US non farm payrolls were either going to be ignored (if strong) or cause a stock rally and USD weakness if weak. So the fact that they undershot expectations last night with a print of 148,000 against an expectation of 180,000 saw the taper recede into 2014 and drove stocks higher and the USD lower.
As a result the S&P 500 still closed up up another 10 points or 0.59% to 1755, the Nasdaq was 0.25% higher and the Dow rose 0.49% to 15,468. Targets of 1800 plus remain in place around the market. Across the Atlantic in Europe the rally started early and then accelerated after the release of non-farms. At the close the FTSE was 0.63% higher, the DAX rose 0.90%, the CAC was 0.42% higher and stocks in Milan rose 0.57% but the IBEX was down 0.25%.
Here at home the SPI 200 on the Sydney Futures Exchange the SPI200 is up 31 points to 5387 bid.
Turning to forex land and we see that USD was under intense pressure and fell, in index terms, to 79.23 which is it’s lowest level since February this year. Euro (1.3779, +0.72%) looks on its way to 1.40 and GBP (1.6229) looks equally strong. USDJPY (98.13) is not much changed but the USD lost 0.77% against the Swiss France which sits at 0.8950 this morning.
Technically the Euro has broken higher overnight through the top of the recent high. A few weeks back when Richard Yetsenga Head of FX Strategy at the ANZ told me Euro was headed to 1.40 I was a sceptic but – hey, hats off to him.
The target is actually above 1.42.
Looking specifically at the Aussie dollar which is well bid at 0.9708 and not far now from the original technical target of 0.9760/70. The support just continues to grow for the Aussie and while a pullback at some stage is inevitable the preconditions for further strength in the months ahead are growing.
Technically the close this morning in the Aussie (US end of day) is right on the 50% retracement of the big fall in the Aussie a few months back and right into the zone of resistance and just below the 200 day moving average which has dropped a little and now comes in at 0.9751 a little lower than the 0.9768 last week.
The pre-conditions for the Aussie to pull up around these levels are starting to stack up from a technical sense and I thought that maybe on the 4 hour charts yesterday it might have been pointing down but it found support – as is usual – at the fast moving average on the 4 hour charts.
The weeklies are still pointing higher though so any pullback is consolidative at the moment.
On Commodity markets the welcome fall in Nymex crude continues and it is now gone and heading a good way lower according to the technicians. Gold was up 2% or roughly $27 to $1341 oz while Silver was up 2.34% to $22.48 oz. this move in precious metals is largely a USD move. The Chinese are doing the right thing hedging Treasuries by soaking up Gold. Copper rose to $3.33 lb also on the back of the USD while in the Ags corn fell 1.46%, wheat rose 0.14% and soybeans fell 0.29%.
On the data front today we get CPI for Australia with the market expecting a rate below 2% year on year. Tonight in the UK we get the BoE MPC vote, BoC vote also as well as US trade data which will be very interesting.
A little editorial about the Taper and the Fed
If the Fed is on the back burner as seems the case now then regardless of the fact that the US stock market is at all time highs and the Aussie is at 97 cents why should we as traders expect the situation to be any different from what we have seen since 2009.
That is, when the Fed is using its balance sheet to inject cash into the US economy it finds its way into the stock market and has boosted stocks.
So for all the hand wringing we are seeing and top calling I just don’t think the metrics are their to see a crash or a big pullback unless or until the stimulus stops. Now of course it will but that is what trailing stops are for.
Enough with the rhetoric from the bears – trade the market in front of you.
Have a great day and good hunting.