Aussie dollar down 110 points after Glenn Stevens warns of intervention – 88 cents?

November 22, 2013

Stocks rallied as bad news diminished fears about the taper and the RBA Governor scared Aussie dollar traders with the threat of intervention – 88 cents is a real chance again now.

Looking first at the US and stocks producer prices fell 0.2% in October, consumer confidence fell further to -15.4 and the Philly Fed undershot expectations by a mile printing 6.5 against 15.5 expectations. These data overshadowed the strength in the US Markit PMI which printed 54.3 which helped the stock market take a bid tone and with 10 minutes to go the Dow is up 103 and holding above 16,000 for rise or 0.66% at 16,004. The Nasdaq is 1.14% and the S&P 500 is up 14 or 0.77% at 1,795.

In Europe the markets opened well in the red but came back strongly for pretty much the whole day but in the end the fact that Mario Draghi hosed down expectations of negative interest rates which were floating around the day hurt the rally as did German Markit PMI which remained relative strong printing in line with expectations. At the close the FTSE was flat at 6,681, the DAX hardly budged closing at 9,196 but both these end of day levels belie early acute weakness. the CAC was 0.34% lower while in Milan and Madrid stocks were 0.61% and 0.41% higher respectively.

The Local SPI 200 December contract on the SFE is up 37 points to 5337 bid. On the bond boards the 3’s are up 4 points and the 10’s have risen 3.5 points.

On Forex markets Drghi’s comments and weak US data helped lift the Euro off its 1.3398 low and it sits at 1.3457 this morning. GBP is up 0.32% to 1.6155 and USDJPY has finally broken through solid resistance and it sits atop 101 at 101.03 this morning. The Aussie was hit by Stevens and is at 0.9224 a full 100 points off where we were around this time yesterday.

There is a real chance that the Aussie is going to 88 cents – I’m out of my short for non-market related factors (funeral today) but I would otherwise still be short and it looks like 88 cents is a reasonable level to target.

It’s a bit head and shouldery – which is a pattern that often works although I have no idea why.

On the day 91 cents is the initial target and then we will see.  On the day however the 1 and 4 hour charts a deeply oversold based on my method so expect a bounce.

On Commodity markets gold is at $1245 this morning largely unchanged from yesterday, Nymex crude continues to respect support and is up 1.48% to $95.24 and copper rallied 4 cents or 1.22% to $3.20 lb. Our friends mining and trading Bitcoin have driven the price up to $771 and if you look at a chart of the successive rises and crashes over the past few months there is every chance it’s at $1000 next week some “charty” types have suggested.

On the data front the German GDP is the big print tonight along with the Ifo business survey, also in Germany. Other than that there is a bit of Canadian data on retail sales and CPI and the Kansas Fed manufacturing index.

Have a great day and good hunting.

Greg McKenna

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