Stocks bounce, taking USDJPY higher

October 20, 2014

A very interesting week last week with huge volatility and an uptick in fear ending with the Dow down just 1% for the week in the end.

Of course, whether it was the S&P 500, or the SPI here in Australia the bounce was as much a solid technical response to huge trendlines as it was to the soothing tones of Janet Yellen, James Bullard and BoE chief economist Andrew Haldane all of who talked about growth and interest rates last week.

Indeed Haldane’s characterisation of the UK economy “writhing in both agony and ecstasy” is the Central Banker quote of the year, perhaps the decade.

So at week’s end “Buy the dip” is not dead.

At the close the Dow rallied 263 points to 16,380, but it was still down 0.99% on the week. The Nasdaq rallied 0.96% on Friday and the S&P 500 leapt 1.30 to 1887. Like the Dow though this left the S&P 500 still 1% lower on the week.

This is still unresolved technically and sideways or down is favoured on a multi-week timeframe.

In Europe, even with a huge rally Friday, only the DAX finished the week in the black after stocks in Germany surged 3.11% on Friday taking the DAX to 8,850. The FTSE rallied 1.84% to 6,310 and the CAC belted 2.92% higher to 4,033. Stocks in Milan and Madrid rose 3.42% and 2,97% respectively.

The local impact was that ASX futures traders pushed the Aussie market sharply higher and it should be a very good open this morning. The SPI 200 December contract rallied 68 points to 5,305.

Asian stocks were mixed on Friday with Shanghai down 0.66% to 2,341 after the miss in the MNI business sentiment survey which printed 51.7 against 52.2. Japanese stocks fell 1.39% to 14,533 but the Yen’s weaker open this week might help a little in Tokyo today and no doubt the US moves will dominate.

On currency markets the Aussie dollar is building a very interesting technical pattern suggesting a big move coming. It sits at 0.8746 this morning.

There is a move coming.

USDJPY is back up near 107 at 106.89, GBP is at 1.6088 and the Euro is sitting at 1.2758.

I’ve closed the USDJPY long from last week this morning and am flat now.

On commodity markets iron ore was higher with December 62% Fe futures up 42 cents to $80 neat a tonne. Newcastle coal is struggling, however, with the December contract down 15 cents to $64 a tonne. Elsewhere on commodity markets crude rallied 26 cents a barrel to $82.96, copper closed at $3 a pound, gold at $1,238 and silver fell 1% to $17.26 an ounce. On the Ags wheat fell 0.19%, corn was 1.14% lower with soybeans falling 1.23%.

On the data front today, it is fairly quiet with no data in Australia but RBA Assistant Governor Kent is talking at 10.30am. Tonight the German PPI will be interesting, but that’s about it.

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