A pretty solid performance from the Aussie dollar and stock markets in the past 24 hours with initial weakness giving way to strnegth as the earth rotated through its 24 hours.
Even though the US was on its Columbus Day holiday stock markets were still open and Senate Leaders Reid and McConnell continued, without success so far, to try to hammer out a deal as the deadline for the debt ceiling draws near. So at the close the Dow was up 0.42%, the Nasdaq rose 0.61% and the S&P finished up 0.40%. In Europe the negativity that gripped global markets early was in evidence with the FTSE in London opening down around half a percent at 6464 before closing at 6508 for a gain of 0.32%. The DAX and CAC were virtually unmoved while stock markets in Milan and Madrid were 0.19% and 0.28% higher.
Here in Australia even though the ASX closed lower yesterday it was actually a positive day insofar as the ASX and the SPI rallied for most of the day and the strength in Europe and the US off their lows has seen the SPI 200 contract up 41 points to 5247 bid. Looks like today will be a good day on the market and if the SPI can take out 5260 it might get a wriggle on.
On forex markets amidst a general trend to US dollar weakness in the past 24 hours the Aussie dollar is very close to a big break out sitting at 95 cents this morning off a low of 0.9408 yesterday morning. It’s not their yet but 0.9520 is the top of the Box or range it has been in for some time now and a break could usher in a move to 0.9770.
The Aussie dollar is being well supported at the moment and based on feedback from the US it seems to be money market funds who have bailed out of short term US debt to safe guard against a US default who kicked off the buying initially last week. The continued push higher overnight and the Aussies out performance against the other Majors also suggests it is continuing to fulfil its place as a safe harbour in investor portfolios as it has often since 2009.
The question now is whether or not the Aussie can take out the 0.9520 top of the box.
As the chart above shows the Aussie rallied then consolidated by pulling back and finding support at our slow moving average and the 38.2% Fibonacci retracement level. It is now poised to either push sharply higher or to fail and see a double top formed.
I’m neither bullish nor bearish at this level and close to the top of the box but if the Aussie can break and hold above 0.9520 then the target becomes 0.9770.
Elsewhere the Euro sits at 1.3565 up 0.16%, GBP is up 0.23% at 1.5986 while the US dollar did gain ground against the Yen rising 0.43% to 98.49.
It is a weird world when the US dollar’s moves against the Yen are at odds with the US dollars moves against the other currencies. USDJPY seems more like an equity market proxy – or perhaps a reverse fear index – than a currency trading on relative investment or economic fundamentals.
Either way however USDJPY found some very strong support at the 200 day moving average last week and is now closing in on trendline resistance at 99.70/80 as you can see in the chart above. My system suggests it still has further topside momentum.
On commodity markets crude was quiet at $102.13 Bbl, Gold was up 0.66% to $1278.70 while copper rose 1% to $3.30 lb. In context though copper has been running on the spot for some time now. Corn rose 0.81%, Wheat was essentially unmoved and soybeans rose 0.45%.
Data wise the Home Loan outturn yesterday in Australia showed there remains little pressure building in the housing market while the CPI and PPI data in China was higher than the market had expected.
Over the next 24 hours we get motor vehicle data in Australia and the RBA minutes from the last meeting which are likely to be AUDUSD supportive if I read the Statement from this month’s Board meeting correctly. FDI in China is out as is Japanese Industrial Production and then CPI and PPI in the UK and the ZEW survey in Germany.
Good hunting and have a great day