Aussies inability to rise on upgraded IMF forecasts tells us "The Bears Have It" | Vantage FX

Aussies inability to rise on upgraded IMF forecasts tells us “The Bears Have It”

January 22, 2014

The IMF boss Christine Lagarde signalled a few weeks ago that the IMF was going to upgrade its forecast for growth which it did formally overnight with 2014 expected to grow 3.7% and 2015 up 3.9%. The IMF did warn against a rush to higher rates while also warning on the fragility of the recovery at the moment.

Maybe the IMF doesn’t have that much credibility anymore but it didn’t have too much impact on markets and certainly failed to lift the Aussie dollar which was 30 points either side of 88 cents. Is it base building or is this the calm before the next bear storm? It’s hard to tell but the longer term downside still beckons – key today is the CPI report at 11.30am AEDT.

Elsewhere on FX markets  the Euro was pressured early by the weaker than expected German ZEW economic survey, which printed at 61.7 against expectations of 64, even though Europe wide sentiment was stronger. On the day though it is largely unchanged at 1.3565. GBP is higher again at 1.6477 driving EURGBP lower to 0.8229 and looking like it has further losses to come. USDJPY lost its early strength and sits at 104.22 this morning.

It’s interesting how Sterling keeps on keeping on. LAst year at one point I thought it was headed to 1.48 and here we have it at 1.6477 this morning.

It has been a strong performance and even though Euro too has resisted the downward forces of its appaling and moribund growth EURGBP has been falling as GBP has been the stronger side of the cross.

The question  then is where will EURGBP fall to?

On a weekly basis the target is the bottom of the uptrend line that comes in at 0.8070 this week.

In the US stocks are rallying toward the close with the Dow recovering from the lows of the day but still in the red under pressure from Goldman Sachs and Verizon. At close the Dow is down 0.27% to 16,414 but the Nasdaq and S&P 500 are firmly in the black up 0.68% and 0.29% respectively with the S&P sitting at 1,844.

In Europe Unilever PLC’s 1.8% rise couldn’t stop the FTSE from falling as it was weighed down by mining stocks and closed down 0.04%. In Paris the CAC rose just 0.03% while the DAX was 0.15% higher. In Milan stocks were quiet also up 0.11% but in Madrid stocks fell 0.93%.

Locally on the ASX overnight the SPI 200 March contract is down 7 points to 5280 bid no doubt effected by the miners weakness that was evident in London overnight. On the Bond boards the 3’s and 10’s are up 1 point even though US treasuries rose 1 point to 2.83% overnight.

Turning to commodities it was a positive night for crude which rose on the back of the IEA’s upgraded demand outlook for 2014. Nymex crude rose 0.66% to $94.88 Bbl. Gold was lower however having failed on Monday at trendline resistance and its is down 0.75% at $1240 oz.

Gold has, this week pulled back from resistance and overnight fell about $10 an ounce back to $1240.

After a massive fall that occurred from the end of 2012 to the low, which we saw again recently at $1280, the base building pattern is going to be protracted. I mention this because while I always respect trendlines – unless or until they break – and this one is a good one but my system when applied to the weekly charts (as opposed to the dailies above) is still looking for a rally as long as the lows hold.

For full disclosure though I have exited my position after the failed break because I had simply been holding for too long based on the dailies and wanted to clean out my inventory.

Copper rose 1 cent to $3.38 lb even though there was a downgraded forecast from Goldman Sachs who think it will fall to $3.11 this year on the back of a surplus in supply. On the Ags soybeans fell 2.83% while wheat fell 0.22% and corn rose 0.18%. Bitcoin sits at $958

On the data front today in Australia we see the release of both the Westpac Consumer Sentiment survey and the ABS Q4 2013 Consumer Price Index. After the bigger jump in the TD monthly inflation index earlier this week there might be a little more volatility than usual but the market is expecting between 0.5% and 0.7% neither of which will change the RBA outlook for interest rates.

Offshore the BoJ and BoCanada have monetary policy decisions while the minutes from the last BoE meeting will be released. Also out in the UK will be the employment report. In the US we have mortgage applications and the monthly redbook survey.

Have a great day, and good hunting





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