turn around and also drove Aussie Dollar and Euro off their lows.

It is going to get frustrating over the next few weeks as markets ebb and flow with the words and hopes over the deal on the Cliff. Yesterday Senate Democrat Leader Harry Reid hit stocks with his warhammer when he critisised the Republicans and last night the opposite was true as noted above. There is only 33 days before the automatic spending cuts and tax hikes so thee pressure is growing to get a deal and President Obama said he is hopeful that a deal can ber done by Christmas – so there is a few more weeks of this to go but I would be really surprised if ultimately some deal is not done even if it is a European style can kicking exercise.

So consistent with the previous days trade the data in the US has been largely ignored. New Home Sales were down 0.3% last month but even though this was better than the expected fall of 0.8% the data was heaavily revised. This morning the Fed released the Beige book which was more pessimistic than the recent data has suggested on manufacturing

Stocks

In Europe there seems to be some residual concerns about the Greek deal but even my 10 year old son knows that greece is still going to have problems with economic growth, austerity and debt for years to come. What the Greek deal did as its major achievement is take away the event risk of a near term Greek implosion or Grexit. So tho that end it’s a positive but doesn”t change anything economically for the zone.

At the close European stocks had come back late in the day with the big markets in London, Frankfurt and Paris in the black but Madrid was lower. The FTSE rose .06%, the DAX was up 0.15% and the CAC rose 0.37%.

In the US the Dow has recovered from heavy losses early when it was down 100 points to currently sit up 75 for a rise of 0.58% with 40 minutes of trade left. The S&P similarly recovered from early losses and is up 0.44% at 1405 while the NASDAQ is also 0.45% higher.

In Asia yesterday the Shanghai Composite was under pressure again off its lows at the close but still down 0.89% and the negativity was infectious with the Nikkei down 1.22%, the ASX All Ords fell 0.24%, the Hang Seng and Kospi fell 0.62% and 0.65% respectively. No doubt with the rally in the US markets Asian shares will have some catch up to do.

Elsewhere on Asian stock markets yesterday the bigger indices were all higher with the exception of the Hang Seng which fell 0.08%. The Nikkei  rose 0.37%, the ASX All Ords was up 0.67%, the Kospi rose 0.87%. The Straits Times rose 0.25%.

FX Markets

Euro and AUD were under pressure overnight until the comments from John Boehner turned sentiment around in stocks and with that also in Global FX markets. It is far from satisfying as an FX trader or strategist to recognise that these big macro markets are being driven by the up and down action of expectations of the fiscal cliff but that is the reality at the moment and it should be informing the way you trade and how you approach the market if you are a short term trader.

Theoretically and practically comments and sentiment on the cliff are mini black swans if you are a day trader – you never know when they are coming or from which direction as we have seen from both Harry Reid and John Boehner over the past 24 hours.

Looking specifically at the EUR it traded down to a low of 1.2878 before bouncing to sit at 1.2925 as I write. As you can see on the 4 hour chart above the bounce was solid and any further positives on the cliff are likely to support EUR.

Elsewhere it was the same for the AUD and it spiked higher along with stocks at the precise moment that they started to rally technically it is a bit mixed but if stocks are going to rally and if, its a big if, a resolution to the fiscal cliff comes eventually then it is probable that the AUD eventually drives higher. It remains well supported.

Elsewhere on Global FX markets the pullback in USDJPY continues and it looks biased back toward 81.37 which is the 38.2% fibonacci retracement level. USDJPY is down 0.32% on the past 24 hours for the biggest move of the big 6 currencies. The AUD is up 0.24% at 1.0470 and we will get a chance today to see how strong the selling up here will be again.

Commodities

Silver and Gold both reversed again overnight losing 0.94% and 1.38% to sit at $33.66 and $1718 oz respectively. Silver did however have a very strong bounce off its low of $32.90 so there remains residual support but the overhead trendline we highlighted a couple of days back remains important resistance.

Crude was off sharply at one point but recovered when the EIA data was released and showed a draw of reserves of almost 400000 barrels against market forecasts of a 500000 barrel rise. At the close Crude was down 0.79% to $86.49 Bbl. Ags were quiet after yesterday’s big moves higher.

Datawise In Australia we get Private New Capital Expenditure which is important in the context of the mining investment boom (as it is now called) and we also get HIA New Home sales. In NEw Zealand we get business confidence later today and then tonight a raft of data in Europe including German Employment, British Mortgage Applications, and then Eurozone Economic confidence and then in the US thee next read of GDP for Q3 which I’m guessing and the market is expecting is going to show an upward revision .

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 me on Twitter @gregorymckenna or @FX_Global

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

Vantage FX | Fiscal Cliff concerns push US dollar higher | 28th November 2012

November 28, 2012 By

The positive outcome from European policy makers with regard to Greece dominated Asian and European trade in stocks and FX markets but US traders failed to take up the bullish cudgels in more cautious trade.

It would be easy to dismiss what seems to be the daily ebbing and flowing of sentiment about the Cliff as just noise and ex-poste rationalisation of what had occurred overnight but th fact that companies are now starting to issue special dividends to shareholders as a way to forestall selling of their stock as the cliff approaches speaks volumes. It is clear that the concern in the US and among companies and investors is real.

