Risk On, non farm payrolls. Risk Off, Chinese trade – It could be an interesting day.

March 10, 2014

There are reasons to be positive and negative today depending on our proclivity to be either glass half full or glass half empty.

Positivity can flow from the release of non farm payrolls (+175,000 v +149,000 expected) in the US on Friday night which were solid but negativity flows easily from the Chinese trade data released on Saturday was just “horrible” as the NAB FX Strategy team put it this morning.

The Chinese data showed a trade deficit of US$22.99 billion against expectations of a US$14 billion surplus. The key here was that imports were up strongly but exports tanked as the officials in Beijing have cracked down on speculative flows via the recent moves in the RMB rate. It seems clear that the data was recently distorted by capital flows mixed up with trade flows recently which has overstated growth which will have many worried about the state of Chinese growth.

So this morning’s trade in Asia is going to be a bit more cautious than would otherwise have been the case given that the S&P 500 in the US made a new intraday high of 1.884 before closing up one point at 1,878. The Dow rose 0.19% to 16,453 while the Nasdaq fell 0.37%.

In Europe stocks had a bad end to trade even though the non-farms had originally seen them higher. At issue was the warning from Russian Gas giant Gazprom that it could cut of the flow to Europe. The result was that the FTSE fell 1.11%, the DAX dropped 2.01% and the CAC was 1.16% lower. Stocks in Madrid and Milan fell 1.36% and 0.98% respectively.

Locally on the ASX the futures market is signalling a lower open with the March SPI 200 contract down 16 points to 5454 bid.

On global FX markets the Aussie is lower this morning and almost a full cent off the pre-non-farm payrolls high sitting at 0.9033 this morning.

Governor Stevens didn’t take the opportunity on Friday to aggressively intervene by jawboning the dollar but he did reinforce the fact that he thought the Aussie above 90 cents was too high in his estimation.

This of course had little impact on the Aussie which rallied up to 0.9132 before reversing course as the US dollar strengthened across the board. But it does ask the question now with the Aussie a full cent off the high if the top is in.

It is probably too early to tell just yet but a stonger US dollar, weaker Chinese trade and big fall in copper are externalities that suggest the high on at least this run might be in. Support on the day is 0.9020.

The Euro hit an important Fibonacci level at 1.3915 before reversing a little to sit at 1.3867 this morning. GBP has had a similar reversal off the highs of friday and sits at 1.6731 this morning while USDJPY sits at 102.91.

On commodity markets crude leapt 1% to $102.69 Bbl, gold fell by 1% to $1337.70 Oz while copper fairly tanked dropping to $3.15 lb for a massive 3.63%. On the Ags soybeans rose 1.39%, wheat rose 0.74% but corn fell 0.98%.

On the data front Japanese GDP is going to be huge today while new loans will be released in China. Tonight we get a raft of individual European industrial output and production data.

Have a great day and don’t forget to catch me live at 11 am today on BTFD.tv for a 30 minute tour around markets.

Greg

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