Aussie dollar finally finding support amid weaker US dollar conditions

November 29, 2013

Thanksgiving is one of, if not the, most important holidays in the US and markets are always fairly quiet and last night was no different with the the impetus out of markets but there was still big news with the Nikkei up strongly again in Japan on the back of the weak Yen and expectations it will weaken further.

Sterling popped and sits at 1.6340 this morning up 0.33% but well up on the low of the day at 1.6275 after the preemptive strike from Bank of England Governor Mark Carney to withdraw extraordinary support that was being provided to the market via the “Funding for Lending Scheme” which was used to encourage banks to start lending for mortgages. Rather the BoE is looking to repoint banks toward small business lenders.  The FTSE didn’t fare so well it was up 30 odd points at one stage with a high of 6,680 before the announcement but it ended up just 0.07% at 6,654.

Elsewhere in Europe consumer confidence rose to 15.4 from -15.4 expected which is a huge miss from the punditry. EU business climate was up slightly to 0.18 from -0.08 and sentiment and confidence were better than expected. In Germany CPI data was also out and showed a year on year rate of 1.3% slightly above the 1.2%. In the end the DAX was 0.38% higher, the CAC up 0.21% while Milan and Madrid had a much stronger day up 0.92% and 0.53% respectively.

On the ASX overnight Dec Spi futures at 7.31 AEDT are up 2 points to 5354 bid. The Dec 3 year is up 1 point at 96.89 and the 10’s are up 1 point to 95.815.

On forex markets the Aussie dollar recovered off the 90.60ish low pre Capex data yesterday to rally all the way to a high overnight of 0.9149 and it sits at 0.9110 this morning.

The Aussie was under intense pressure yesterday until the much better than Capex release for Q3 of 3.6% really put a question mark over the expectation that the mining cliff is upon us and the Australian economy is in a hole. Perhaps it is still going to happen but as I wrote yesterday it has been postponed. News this morning that Rio Tinto is going to invest another $9 billion in Western Australian mines is further evidence that investors might be a bit too pessimistic.  At least for the moment.

None of this means the 88 cent region is out of play but for the moment the Aussie seems to have found some psychological support and with GBP and EUR higher the USD is on the back foot a little.

What I have done in the 4 hour chart above is give a little example of the rally we saw in early November and the set up that drove it and the current situation and set up based on which I have an expectation – and a position – that the Aussie will rally back up and through 0.9150 toward 0.9180.

Euro is holding above 1.36 just at 1.3602 and USDJPY is at 1.0222 this morning.

USDJPY continues to drive higher and is at 102.25 now closing in on the highs of April this year.

Longer term the rally looks on track to 104 but we are getting into heady territory particularly given that fact that EURJPY is at it the highest level since 2009 suggests some caution is becoming warranted.

On commodities Bitcoin is at $1143 off a new all time high of $1224 as the mania continues – call me cynical but the traders of the early 19th century would be so proud of the corner that is being run in Bitcoins at the moment. Nymex crude is closing in on that very important technical level at $91.32 Bbl and it rests at $92.25. Gold is largely unchanged in the id $1240 region and sits at $1244.50 this morning. Silver sits at $19.68 oz Copper is at $3.22 lb.

Trading on the NYSE is going to finish at 1pm so it is also likely to be a quiet, post holiday trading day to end the week.

Before that though we see South Korean industrial output, Japanese CPI, unemployment and industrial production. In Australia Private Sector Credit is out and it will be interesting to see if there is any pick up in demand for debt or if Australian’s appetite for paying off their loans continues to swamp new lending. House prices are out tonight in the UK which the BoE will be watching. In Europe we get retail sales in Germany, mortgage approvals in the UK, EU CPI, Italian CPI and the EU unemployment rate. Indian GDP and Canadian GDP are also out late tonight.

Nothing in the US.

Have a great day and good hunting

Greg

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