Which is why even with data from the US overnight better than expected on all counts it had little impact. The Durable goods data came in at flat versus -0.6% expected and ex-transport it was up 1.5% against expectations of a -0.5% print. Case Shiller Home index was up 3% yoy, consumer confidence jumped a point and a half to 73.7 and the Richmond Fed manufacturing index sat at 9 this month against -2 expected and much better than the -7 we saw in October. The positive impact of this data was however lost in the maelstrom of the weak OECD outl0ok (see below) and the vortex that is the Fiscal cliff discussions. For all the challenges facing the US economy at present at the very least we can say that a lot of the data is printing better than expected as you can see in the chart below which maps the Citibank Economic surprise index.

Citi US Economic Surprise Index

Turning to the OECD even though it is a bit late to the party given the 6 monthly gaps in their forecasts it has downgraded its growth target for 2013 for its member countries from 1.6% in May to 1.4% and gave its most dire warning since the depths of the GFC with the Chief economist Pier-Carlo Padoan saying,

“After five years of crisis, the global economy is weakening again. The risk of a new major contraction can’t be ruled out.”

Stocks

In Europe the Greek deal dominated and stocks were higher in London, Frankfurt and Paris with their indices rising 0.22%, 0.55% and 0.03% respectively. The Greek deal we have to say is good news for the moment and Greek got lower interest rates, more money and an interest rate holiday but can it really get down to the 120% of debt it is aiming for or will we be back here again for a 4th bailout next year? Probably yes but perhaps not till after the German election in 2013.

In the US the markets were under a little pressure all day relative to the positivity leading into the US trading day and they started to sell off a little harder once Democrat Senate Majority Leader Harry Reid said he was disappointed with the discussions, or lack their of, with the Republicans. So with 30 minutes to go before the close the S&P 500 is down 0.24% at 1402, the Dow is off 0.43% and the NASDAQ has fallen just 0.04%

Shanghai Share selloff

Keep an eye on China and Chinese shares – yesterday the Shanghai composite index was down another 1.3% as the slide that has been in place for a year or more continues. Indeed as you can see in the chart the Shanghai is heading back toward the lows of late 2009. As I say worth keeping an eye on.

Elsewhere on Asian stock markets yesterday the bigger indices were all higher with the exception of the Hang Seng which fell 0.08%. The Nikkei  rose 0.37%, the ASX All Ords was up 0.67%, the Kospi rose 0.87%. The Straits Times rose 0.25%.

FX Markets

It was reversal time in the past 24 hours on Global FX markets as the news of the Greek deal saw the Euro and Aussie Dollar rally initially but then lose ground once it became clearer that the US markets had their own concerns about which to worry. So the EUR rejected the high at 1.3009 and now sits at 1.2932 for a fall on the day of 0.29%. The AUD has been more stable and even though it made a marginal new high for the range at 1.0489 and has pulled back to 1.0457 it is only down 0.06% over the past 24 hours.

Australian Dollar

It’s not the prettiest chart you’ve ever seen and the reversal from the highs suggests this remains a range trade for the AUD and in particular if equities aren’t managing to rally any further at the moment then it is going to struggle a little. The 4 hour charts suggest a move back toward 1.0410/15.

Elsewhere the USDJPY had a positive day as the USD did better across the board and we’ll have to see over the next 24 to 48 hours if the pullack over the previous three days was just a countertrend rally or the start of something bigger. For mine only a move through the high of last week would turn the outlook sharply positive again. But USDJPY is up 0.18% to 82.20 while GBP is largely unchanged at 1.6022 but looking a little wobbly.

Commodities

Silver couldn’t push through trendline resistance again overnight and is down 0.45% to $34.05 oz, Gold is off 0.42% to $1745 oz and Oil is down 0.62% to $87.19 Bbl. Clearly in these process you can see the impact of the US dollars move overnight as much as anything but equally as any cursory glance at the Vantage Silver chart we posted earlier this week would show technicals and trends still matter too.

In the Ags it was a huge night again as the rally continues in wheat on weather related concerns. Wheat for December rose 2.56%, Corn was up 1.44% and Soybeans rallied 1.65%. The fact that Corn and Wheat held firm when Soybeans tanked recently underlies the strength of this complex at the moment.

Datawise Construction work for Australia is due today and then German CPI tonight before we see Home sales and the Beige book from the US..

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 me on Twitter @gregorymckenna or @FX_Global

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

Vantage FX | Worries surface, stocks and USDYEN off | 27th November 2012

November 27, 2012 By

Europe and US markets weren’t so keen on buying stocks in the manner that they had last week as risk appetite went off a little overnight. The Aussie Dollar held in reasonably well although it is down and the USD benefited particularly against the Yen which continues to consolidate from recent highs.

It’s hard to know what’s different on a Monday that isn’t apparent on a Friday because nothing really happened over the weekend to cause stocks and risk to go off. The answer is that nothing really fresh happened but traders just wanted to focus on the negatives over the past 24 hours. Feeding that negativity was the release overnight of the German Gfk Consumer confidence survey which was weaker than expected at 5.9 from 6.1 last and 6.2 expected.  Of course we are also a few days closer to the Fiscal Cliff, and another day without a resolution to the Greek issue if you add the  Catalan election which seems to imply some sort of move toward autonomy plus weaker than expected Chicago Fed (-0.56 v 0.00 last) and Dallas Fed indices (-2.8 v 1.8 last) and there is probably enough marginal negatives to combine to a dour day’s trade.

