Euro testing massive short term support as stocks rally.

July 17, 2014

Running on the spot.

Stocks go down one day and up the next.

What is difficult to fathom though in last nights price action is that Europe and the US saw something in Chinese GDP that traders in Asia did not. Sure news of the massive $US 80 billion offer by Rupert Murdoch’s Twenty-First Century Fox to buy Time Warner, even though it was rebuffed, set a solid tone. But most reports are that the fact that the Chinese data – at least the headline was on the money – was the catalyst for the big moves in European and US stock markets.

Of course comments from fed Chair Yellen in her second day on Capitol Hill that she is optimistic about the economy and in particular that growth is at a point sufficient “to support continued improvement in the labour market” are also positive but that puts more upward pressure on rates and downward pressure on stocks.

Or at east it should have.

So maybe the trader I mentioned yesterday is right – central banks have thrown a blanket over the market and any fal, yes any, is a buying opportunity.

Not for me though – I’m still leery of these moves in stocks.

Anyway at the close the Dow was up 77 points to 17,138 for a gain of 0.45%, The S&P recovered 9 points or 0.44% to 1,982 but the Nasdaq lagged up just 0.2% to 4,426.  Also helping the market was the release of NAHB home builder confidence which rose to 53 from 49 but industrial production rose just 0.2%. The PPI was up 0.4%.

Can this uptrend really continue without a break lower?

In Europe stocks rallied on the Chinese data and easing fears about Portugal according to CommSec chief economist Craig James. At the close it was a sea of green with the FTSE up 1.11% to 6,785, the DAX pushed 1.44% higher to 9,859 while the CAC was up 1.48%. Milanese stocks rose a ridiculous 3.17% while stocks in Spain were 1.83% higher.

The upshot has been that locally futures traders have taken the September SPI 200 contract up 14 points to 5488 and it seems a positive day for the physical market beckons. Fortescue in particular is worth watching given proximity to its downtrend.

In Asia yesterday markets showed the difference between headline and underlying data. Yes Chinese GDP hit expectations but the internals were not as strong as the headline. So Asia didn’t find the market too exciting and the AUD fell because traders focused on the housing data.

So at the close Nikkei was 0.1% lower at 15,379, the Hang Seng was up 0.27% at 23,523 while stocks in Shanghai were 0.16% lower.

On currency markets the Aussie recovered off trendline support as European and US traders took a different approach to the Chinese data than those closer to it. It sits at 0.9365 this morning well off the 0.9327 low.

Tested the old downtrend yesterday – 0.9320/25 big support.

Euro’s woes continued falling to 1.3526 this morning as traders recognise that the divergence in economic activity and monetary policy outlooks is growing. Sterling is at 1.7134 and USDJPY continues to run on the spot at 101.69.

Closing in on support.
On commodity markets iron drifted a smidge lower with September 62% Fe closing at $98.32. Coal tanked however dropping $1.35 tonne for September delivery. It looks ugly but hopefully a low is near. Elsewhere Nymex July crude popped $1.56 Bbl to $101.52, copper fell 4 cents to $3.20 lb while gold is at $1,298 and silver at $20.78. On the ags corn rose 1.14%, wheat was unchanged and soybeans rose 0.57%.

On the data front we get the NAB’s quarterly business survey at 11.30 this morning which has a bigger set of respondents and more detailed questions than the normal monthly survey. Tonight’s CPI in the EU is huge while in the US we see jobless claims and the Philly Fed manufacturing index.

Social

Free Daily Market Update

Live Spreads

SymbolBidAskSpread

Spread

Sign up to the latest forex news and daily FX trading setups

Get started with a FREE $50,000 demo account