Gold and Aussie have failed breaks as US Stocks recover

January 28, 2014

It was a terrible end to the week last week as the markets finally woke up to what readers here and watchers of my show on BTFD have known for ages – money has been flowing out of emerging markets.

Yesterday in Asia and Europe the carnage continued but overnight while volatile US Stocks are trying to drag themselves back into the black.

The big news overnight has been some big selling in tech shares but also the fact that the German IFO Business Climate (110.6) and Current conditions (112.4) were both stronger and at multi-month highs. The DAX couldn’t benefit due to the overall bearish bias of markets but it is a good sign for the German economy nonetheless. Also of note – and more troubling for the US economy – the 7% fall in new home sales suggests some loss of momentum in this sector of the economy as rates have risen over the past few months.

The wash up is that with 30 minutes to go before the close the Dow has traded in a 15,939-15,784 range but is back in the black at 15,906 for a gain of 0.18%. The S&P 500 is flat at 1,790 while the Nasdaq is under pressure from tech shares and is down 0.54%.

In Europe it was a bad night with the FTSE under acute pressure as British Gas declaring Force Majeure in Egypt which weighed on the index and it closed down 1.69%. The DAX couldn’t get a lift from the better data and fell 0.46%, the CAC fell 0.40% while in Milan and Madrid stocks were down 0.44% and 1.12% respectively.

Australian markets were closed yesterday but Asia had an ugly day with the Nikkei and hang Seng both down more than 2%. On local Futures trade the SPI 200 is off 24 points at 5133 bid which is not too bad and the Australia Day holiday has saved the local market from some extra volatility.

– There has been plenty of volatility however in Global FX markets over the past few days and the last 12 hours which saw some reversal of fortune as US stocks didn’t continue to tank. The Euro sits at 1.3670 off the high of 1.3716, Sterling is up 0.57% to 1.6575, while USDJPy has reversed some of the yen strength and is up 0.24% at 102.62 but the low yesterday durring the period of acute equity weakness was 101.77.

The Aussie dollar has proved resilient also and sits at 0.8749 well above yesterday’s low of 0.8675.

In a similar vein the Aussie’s acute weakness to end last week has given way to a tentative rally as it sits back at 0.8750ish this morning.

It is too early yet to say the Aussie is going to rally on either the weeklies or the dailies but the 4 hour charts suggests further upside in that time frame.

On Commodity markets the gold bulls will be disappointed by the apparent break and then failure above important trendline resistance. The last 24 hour high has been $1278.98 but Gold is sitting at $1253.41 this morning.

The relationship between gold and the risk off meme over the past couple of weeks has been something I have talked about here and we saw again yesterday that during the depths of the Asian and European sell off that gold was strong moving up to $1278 but it has since crashed $25 an ounce.

The trendline that Gold has – SO FAR – failed at dates back to March last year and it remains an important trendline to watch.

Key level on the downside is $1237.37 which is the uptrend line from the recent multi-year low over hte holiday season.

Happily though crude is off a little at $95.65 down 1% and copper is back below $3.30 lb and sits at $3.29 this morning. Corn rose 0.52%, wheat was 0.31% lower and soybeans rose 0.23%. Bitcoin on Mt Gox is $970 but you can get it elsewhere much cheaper.

On the data front we see the release of the South Korean manufacturing index while in Austalia we get the leading indicator and NAB Business survey. tongiht German import prices and UK GDP which will be a huge number for the Pound before we get durable goods, Case-Shiller house price index, consumer confidence and Richmond Fed manufacturing index.

Have a great day and good hunting

Greg

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