Equally however it could simply be that as we noted yesterday given the thinness and low volume of last week’s stock rally markets will really need to see confirmation to kick higher. So when there were no positive catalysts over the weekend or yesterday the short term focus turned negative – so after last night’s price action as we also noted yesterday we remain wary.

LoonieThe big news overnight was the announcement that the Bank of Canada Governor Mark Carney was to succeed Mervyn King as the Governor of the Bank of England. Global FX traders got a bit excited and took GBPCAD sharply higher which also put upward pressure on the USDCAD rate.

As you can see in this chart USDCAD is right on trendline support from the low of early September. This is a good catalyst for trading with the line looking solid for now but a break looking also likely to prove decisive for a change in trend.

Whatever you view on USDCAD there looks likely to be some action here soon.

Stocks

So with negativity to the fore European Bourses were lower across all the markets I follow. The FTSE fell 0.56%, the DAX dropped 0.23% and the CAC was 0.79% lower. Everything I read is about the Cliff and Greece.

In the US with 40 minutes before the close the S&P 500 has clawed its way back over 1400 and sits down 5.79 points or 0.41% at 1403.36. The Dow is 0.50% lower but the NASDAQ is up on 0.11%

In Asia yesterday most markets had a better day as they caught up with the strong moves in Europe and the US from Friday. Monday Asian trade can often be fraught with getting the wrong signal or message from the Friday close and so it seems was the case yesterday. The Nikkei was up 0.24%, the ASX All Ords rose 0.27%, the Straits Times was 0.51% and Taiwan surged 1.11%. Both Hong Kong and Shanghai were lower however dropping 0.24% and 0.49% respectively.

FX Markets

Like stocks Global FX traders decided it was a good night to take some money from the table as the strength in the Euro, Euro Yen, Sterling  and AUD  were all sapped in different degrees. It was hardly a big or exciting 24 hours by any stretch of the imagination with EUR only trading a 1.2942-1.2984 range and it is right in the middle as I write. Equally the AUD only traded 1.0432-1.0467 to be essentially unchanged on the past 24 hours.

USD JPY Swing high

USDJPY however looks like it is going to continue its pullback – if you are into Swing Lows (no not the Sweet Chariot song) and Swing Highs then you can see in the chart above that USDJPY certainly has a tradable peak against which positions can be placed. I have gone a little early on this one based on my usual indicators – my MACD indicator is yet to confirm a pullback is due, the moving averages that I use still signal and uptrend and the +DMI at +26 is not extreme – so I am out on a limb but with a clear stop level above the recent high.

For the Aussie traders the outlook remains clouded while below 1.0480 which was the recent high but if it can get through here then it can run to the important trendline resistance at 1.0545/50.

Commodities

Crude fell a little as the US dollar did a little better dropping 0.60% to $87.75 Bbl, gold was essentially unchanged at $1750 oz and silver closed at $34.00 oz. Yesterday we noted that Silver had big trendline resistance at $34.21 and this was the high overnight as Silver tried but failed to push through this important level overnight. As we always say respect the trendlines unless or until they break but a move through here plus say 8-10 cents oz would open the way to a move toward the recent range top at $35.35.

Otherwise it was a fairly quiet night on commodity markets except for Coffee which dropped 6.96%.

Datawise In New Zealand today we the trade data which will be interesting as well as the RBNZ inflation expectations. tonight we have German import price index and UK GDP. In the US its Durable goods and Case Shiller house prices.

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 me on Twitter @gregorymckenna or @FX_Global

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

Vantage FX | Aussie dollar Breaks higher on stock rally| 26th November 2012

November 26, 2012 By

Last week was a good week for stocks and for the first time in ages my summary of the week’s events had more positives than negatives from the fundamental side of the equation. The Chinese PMI back above 50 for the first time in 13 months, the German IFO business confidence survey released Friday at 101.4 was better than expected by almost a full point, US housing data was better again, we had a cease fire in Gaza. On the downside the two key points were Japanese trade data which showed a fall in exports of 6.5% yoy in September and France’s loss of its Triple A from Moody’s

But this week will need to see confirmation of the moves higher in stocks because of the interrupted holiday trade and also because in terms of the US Stock rally it came on pretty thin Holiday induced volume. One of the tenets of futures trading that I was taught more than 20 years ago was that volume was the confirmation that supported a market move – we didn’t get that last week so as a result we are a little wary this week.

Of course we are also watching the impact of Fiscal Cliff talks in the US given the market has rallied back so well over the past week and has a lot of embedded capital gains for the year in it.

S&P 500

So having called the rally in stocks last week we aren’t going to jump off the band wagon just yet but there is enough potential hiccups in coming weeks for us to drag stops up closer to market and to take some cash if the S&P 500 hits the 1418/21 region for the moment.

Stocks

So at the half day close on Friday the S&P 500 was up 18 pts of 1.30% to 1409 after playing catch up for the day off and the more ebullient tone from the Chinese data earlier in the week. The Dow rose 1.35% and the NASDAQ up 1.38%.

