It’s cup day and the winners are Aussie Dollar bulls

November 5, 2013

There won’t be a lot of work done in dealing rooms around Australia today because lets face it, with Melbourne out for the day and Sydney getting ready to go to Melbourne Cup functions around lunch time most traders will have their head in the form. At least wholesale traders anyway – many professional retail traders I talk to won’t be caught dead bothering with the punting thing on the Cup, the pay off is just not good enough for the risk.

Equally the Reserve Bank Board meeting is important but with no move expected it should be a fairly quiet day.

Looking overseas to the US stocks managed to push higher once again with the Dow up 0.15%, the Nasdaq up 0.38% and the S&P 500 up 6 points or 0.36% to 1768. The good news was that the NYC ISM surged from 53.6 to 59.3 while factory orders were up 1.7% in September which is a reasonably solid performance in what it suggests for the economy.

Across the Atlantic EU Manufacturing PMI hit expectations printing 51.3, Germany was a little stronger than expected at 51.5, Italy undershoot a little at 50.7 and France went further backwards printing 49.1. Initially these result seemed to weigh on European bourses but by the close of play they were firmly in the black. The FTSE ended up 0.43%, the DAX was 0.32% higher and the CAC up 0.37%. In Milan stocks rose 0.77% while in Madrid the IBEX was 0.36% higher.

On the Sydney Futures exchange the SPI 200 contract rallied 17 points to 5396 after a big reversal yesterday in our time zone and the SPI 200 found support at the fast moving average and you can see below an example of the mystical qualities of the moving averages that I use.

As the chart action shows the price pulled up yesterday at the fast moving average and while above this the SPI200 looks OK. My system however does still point to a break but we don’t preempt it till it happens so the level to watch is 5364.

On FX markets the Aussie was the big winner after the stronger than expected retail sales yesterday coupled with low inflation and the strong rise in the ABS house price indices. This morning the Aussie sits at 0.9509 up 0.72%. The Euro is 0.24% higher at 1.3520, Sterling gained 0.31% to 1.5972 and USDJPY 98.57.

It feels like the next 24 hours will decide if the Aussie has found support. 94 cents was the target last week and although I expected it to test and break it this week we have to respect that fact that the data flow yesterday and with it sentiment toward the Aussie dollar was buoyed.

Looking technically we can see that the Aussie is now approaching the fast moving average from the low side and it will provide resistance in the 95.15/25 region. If it breaks then the Aussie might gallop away toward the 200 day moving average.

On commodity markets crude was largely unchanged at $94.47 Bbl, Gold was similarly quiet at $1311 but Copper tanked 5 cents a pound or 1.4%. It’s been in a fairly tight range for a while now but it bears watching. Corn, wheat and soybeans fell 0.41%, 0.67% and 0.24% respectively.

Bitcoin ripped higher from the 213 open yesterday morning to 234 this morning and seems biased higher.

On the data front today in Australia we get the release of the AiG performance of Services Index, HSBC China Services PMI, RBA decision and statement this afternoon before European PPI and ISM non manufacturing PMI in the US.

Good Luck, Good hunting and good punting.

Cheers

Greg

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