Commodity bloc finds some friends as the Aussie rallies from 6 month lows

September 16, 2014

The Aussie dollar is oversold. On the dailies it has dipped below the bottom of the Bollinger Band which I have found always leads to a reversal for a period while it resets, weak players hands are forced and the bigger trend can resume.

This is as true of a move above the top of the bands as much as it is of the current fall below the bottom – so this rally is both expected and still consistent with and overall trend to further weakness. Perhaps just not at the moment.

Of course if the RBA discussed the Aussie dollar in more detail – as might be the case given that they changed their language in this months statement – then it could be on for young and old again as the sellers take their cue. There is of course the opposite risk as well.

Iron ore also rallied overnight along with the Kiwi and the Loonie suggesting there is more than just Aussie dollar in this at the moment. Iron ore’s rally in particular, if it has legs, will help the Aussie in the short term but traders can hardly rely on it to save the Aussie given they ignored the iron crash over recent months when the Aussie was strong. RBA today and FOMC later this week are the key events for the Aussie which sits at 0.9030 this morning.

By longer term bias is summarised in the above chart – it is longer term though.

Elsewhere on currency markets Sterling sits at 1.6231 this morning while USDJPY might have topped and is at 107.17 while Euro is at 1.2934.

I have just sold some USDJPY – there is an obvious stop.

On stocks in the US trade was mixed with Dow up 0.2% to 17,026 the S&P dipped 0.1% to 1,983 but the Nasdaq fell 1.05%. What drove the sell off seems more speculative than real with some market watchers suggesting it is traders and fund managers making room for the Alibaba IPO in their portfolios. Perhaps?

On the data front that was mixed as well with industrial production falling 0.1% against an expected 0.3% rise in August. But the New York Empire manufacturing index was a counter balance to this with a surge from 14.70 in August to 27.54 in September. That is good news but the competing data highlights the difficultly the FOMC will have when it sits down for a 2 day meeting tonight in handling what is a clearly recovering but not surging economy.

In Europe the DAX managed to eke out a small gain of 0.09% to 9,660 while the FTSE dipped a little bit, down 0.04% to 6,804. In PAris the CAC fell 0.29% while stocks in Milan and Madrid fell 1.04% and 0.44% respectively.

Locally the impact was that after a really poor day on the physical ASX market yesterday September SPI futures are up 2 points to 5,474 while December contract rose 3 points to 5473.

I still can’t see this move lower being finished – no signal yet anyway.

In Asia yesterday the maelstrom surrounding the elections seems to be weighing on investor sentiment in Hong Kong with the Hang Seng down 0.97% to 24,357. The Nikkei was up 0.24% to 15,948 and in Shanghai stocks rose 0.3% to 2,339.

Sterling sits at 1.6231 this morning while USDJPY might have topped and is at 107.17 while Euro is at 1.2934.

Crude rallied 0.61% to $92.83, gold rallied a few dollars to $1,233 and silver closed at $18.67 while copper dipped to $3.09 a pound. On the Ags wheat dipped 0.4%, soybeans were largely unchanged and corn rose 1.36%.

On the data front today we see the RBA minutes from this months Board meting at 11.30, BoJ Governor Kuroda will speak and Chinese FDI data is out. Tonight the CPI in the UK will be a big event for Sterling and the expectations on rates. In Germany the ZEW survey of economic sentiment is important while the US will release PPI, TIC flow data and Producer prices.

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