In Europe every index I watch except for Oslo, which was down just 0.08%, rallied. The German IFO certainly helped and buoyed European markets with the FTSE was up 0.49%, the DAX rose 0.89% and the CAC was 0.87% higher.

In Asia it was a similar story of markets finishing in the black and given reports this morning are that the Black Friday trade in the US was the best ever it is feasible that Asia kicks off with a bout of buying. In Australia the SPI 200 has room to run toward 4464 trendline resistance from Friday’s close at 4443. Likewise all the calls for more cuts in Korea probably bias the Kospi higher but the Nikkei might suffer a little under the weight of Abe’s retreat, subtle as it is, from his previously aggressive BOJ stance.

FX Markets

The Euro’s moves last week technically made sense but fundamentally I struggled to make any sense of them given the enduring problems and lack of resolution over Greece or even an agreement on the €1 trillion budget for the zone going forward. Instead the market preferred to focus on the “hope” of a resolution as opposed to the actually non-resolution which is very informative in itself. But the reality seems to be that the correlation between the S&P 500′s moves and that of the Euro might have played more than a small role in this with the Euros 21 day correlation with the S&P about 0.70 and still close to 60 over 55 days.

Euro rate

Last week I thought the Euro was biased back to the trendline resistance you can see was the high on Friday night and came in at 1.2990. It retains a positive bias on the daily charts but is a little overcooked on the shorter time frame and I wouldn’t be surprise to see it pull back a little toward 1.29. So on balance based on both the correlation with the S&P 500 and the technicals EUR needs a continued stock rally and a clear break of 1.30 to push higher. One confirms the other.

In Japan it seems that the putative PM Shinzo Abe is walking back from the attack on BOJ independence that he has been waging since it became clear there was an election coming a couple of week’s back. What possibly changed his rhetoric has been the tensions between his plan to raise inflation and the mountain of Japanese Government debt that needs to be serviced. It was widely reported in the last few days that if inflation rises to his 2% target then the cost of servicing the debt will exceed ALL of the expected tax revenue. This reinforces the USDJPY high for the moment for me even though it did come back very strongly to finish at 82.36 from the low of 82.05

AUD v S&P 500

For the AUD it broke decisively through the 1.04 at the same time that the US equity traders came back and took the S&P 500 higher. For the Aussie bears out there the strength of stocks is a headwind and although the daily 21 and 55 day correlations are quite weak at 0.14 and 0.15 respectively it does set the overall tone for risk assets as you can see in the hourly chart above of the AUDUSD v S&P futures trade.  Obviously a pullback in stocks will probably knock AUD a bit also but my sense is that there are a lot of short term bears out there being pressured and they may break if AUD trades up through 1.0485.

Commodities

Crude was up 1.03% to $88.26 Bbl rising from the outset as the US dollar was hammered by the strength in equities pushing US dollar denominated commodities higher.

Silver rally's

To wit, Gold was up 1.35% to $1735 oz while Silver rose 2.30% to $33.385 oz. As you can see in the chart above from my Vantage platform Silver is approaching long term resistance which stretches back to the September 2011. A break of this line at $34.20 would open the way for a run to the recent high at $35.35 – one thing to note though is that we always respect trendlines and never pre-empt the break.

Datawise We are watching the results from the Catalan election today as well as the Minutes of the BOJ’s recent meeting and of course the Euro EcoFin meeting tonight and what they say and do about Greece. Toniight the Chicago Fed and Dallas Fed indices are out.

Over the rest of the week we’ll be watching the trade data, Business Confidence and private Capital Expenditure in New Zealand, Retail Sales and Industrial Production in Japan, GDP, Mortgage Approvals and Financial Stability in UK, Durable Goods, S&P Case Shiller House Index, Richmond Fed, Beige Book, New Home sales, GDP, Jobless Claims, Kansas Fed, Personal Spending and Chicago PMI in the US.

In Australia the key data in our over leveraged economy is the Private Sector Credit data late in the week but we also have HIA new home sales and construction work done.

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.

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

Vantage FX | Chinese PMI bouys, Yen low might be in | 23rd November 2012

November 23, 2012 By

With US markets closed for the Thanksgiving holiday Europe had a great night after the positive improvement in the Chinese HSBC  PMI was built upon with reasonable PMI outcomes from Europe’s big economies. The Yen also weakened substantially as well but its rally back is suggestive of an interim bottom for the moment.

Looking at the PMI results and starting in China the HSBC Flash PMI showed that manufacturing output was in expansionary territory for the first time in 13 months printing at 50.4 from 49.5 previously. Clearly this is not roaring higher but at a 13 month high it is another indicator that the Chinese authorities have indeed fashioned a soft landing.

Market Euro PMIIn Europe the PMI’s were similarly encouraging although still mainly in the contraction zone as you can see in the chart beside from Markit. Indeed the French PMI increased from 43.7 to 44.7, Germany from 46.0 to 46.8 and the overall Eurozone from 45.4 to 46.2. So its still recession and contraction for Europe at the moment but at least there was some improvement. But the employment sub index was weak still so there is certainly more hard going on the jobs front for the many millions of Europeans who are out of work.

Europe is clearly still struggling under austerity.

Elsewhere in Europe Spain kicked off its borrowing program for 2013 with a bond auction raising €3.9 billion from 2012 to 2021. Spain needs to raise something in the order of €207 billion next year possibly more if the budget deficit overshoots current expectations.

