A very interesting night last night for the Euro in particular. The weak ZEW survey – see below – was a cracking excuse for the bears to hit Euro hard but it was unable to break the lows of last week and as a result looks like it is building a base for a move higher.
It makes no sense fundamentally but then if the EURUSD price made fundamental senses it would be about 10 big figures lower.
But that is the key isn’t it – whether it is Euro, Yen or Aussie there are strong, very strong, arguments they should all be lower yet they continue to hang in there. That is important information from the market and in the price and we must respect it as traders.
Looking at the Euro technically though as I noted the other day it does look like a pause or a rally is required before the next – inevitable – leg lower begins.
For the moment we have a 100 point range and a break either side would be required to get traders excited and a break of 1.3450 – however unlikely – would be huge.
In terms of the data overnight once again we have a bit of a focus on Ukraine as it is now unequivocally clear that the sanctions on Russia are going to add to the weak economic outlook for the region. Last night the release of the ZEW business showed sentiment survey fell to an 18 month low of 8.6 against expectations of 18.2 and from 27 last month. The current situation also fell heavily to 44.3 from 61.8 last.
On the other hand in the US NFIB business optimism was a little higher at 95.7 from 95 last but it was the JOLT survey which shows the improvement in the US economic outlook. The report from the BLS showed that job openings grew again in June, to 4.67 million from 4.635 million May. Also worth noting is that the US Treasury released its latest budget showing a fall in the monthly deficit and a huge $200 billion fall in the deficit so far this year – hopefully its tax receipts, hence economic growth, driving the improvement.
So in the end the Dow bounced around all day to finish down 0.05% to 16,561, the Nasdaq fell 0.28% to 4,389 and the S&P 500 dipped 3 points or 0.15% to 1,934.
In Europe at the close the DAX in Germany was down another 1.22% to 9,069, the CAC fell 0.85% to 4,162 while stocks in Milan dropped 0.23%. In London stocks barely changed on the day closing at 6,632 while Spanish stocks managed to rally 0.48%.
Overnight the August and December SPI 200 futures are down a few points but it seems the September futures are unchanged at 5467. The CBA, which makes up close to 9% of the ASX market capitalisation, will report earnings this morning which will impact direction on the overall market today.
It was fairly quiet in Asia yesterday but the release of Japanese Q2 GDP is going to be huge today with most pundits expecting a contraction. The market forecasts is that growth in the second quarter fell 1.8%.
On Currency markets the Euro was under intense pressure early after the German ZEW survey data but it held above last weeks lows and is at 1.3367 this morning suggesting the Euro is trying to find a base. USDJPY is at 102.24 and Sterling sits back above 1.68 at 1.6810.
Sterling – like Euro has a chance at build support around /below current levels as the chart below shows.
Maybe it’s time for the USD to edge lower again – but my longer term bias is for strength.
After dipping yesterday toward last week’s lows the Aussie likewise has lifted a little and sits roughly unchanged at 0.9268 this morning.
Respect the range – until it breaks I guess.
On commodity markets iron ore slipped $1.25 a tonne for September delivery to $93.25. Newcastle coal fell 90 cents to $70.75 a tonne.
Nymex crude fell 84 cents a Bbl to $97.24, gold is still floating around the $1,310 an ounce mark with silver at $19.95. Copper dipped a few cents to $3.15 a pound while on the Ags wheat fell 1.54%, soybeans fell 0.63% but corn rose half a percent.
On the data front today Japanese GDP is very important in a macro sense but locally the focus will be on the release of the Westpac Melbourne Institute Consumer Sentiment Index. Prior to last weeks big jump in unemployment and yesterday’s crash in the ANZ weekly series there was some hope this might be a good number – whatever the outcome it is an important number as a pointer to domestic consumption.
Tonight German, French and Spanish CPI are all very important as is UK labour and unemployment data and the BoE quarterly inflation result. Then of course we get the retail sales data for last month in the US which is very important as well.
A big 24 hours of data.