Stocks and Aussie lower but Facebook and Apple beats will buoy sentiment

April 24, 2014

Right, time for some thoughtful reflection on whether or not the massive beats by Apple and Facebook after hours render the negative price action in US markets during their day moot.

The reason I raise this question is because if the rotation out of the Nasdaq was about fear of another tech bubble or at least a move away from the leaders to the laggards. But these two moves must surely put the idea that the bellwether tech companies are in decline to bed – surely? Shouldn’t it.

Why is that important to FX traders? Because if we get a turn in sentiment then the US dollar will continue to struggle a little and the Aussie dollar is likely to find support.

Worth thinking about anyway and something to factor into your thought process if you are a fundamental style trader. Either way though both are solid results and you can read more on Facebook and Apple on Google.

Already the local market had ignored the weakness in the US with the SPI 200 higher in overnight futures trade and the June contract is currently pointing to a better start for the ASX up 20  points to 5528 bid now while it was up only around 8 points at 6am this morning.

Yesterday the local market closed at a post GFC high and the market has clearly broken out. The question is where though?

If we use a pure Fibonacci projection on the break we get a move to 5752 – yes 5752 on the SPI 200 futures contract.

Looking at the data overnight after the Chinese flash PMI data was weaker than expected yesterday with similar results in France and the US but Germany and the EU were slightly better than expected. US new home sales tanked down 14.5% month on month.

So in the end the Dow was off slightly at 16,502 down 0.07%, the Nasdaq fell 0.83% to 4,127 while the S&P 500 down 5 points of 0.24% to 1,875. But things are going to be better tomorrow would be the guess.

In Europe comments from ECB Council member Nowotny that the ECB wouldn’t rule out QE but it wasn’t yet needed sounded a lot like softening up but markets couldn’t get a lift and gave back the positivity of the previous day’s trade. At the close the FTSE edged 0.1% lower to 6,675, the DAX fell 0.58% to 9,544 while the CAC lost 0.74% to 4,451. In Milan stocks cratered a little down 1.18% while in Madrid they fell just 0.13%.

Also interesting in Europe was the return to bond markets with EUR750 million of 10 year bonds which was oversubscribed with a bid ratio of around 3.5 times. Equally interesting was the failure of a Russian bond auction which was cancelled.

Turning to Asia today and it looks likely to be another mixed bag after the Nikkei rose 1.09% after the leading index didn’t fall as far as some thought while BoJ Governor Kuroda noted he thought inflation would print higher than the current BoJ projection. In China the Shanghai exchange was down a little after the lower than expected outcome of the HSBC Flash PMI but the fall of 0.28% wasn’t overly material. Today’s focus is likely to be the Chinese leading index which is due out at 2 GMT.

On currency markets the Aussie was the big mover down around a cent after the lower CPI and Chinese PMI combined to knock the bulls for six. It is coming back a little in early Asian trade this morning at 0.9285.

Key support now is my slow moving average at 0.9252 but Westpac reckons the downside might have opened up to below 92 cents.

Elsewhere on forex markets Nowotny’s comments hardly dented Euro which is still atop 1.38 at 1.3816 this morning. Sterling fell after the 9 nil vote to keep monetary policy as is was released with the BoE minutes while USDJPY is at 102.46.

Turning to commodities there was a huge build in stocks last week which has taken crude lower but I’ve also had a change of contract so the move is so pronounced with may Nymex crude only down 0.21% to $101.54. Techincally $100.70/80 is the key to the next move given it is trendline support. Gold hasn’t done much sitting at $1284 oz while copper is at $3.07 lb. On the Ags it was typical price action with corn up 1.36%, wheat up just 0.52% while soybeans fell 0.69%.

On the data front today there is little in Asia other than the Chinese Central Bank’s leading index but German IFO tonight will be important as will durable goods in the US along with the usual jobless claims data while the Kansas fed manufacturing index is also out.

The above first appeared in my 20 seconds piece at Business Insider this morning

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