Stocks

So on balance at the close the Europeans were happy with the Chinese data and that of Europe and the bourses were sharply higher. The FTSE was up 0.68%, the DAX rose 0.84% and the CAC was 0.60% higher – indeed all of the European markets I watch were higher overnight. Also worth noting is that hopes continue to grow that a Greek solution is possible at next Monday’s meeting.

In Asia yesterday the Chinese data was the primary Macro focus resulting in a mostly bullish bias across the region. the Nikkei was up 1.56%, the Hang Seng rose 1.02%, the Kospi was 0.82% higher with the Straits Times also ebullient rising 0.89%.

SPI 200

The Australian market likewise was higher up 0.95% in ASX All Ords terms and as you can see in the chart above ran into an old trendline which it was unable to close above. From a trading perspective there is a lot of congestion for the SPI in the 4330-4530 zone on the weekly charts and I would be looking for a consolidation in this zone before the next big move. The top of this zone is an old trendline stretching back to 2007 so it is HUGE.

FX Markets

The first thing I do everyday is run through Reuters and Bloomberg on my iPhone for any news that might be relevant for this note while I’m making a coffee and then the next thing I do is sit down and scroll through the charts of the 40+ markets I watch.

What struck me this morning was the candlesticks on the USDJPY and many of the Yen crosses which, when combined with my other indicators suggest that even within the overall uptrend an interim top might, I stress might, be in for the moment.

Of interest is the very last candle stick which shows the yen made a new low (USDJPY high) in the last 24 hours but has or is closing below the close of yesterday. At the same time my MACD indicator is at a very high level and the ATR has risen materially over the past month or so. What this says to me is that longs need to be brought closer to market or if super aggressive a short could be instituted with a stop above last nights high.

But remember I am very bullish longer term this cross so it is a counter trend trade.

Elsewhere EURUSD pushed a little higher but could not hold onto gains. Euro is currently at 1.2876 up 0.38% but off the days high of 1.29oo. Technically it looks like it can run toward resistance at 1.2985ish and we’ll see how it looks there. Against the GBP Euro is trying to break back inside its old uptrend but its been trying to do that for a couple of weeks now. With GBP hitting trendline resistance against the USD EURGBP just moght be able to get through if EUR kicks on. Worth noting is that EURJPY has broken a 3 year downtrend overnight so a close around these levels would be a big signal for that cross.

For the AUD 1.04 was the high again and the AUD sits at 1.0385 presently – It remains becalmed.

Commodities

For me the big news on commodities overnight was that Barclays are leaving the floor of the LME which has to have an impact on liquidity longer term otherwise not a lot of action except for copper which was pushed higher by the Chinese PMI data up 0.6%.

Datawise German GDP tonight will be important and interesting as will the IFO report and Italian retail sales. Otherwise quiet with no data in Australia and the US having a half day’s trade.

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.

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

Vantage FX | Trend changing for the Yen, AUD still pressured | 22nd November 2012

November 22, 2012 By

A quieter pre-holiday session overnight in stocks in the US as traders thoughts turn to the Thanksgiving Holiday tonight. The truce in Gaza helped the tone overall but the big news of the night was the huge selling of Yen as the poor trade data from yesterday combined with the election to suggest the BoJ just might get radical sometime soon.

Japan remains the world’s third largest economy but the data that is flowing at present speaks volumes for the malaise that is not only gripping the economy as a whole but also at a more granular level with regard to individual companies. Yesterday the trade data showed both exports and imports fell with the former down 6.5% year on year in October which was a much worse outcome than the market was looking for.

We’ve written much about the Yen lately and it remains our view that substantial weakness is still ahead for this currency   against the USD. Last night it also came under pressure across the board and as you can see on the weekly EURJPY chart above it is at risk of breaking up through a multi year down trend line stretching back to late 2009.

Fundamentally the Yen has been too strong for too long and the economy is suffering – its fall won’t be linear but this trend to Yen weakness looks set to continue.

Elsewhere overnight the meeting of European leaders to discuss the Greek situation broke up again without resolution and they are going to reconvene on Monday to have another try. This disappointed markets as you would expect and the sticking point seems to be that the IMF can”t participate unless they can see some improvement in the Greek position in the future – thus they fiddling with interest payment terms and other measures to get Greece over the line.

Stocks

But this didn’t seem to worry European stock markets overly with all of the European markets I follow except for Oslo ending in the black. The FTSE was 0.07% higher, the DAX rose 0.16% and the CAC was up 0.44%. Madrid rose 0.36% and Helsinki rose 0.93%.

In the US stocks traded in a fairly tight range in pre-holiday trade and with 25 minutes to go the S&P 500 is up 0.12% to 1390, the Dow Jones is up 0.31% and the NASDAQ is 0.24% higher. Jobless claims were out showing a big fall of 41,000 last week but this data is impacted by the recent Hurricane Sandy and as such are not market moving for the moment.

In Asia yesterday even with the weak trade data the Nikkei managed to head higher by another 0.87% percent. The Hang Seng was up 1.39% as 40 of the 49 companies in the index rose lead by the banks. The Kospi fell 0.32%, the ASX Allords also fell and closed 0.38% lower while the Straits Times was essentially flat but Shanghai managed a 1.07% rally.

