FOMC Minutes, US employment drive markets but keep an eye on Nymex Crude

January 9, 2014

Interesting news from the FOMC minutes overnight showing that they only reluctantly Tapered at the December meeting with discussions about how to communicate the language around it key. But it was probably the big upward surprise in the ADP employment report which printed 238,000 in December way through the 200,000 expected that was the key focus of markets. This data augurs well for a strong non-farm payrolls report Friday night in the US which has contributed to the US dollar strength against the Euro, Yen and Aussie.

Looking at the European data release we see that the Italian unemployment rate hit a 37 year high of 12.7% and youth unemployment remains well through 40%. Markets are buying Spanish and Italian debt again but data like these just highlight that the heavy lifting in the Euro zone is being done almost exclusively by Germany. Having said that EU wide retail sales were quite strong last night printing up 1.4% in November against expectations of just 0.2%. German factory orders were also stronger at 2.1% in November against expectations of 1.5%.

The wash up of all of the above was that at the close the Dow is off 71 points or 0.43% to 16,460, the Nasdaq bounce 0.4% in the last 10 minutes to close up 0.31% while the S&P ended the day down just 1 point at 1,837.

On European Bourses the FTSE opened lower and continued to drift into the close losing 0.5% to 6,722. The DAX however did much better losing only 0.09% with CAC dropping just 0.04%. In Milan stocks fell 0.17% but in Madrid traders took stocks 0.74% higher.

Closer to home on the Sydney Futures Exchange the March SPI 200 contract is off 9 points to 5275 bid. On the bond boards the 3’s have fallen 6 points (implying rates higher) and the 10’s have lost 4.5 points.

On forex markets the Aussie has tested below 89 cents again with a low of 0.8892 but the thing to note here is that this was after a high of 0.8951 earlier in the night when the sellers entered once again – it sits at 0.8910 this morning.

The Aussie is not really doing anything at the moment – the seller still are there but thre is some buying still in the market as Westpac posited last week.

As you can see in the chart above the Aussie is really going nowhere for the moment key evels to watch are 0.8840/50 and 0.9015/25 – range trading favoured until we see a break.

The Euro likewise made a high of 1.3635 before the ADP report and is off 0.3% this morning at 1.3574. GBP rallied 0.26% to 1.6445 while USDJPY is up 0.21% to 104.80.

On commodity markets gold is down again and has largely filled the gap back to $1215 from earlier in the week when the market had its mini-crash. It’s currently down $4.10 to $1,222.30 oz. Copper lost a couple of cents to $3.39 lb while on the Ags corn and wheat were smashed losing 2.70% and 2.61% respectively while soybeans were largely unchanged.

But in many respects Nymex Crude is the big news in commodity markets and at $92.54 Bbl has now broken the uptrend from the 2008 and 2012 lows.

Trying to call Nymex crude lower over the past year has been a mugs game as the combination of the trends from 2008 and early 2012 has made fools of anyone without a longer term technical perspective. Indeed the fundamental impact of the thawing in relations with Tehran and the extra supply this offers the market was greeted with a rally above $100 rather than a sell off.

But as the US looks to be heading toward energy self sufficiency and as there is increased agitation toward US exports of oil the technical outlook might provide a guide to the next big move.

The weekly chart above shows that last night we had aconfirmation of a break of both uptrend lines now but also suggests that before we get suckered into a bear trap Nymex Crude neds to close below the pink line which comes in at $91.35. The dialy charts suggest this is on the cards into week’s end but it needs a weekly close to confirm.

The target if this happens is $84 Bbl or thereabouts.

On the data front in Australia today we see building and retail sales data and the ABS is releasing online sales which will be interesting. In China we get CPI and tonight trade data out of France and the UK. EU wide business sentiment is out along with German industrial production. But it is the BoE and ECB rate decisions which will be the key drivers. As Europe heads toward deflation will the ECB do something surprising?

In the US its initial jobless claims and the challenger job cuts in the lead up to non-farm payrolls on Friday.

Have a great day and good hunting

Greg

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