Newt Gingrich is a former Speaker of the US House of Representatives and interviewed by Lisa Miller of ABC TV this morning he basically said the current impasse could last from 1 day to 3 weeks but don’t worry about it. And so it was over night on markets that just like your body builds up a resistance to Coffee, Chilli, Alcohol and Pain the market has built up immunity to US Capitol Hill shutdowns and associated political grandstanding because stocks rallied, rates were up, both in the front and back end of the US curve and gold – the ultimate safe haven in times of trouble – was absolutely poll axed. What as strange market it is that has evolved since the first Greek troubles in mid 2010.
So at the close the S&P 500 was on a tear up 13 points or 0.80% to 1695 but still below 1700. The Dow rose 62 points or a more modest 0.41% and the Nasdaq was 1.23% higher.
In Europe Milan was sharply higher after it emerged that some of Berlusconi’s party members weren’t going to follow his lead in Parliament and so the Government may not collapse – stocks rose 3.11% as a result. The FTSE was flat but the DAX rose 1.10%, the CAC was 1.29% higher and Spanish stocks in Madrid rose 1.70%.
Closer to home the SPI contract on the SFE is up 23 points and technical it looks like it just dodged a bullet. The dailies for the SPI200 MT4 CFD as you can see below with it finding support at my slow moving average.
That level and the low is also around the August highs which reinforces the potential strength of this zone. It is still my sense that the SPI200 is going lower however and while as I said for both stocks and the Aussie yesterday I wasn’t bearish I’m not overly bullish the SPI at all unless it can take out the recent highs.
Perhaps the strength came from interest rate expectations and no chance of a Fed Taper any time or ECB accommodation reduction as the weaker than expected data prints from the raft of PMI’s that were released overnightor maybe it is just pessimism fatigue – either way you have to ask what can knock this market sustainably off its perch. Seems only a real Taper at present or maybe a US default if it happens in a few weeks time.
Over on Forex markets however saw the US dollar under pressure with Euro up at a multi month high of 1.3588 overnight before pulling back to 1.3527 for a largely unchanged day, GBP roared to 1.6260 but then drifted back to 1.6195 and USDJPY sits at 97.96 down a little after a raft of announcements from the Abe Government yesterday about increased sales tax and stimulus measures not to mention strong Tankan data.
The Aussie dollar gets its own section this morning because it is the only material mover in FX land up 0.84% on yesterday at 0.9393 – off its high of 0.9435 no doubt – but a cracking performance regardless. Of course the big driver was the RBA’s seemingly upbeat tone in the Governors Statement yesterday afternoon and the expectation that if the RBA doesn’t have a tightening bias at least they have lost their easing bias. Coming on top of the big jump in the AiG PMI and retail sales it was very positive for the Aussie and it’s going remain well supported unless stocks fall out of bed.
Okay – now we have a range that we can trade I think and now we have levels that we can run with if they break in the AUSUSD.
What you can see in the daily chart above is that the Aussie has pulled back from a high, broken the fast moving average but found support at the slow moving average. The way I trade that reinforces the slow ma as support as well as the fact that for the moment at least this is just a retracement in the overall uptrend. So with the weeklies still pointing higher the outllok for the Aussie, although I am thinking it is in a range for a bit is still very positive.
On the hourly charts you can see the box more clearly and you can also see the clear break of the hourly downtrend line that occurred yesterday. 0.9325/40 will be support initially and then the 0.9260/80 region. Topside there is more room to move but the recent highs would initially at least, be expected to hold.
On Commodities gold fell out of bed on what looked like technical induced position squaring and at $1287 it has hit technical targets now. Crude fell 0.66%and copper dropped 5 cents to $3.27 lb.
On the data front today ANZ Commodity prices in New Zealand then Building Permits, HIA new home sales and trade in Australia before EU PPI tonight and then the crucial ADP employment change survey as a precursor to Friday’s non-farm payrolls. The CBA has a press conference as well but we don’t expect to much from that.
Have a great day and Good hunting