FX Markets

As noted above its all about the Yen and the Yen crosses at the moment as markets focus on the election and the potential for increased radicalism by the BoJ and money printing. It is a fair expectation because after 20 years what else can the Japanese Government of the BoJ do – if the Yen reflected the economy it would be well north of 100 but it has consistent outperformed its own economic circumstances for much of the GFC period – so in seeking to devalue the Yen or at least putting that in the minds of traders so the trend is slowly changing for the Yen and further weakness beckons over time.

Elsewhere on Global FX markets the Australian Dollar is off 0.25% to 1.0359, off the low of 1.0332 and well off the high for the past 24 hours just under 1.04 again. The Aussie is directionless against the USD at the moment but there is action on the crosses particularly AUDJPY which looks biased up toward 87 sometime soon – but its being driven by the Yen side of the cross as the Aussie is lagging at the moment.

As you can see in the AUDJPY 4 hour chart above the AUD is looking a little overdone and may be due for a pullback – 84.15 would be massive support and we favour this higher in time.

Euro is most unchanged against the USD at 1.2823 but that is almost a full cent off the low of 1.2733 overnight, while the GBP is up 0.1% to 1.5944 and also substantially off its lows of 1.5881.

Commodities

The EIA reported a decline in Crude supplies overnight of 1.5 million Bbl’s against the expected increase of 1 million bbl’s and even with the truce in Gaza  Crude managed to rally 0.63% to $87.30. Crude is in a shallow uptrend at the moment and retains a positive bias as a result.

In the precious metals market both silver and gold were higher with silver once again outpoint gold rising 1.21% to golds 0.27% rise. At $33.31 oz. Silver is close to downtrend resistance which comes in at $34.34 as you can see in the chart above

Datawise Thanksgiving in the US tonight but that doesn’t stop the flow of a huge volume of PMI’s coming out of China, France, Germany, Holland and the Eurozone. Also out are retail sales in Canada

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.

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

Vantage FX | Crude drops 3%, Aussie rejects 1.04 again | 21st November 2012

November 21, 2012 By

The housing data out of the US overnight was fantastic and speaks of an enduring recovery in that sector of the economy but stock markets in the US still finished lower after Ben Bernanke gave a speech and a Q&A session where his honesty was reward with a sell off when he said that the Fed didn’t have a magic bullet to fix the Cliff or infinite powers to sort things out.

Bernanke was concerned about fiscal austerity at a state and local level but he was positive on housing and also noted at the end of his speech that,

cooperation and creativity to deliver fiscal clarity–in particular, a plan for resolving the nation’s longer-term budgetary issues without harming the recovery–could help make the new year a very good one for the American economy.

So if the Fiscal Cliff can indeed be avoided even with the other headwinds facing the US economy Bernanke things things could be Okay – lets hope so.

On the data front overnight we saw German PPI was lower than expected coming in flat for the month and only 1.5% yoy in October while in the US there was euphoria over the big uptick in housing starts 894,000 relative to expectations of 840,000 has many pundits now updating expectations for the addition to growth housing could provide in 2013.

Closer to home also talking overnight was Glenn Stevens Governor of the RBA who said that while the RBA recognises that further easing may be required over time the overall improvement in the global environment and the slight uptick in the recent inflation data combined with the still large impact of the mining boom (he was quite sanguine on it) meant that sitting pat for the moment seemed the prudent thing to do. Governor Stevens also was quite open about the RBA keeping some of the transactions it has done with other Central banks and Sovereigns on its balance sheet as that seemed the proper thing to do given the elevated level of the AUD.

Stocks

At the close Europe’s bourses weathered the downgrade of France yesterday from AAA by Moodys well and closed mostly higher. The FTSE rose 0.18%, the DAX was up 0.69% and the CAC was up 0.65%.

Big news in the US equity market overnight with Hewlett Packard taking an $8 billion dollar write down on a company acquisition which knocked it shares down over 10%. SO as we near the close with 30 minutes to go stocks are staging somewhat of a comeback from the lows so it will be interesting to see how they close. At present the S&P is off 0.16% from a low of around -0.66% earlier and the S&P sits at 1384.71. The Dow is off 0.22% and the NASDAQ is off 0.27%.

In Asia yesterday it was more mixed with the Nikkei down 0.12%, the Hang Seng 0.16% lower and Shanghai off 0.40%. In positive territory at the close were the KOSPI up 0.64%, the ASX All ords up 0.57% and the Straits Times up 0.27%

FX Markets

The USD closed higher against the Yen again overnight and I still think that this one is going substantially higher in time.

While the USDJPY looks a little overdone on the dailies at the moment and is probably due for some sort of pullback soon on the weeklies as you can see above this rally has broken a significant down trend line and is really only just getting going. As I have written recently this is a portfolio position for me and i think it is going significantly higher.

The EUR is flat on the day after trading 1.2763 to 1.2828 while the Aussie is the worst performer of the big 6 currencies down 0.37% at 1.0362 as I write. Just like yesterday’s equity induced rally so the Aussie has been knocked off its pedestal above 1.04 overnight as it once again rejected the uptrend line it broke down through last week. Please see my post from this morning on the AUD’s new reserve status.

