Aussie under 91 cents but USDJPY heading to 104

November 28, 2013

Tonight is Thanksgiving in the US so some traders were already absent for overnight trade but it didn’t stop the Nasdaq from driving further above the 4000 mark with levels not seen since the year 2000.  At the close it is up 27 points or 0.68% at the close. It’s been a positive day all day for the Nasdaq while the Dow and S&P 500 had a mini dip mid day before recovering to sit at 16,097 up 0.15% and 1,807 up 0.24% respectively.

On the data front overnight the US data was strong on the employment front with jobless claims dropping 10,000 to 316,000 which is now getting back to pre-GFC type levels. The Chicago PMI was solid also at 63 against the 60 expected but this was still lower than last month’s 65.9 which along with the fact that Durable goods (ex-transport) fell 0.1% versus the 0.5% expected helped balance out the good jobless claims data in terms of the taper debate.

In Europe German GFK consumer sentiment hit a 6 year high at 7.4, Silvio Berlusconi was thrown out of the Italian Parliament and French and Spanish data disappointed, unsurprisingly, with confidence down to 84 in France and retail sales in Spain were down 0.5%..

As a result stocks in Europe were up on the day. The DAX rose 0.66%, the CAC up 0.36%, Stocks in Milan rose 0.80%, stocks in Spain were 0.96% higher while in London the FTSE rose 0.19%.

Closer to home on the ASX overnight SPI 200 futures at 8.00 am AEDT is up 11 points at 5,359 bid. The Aussie stock market is still under performing and under pressure at the moment but if we look at the SPI 200 we see that support is still holding

The SPI and the ASX are the little engines that can – just for the moment continue to hold support. Certainly the offshore rally is holding the market up but if that is the case then that is the case.

It seems only a trendline break will see any type of cascade – until then, as always, respect trendlines unless or until they break.

Turning to the Aussie dollar it is clear that it remains out of favour and is again the worst performer against the US dollar at 0.9062 this morning. The Aussie ignored some decent construction data yesterday and so remains vulnerable if the Capex to be released today is weak. The question of course, is how low will it go?

As I’ve been writing for a while now the target for the Aussie is 88 cents. The fact no one cared about the solid construction data and the upgrade that we saw from some shops to their GDP forecasts tells you the psychological profile of the market at the moment.

There are many studies that show how markets will have a “view” or a “slant” on the data. The Euro in the first couple of years of its life was one of the best examples – so it is with the Aussie that the market seems more inclined to act on bearish data and stories than it is on anything that is bullish.

Perhaps it’s Glenn Stevens intervention, perhaps it is the China story as Greg Gibbs suggests, perhaps its a combination of all of them but the Aussie falling and ASX under performing while stocks rise offshore tells you that Australia is out of favour at the moment.

For how long? Who knows but the price action is what you need to watch along with a raft of data over the next week starting with Capex today.

Hard to see where this thing is going to pull up before 8840/60 low we saw back in August.

You could draw a line on the weeklies which suggests 0.9030 might be a huge level as well.

Time will tell.

Elsewhere on FX markets Euro is back off a 1.3612 high at 1.3567 this morning, largely unchanged on the day before. The strength came on the back of the German government deal announced in our timezone yesterday. Sterling was on a tear to 1.6330 after there was no revision to the 0.8% GDP print for Q3 GDP but it too has backed off a little and is at 1.6270 this morning. USDJPY recovered its poise after a test of the break out level yesterday and is atop 102 this morning at 102.15 – 104 remains the target.

Indeed Dollar Yen is on track for 104 – but resistance is close

Back more than a year ago when USDJPY was in the high 70’s I wrote that I thought it was going to 100. Shinzo Abe made that happen a lot faster than I expected but it has happened.

No I reckon USDJPY is going to 110 in the next year and 150 eventually – its more about Japan than the US dollar but they are my overriding fundamental beliefs.

Technically though while I’m targeting a run to 104 for the moment the 102.60/80 region looks like there is a bit of wood to chop.

Bitcoin traded up and through $1000 last night which is no surprise really as it continues to follow a familiar chart pattern plain to anybody watching. Indeed last Friday we noted “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.” Bitcoin traded a high of $1073 last night before collapsing to around $925 and it is back at $1050 at 8 am AEDT.

On other commodity markets Nymex crude is closing in on a huge level at $91.30/40 Bbl which if it breaks will suggest an $85 price according to the technical analysts I speak to. It is down 1.68% at $92.11. Gold remains roughly unchanged at $1,239 oz, silver down 0.8% to $19.69 oz, copper is down 1 cent $3.21 lb. Corn fell 0.3%, wheat was 0.73% higher and soybeans fell 0.88%.

Data today sees retail trade in Japan, Business confidence in New Zealand, HIA new home sales in Australia along with the very important Capex data before a raft of data out in Europe including Spanish GDP, German unemployment, EU confidence and business climate.

It’s Thanksgiving in the US.

Have a great day and good hunting

Greg

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