Aussie dollar and stocks pressured – How low can they go?

September 26, 2013

What a difference a week makes – and no I’m not talking about the amazing come back victory of the Australian Skippered Team USA in the America’s Cup but rather the continuing weakness in stocks from the post no taper highs. The focus has rightly turned to the debacle that looms large in the US debt ceiling and fiscal debate and the unedifying spectacle of a Senator reading Dr Suess books in a 20 hour pseudo filibuster just points to the difficulties ahead even though it was about Obamacare.

So stocks in the US were down for the 5th day in a row, the longest losing streak this year. The Dow closed down 0.40%, the Nasdaq fell 0.19% and the S&P 500 fell 0.26%. In Europe stocks were largely unchanged on the Continent with Germany up 0.02% and France down 0.01%. The FTSE fell 0.30% while stocks in Milan fell 0.14%.

Lets look at some charts

The S&P 500 has fallen for 5 days now and is looking increasingly like a bigger downside test is in the offing. Now that the fast moving average has given way along with thee 38.2% Fibonacci support of the recent up move the next zone of support is the slow moving average and the 50% Fibo support which comes in at 1375/78. After that the 61.8% support comes in at 1362 with the big uptrend for this year at 1347.

More weakness looks in train in the days ahead.

The S&P is the global benchmark and while the ASX often under performs to the topside its usually harder for it to deny negativity as it flows around the world.

As you can see above the 5220 region on the SPI is crucial – a break and its gone. 5173 is next support.

With concerns about the US fiscal and debt situation dominating it was no surprise that the US dollar came under pressure but the weakness is mainly against the big pairs of the Euro (1.3524, +0.39%), GBP (1.6084, +0.51%), Yen (USDJPY 98.46, -0.27%) while the Aussie(0.9364, -0.27%) and Canadian dollar (1.0311, -0.13%) were dragged down by the weakness in risk appetite.

Aussie dragged lower but holding in – so far

It’s looking like the Aussie’s two day break of the 38.2% retracement level of the big down move last week was a false break and as I wrote yesterday the Aussie is just a day behind the moves in equities.

With the S&P having broken the fast moving average but the Aussie still holding the question is whether the Aussie will hold its own support at 0.9325. this is the key short term level and then 0.9283 and then 0.9236.

On commodity markets Crude oil fell another 0.85% to $102.25, and Gold rallied 1.51% to $1335 oz, while Silver was 1.39% higher. Copper was up a cent at $3.27 lb and the Ags just keep being volatile with Corn up 1.17%, Wheat 1.79% higher and Soybeans rising 0.72%.

Overnight data in the US and Europe was kind of mixed with the Gfk Consumer Confidence in Germany up 0.1 to 7.1 while Durable Goods in the US ex-Transportation undershoot expectations by falling 0.1% against expectations of a 1% rise.

On the data front today we’ll all still be watching and thinking and worrying about the potential disruptive impact of this US fiscal and debt debate. Singaporean Industrial Production will be interesting as will UK GDP tonight and then the next read on US GDP, the usual jobless claims data and personal consumption and pending home sales before the Kansas Fed manufacturing index.

Have a great day and good hunting

Greg

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