Commodities

Even as the Israeli’s and Hamas continue to hammer each other there is talk of a ceasefire on its way and this knocked crude lower – or at least that was the report –  with Nymex crude futures dropping 2.53% to $87.02 Bbl but it seems to be finding a bit of support from the trend line that it broke up through the previous day.

Gold fell about $11 oz or 0.62% while Silver was up 1.21%.

Datawise The Westpac Leading index is out this morning for Australia and then Japanese trade data and the BoJ’s monthly economic survey. With Thanksgiving tomorrow tonight we get jobless claims, Markit manufacturing PMI, Reuters Michigan Consumer Sentiment and Leading indicators.

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 me on Twitter @gregorymckenna or @FX_Global

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

Vantage FX | Aussie higher as stocks and risk rally extends | 20th November 2012

November 20, 2012 By

Stocks extended their rally overnight pushing sharply higher once again as the seasonal bullishness seemed to take hold dragging the Aussie Dollar higher and pushing the US dollar lower once more as the usual correlation asserted itself.

The major catalyst, beside the technicals, seems to have been growing optimism over the talks on the Fiscal Cliff but equally the Housing data in the US was good last night as well. The NAHB housing market index rose from 41 to 46 in November while existing home sales increased from 4.69 million pace to 4.79 million while existing home sales increased by 2.1% in October. This continues the run of better than forecast data in the US which is an important psychological input to traders as we discussed yesterday in our piece on the potential stock market rally.

Elsewhere though the battle in Israel and Gaza intensified pushing crude oil prices sharply higher on fears of escalation and interruption to supplies from the region. Is this a credible concern or just an ex-poste rationalisation for the move? Probably the latter but nevertheless it is a terrible situation and keeping traders focused on the region and just adds to concerns over Syria and Iran.

Stocks

Data in Europe, Italy specifically, was pretty poor overnight with industrial sales and orders accelerating their yearly declines down 4% and 4.2% respectively in September. But that didn’t stop European stock markets from both playing catch up from Friday’s close and then adding some good old rallies of their own. At the close the FTSE was up 2.36%, the DAX (which bounced nicely off support Friday last) was up 2.49%and the CAC rose 2.93%. Madrid was up 2.28% and Milan 3%.

In the US as I write with 25 minutes to go it has been a huge night for Apple which has moved sharply higher up $34.59 or 6.56%. Equally it has been a good day’s trade for the bulls on the markets more broadly with the S&P 500 up 1.75%, Dow up 1.40% and the NASDAQ up 1.98%. The corollary of this of course is that US Treasuries have moved up sharply in yield.

In Asia yesterday the rally on Friday night was the key driver although traders were more tentative knowing that Asian Monday trade can be a grave yard of good ideas hatched out Friday nights US close. So there is room for catch up in trade today. The Nikkei was on a tear again up another 1.43% but it was more subdued elsewhere with the Kospi up 0.93%, the Hang Seng rose 0.49% and the Straits Times rose 0.18%. In Australia the All Ords was up just 0.52% and traders will no doubt be expecting a good kick on today

FX Markets

The USD came under pressure last night as stocks extended their bounce from the lows of Friday’s trade and investors clearly felt that they don’t need a safe haven after all with the talks on the Fiscal Cliff seen as gaining traction and talks on Greece also sounding conciliatory.

The USD has pulled up right at the 200 day moving average support last night and the question of whether the USD can hold this important technicals support will be decided over the next day but it is worth noting that while it looks biased lower the S&P looks biased to break its 200 day moving average to the topside which is entirely consistent given the negative correlations of these two indicators.

The USD’s struggle was reflected in a weaker USDJPY which topped out at 81.58 before it slipped back toward 81.00 and it sits presently at 81.18. Support remains 80.65 on the day and if that gives way then 80.30 and 80.18. Yesterday’s Japanese leading index fell from 93.2 to 91.6 previously reinforcing to me the longer term trend that is beginning to assert itself in the USDJPY.

The EUR rallied hard and is up 0.53% at 1.2803 but off the high of 1.2819 overnight. This is a very strong move off the 1.2728 low and I confess that even though I was bullish stocks yesterday I thought the USD might break the negative correlation and go with it. Seems I was wrong – at least today but I’m not convinced that the strong negative correlation between the USD and stocks shouldn’t reduce in strength in coming weeks and put the EUR back under pressure. Time will tell.

Aussie DOllar and S&P 500

The AUDUSD is getting dragged higher by the better tone in equity markets as you can see in the chart above which is the daily candle of the AUD (Vantage Colours) versus the S&P 500 (Aussie green and gold) which is interesting because it had been doing its own thing for much of the equity market sell off until it hit the acute phase late last week.  The story floating around that the IMF is to include Aussie and Canadian dollars in “official” reserve assets will certainly underpin from a fundamental point of view as well.

Short term the old uptrend line is at 1.0414 this morning and has so far proved resistant to further rallies. If it can push through here then the next resistance is 1.0440/50.

Commodities

As noted above Crude rallied hard and is up 2.69% to $89.25 Bbl for a quite decisive break of the downtrend that has been in force for the past couple of months. This rally could extend as far as $92 Bbl. Gold was also higher which suggests that both its move and crudes and copper and other commodities had benefited due to the fall in the USD’s value. Gold is at $1710 oz, up 1.15% as I write with Silver 1.21% higher.

Datawise In Australia we get the Conference Board leading index and then the RBA Minutes. The BoJ’s monetary policy announcement and press conference will be a huge event for FX traders interested in the take on printing so this is one to watch later today.   Tonight in the US we get more housing data.

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 me on Twitter @gregorymckenna or @FX_Global

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

Vantage FX | Stocks drag Aussie dollar higher – bounce has legs | 19th November 2012

November 19, 2012 By

I have been on the bear side of the trade for stocks since the start of earnings season but as it wraps up and the jury is in with a tale of missed earnings and revenues so to might the sell off that accompanied these poor results also be trying to wrap up. I say trying because there is no real evidence that this is the case just Friday’s trade and a feeling that on the dailies at least markets have become stretched.

Equally though a number of people who’s thoughts I respect have been suggesting that perhaps it is time for a bounce.

Indeed even though the weekly close was below my 1362 level for the S&P 500 I have to note that in Friday’s trade for the S&P 500 – and many markets – was, in a technical sense,  a very bullish day with a lower low and higher high than the previous day and a pretty strong close – technicians call it an outside day and a bullish one. Equally I have been watching apple closely and it too had a big reversal.

Now for the trend followers out there who think that I might be mad and that the trend is still currently down for the S&P and for Apple let me say you are right and my trend following systems are still short. But not everyone is a trend follower nor do they have the psychological profile to be one and the point of this morning’s note is to simply flag that there is now a high probability that we can use Friday and Friday’s price action as a tradeable low for a counter trend rally.

What drove the market higher on Friday for this set up was the break up of talks between the Key House and Senate leaders which were concilliatory and “constructive”. Republican Leader John Boehner sounded very confident that a deal can be done in the post talk press conference and at that very instant markets popped sharply higher and although they dipped again they were strong into the close.

Summarising the tone was a quote in the Wall Street Journal from over the weekend,

“If you continue to see reports like this, and not just talk but hard numbers and hard plans, the market will get a little more comfortable that something constructive will happen,” said Ryan Larson, head of equity trading at RBC Global Asset Management.

There is that word constructive again – I’m guessing you’ll read that more than once today and this week.

Stocks

So at the close US markets had a good run with the S&P 500 up 0.48% to 1359, the Dow was 0.37% higher and the NASDAQ rose 0.57%. Data out earlier in the day was on the weaker side with Industrial production down 0.4% against the pundits expectations of a rise of 0.2% and Capacity Utilization was also lower – so while the trade this week might be more positive the economy still has its issues – although Hurricane Sandy definetely distorted this data.

In Europe the problems around the conflict in the Middle East and the start of the fiscal cliff negotiations left bourses in the red at the end of the day and before the strong bounce in the US. The FTSE was down 1.27%, the DAX dropped 1.32% and the CAC was 1.21% lower. Madrid was off 1.46% and every other European market that I follow also closed lower. So no doubt they should have a better start to the day this afternoon as they catch up to the US rally.

In Asia the Nikkei was sharply higher again as they idea that a change of Government, now that the election is being held, and the money printing that might accompany it takes hold. This saw the Yen weaker again on the week and the Nikkei up 2.20% in Friday trade. In other markets the ASX was down 0.24%, the Kospi fell 0.53%, SHanghai dropped 0.77% and the Straits Times was flat.

FX Markets

The USD continued to benefit from safe haven flows and strangely given recent correlations the Equity rally did no knock the USD lower this time. Indeed USDJPY pushed higher again and the Yen is at its weakest level since April this year as you can see in the chart below.

I continue to target higher levels in USDJPY in the weeks and months ahead – short term the target levels are 81.88 and then 82.64 with support at 80.65.

The rally in the USD against the Euro also resumed with the EUR turning lower again only a push back above the 200 day moving average at 1.2809 would turn the focus back higher for the Euro. Elsewhere the Pound was a little stronger and it looks like it might have made a tradeable low on Thursday.

The AUDUSD bounced nicely from its  lows at 1.0288 not really getting anywhere near the 1.0250 level that I thought might have been the case. If the argument for a bounce in equities holds any water at all then the Aussie Dollar should also continue to be supported. An old colleague of mine who i was talking to on twitter last week noted that you could see in the way the AUD was trading just how much support the Aussie continues to have. On the 4 hour charts the Aussie looks like it has the legs to rally perhaps back toward 1.0380ish for a retest of the bottom of the pennant formation that it fell through last week.

Commodities

Crude rallied continuing its rather volatile daily moves but it is really just dancing on the spot at the moment and has been for most of the last week but with a mild upside bias. Closing at $86.62 for a gain of 1.22% on Friday Nymex Crude is just a dollar from breaking out of the recent down trend, at least the trendline anyway.

On precious metals markets gold was largely unchanged at $1712 but silver bounced 1.21% to $32.86 oz.

Datawise In NZ we get PPI data this morning and then the minutes from the BOJ’s last meeting which might be of interest to the USDJPY bulls like myself. Also of interest will be the release of the Japanese Leading and Coincident indexes and then tonight in Europe Jens Weidmann of the Bundesbank speaks and we get Italian Industrial orders and sales before US housing sales data for Existing homes tomorrow morning.

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 me on Twitter @gregorymckenna or @FX_Global

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