Stocks rise marginally and Aussie Yen held as USDJPY recovered

May 6, 2014

It’s RBA day so the Aussie dollar is unlikely to finish where it starts the day, one way or another but it was USDJPY which provided most of the action in Asia yesterday moving down to 101.84 before recovering overnight.

This in turn pushed Aussie Yen lower to test very important trendline support as you can see in the chart below.

This line’s importance can’t be overestimated because in 2014 in what has been a low volatility environment trendlines have been really important trade signals. Both the Euro and Pound bounced strongly off similar lines over the past 6 weeks so traders are clearly watching these levels.

So the low around 0.9424ish, which looks like it is right on the trendline, is the key for both the AUDJPY and the AUDUSD which will likely get hit also if it breaks.

Looking at the data overnight the big jump in the ISM non-manufacturing PMI to 55.2 from 54.1 expected and 53.1 last with solid hiring intentions is another strong sign that the first quarter weakness in the US economy was really just weather related. The markit version of this survey was also higher at 55 in April.

So it ended up a positive day with the data rescuing the market from early weakness after an early weak lead from Europe on enduring Ukraine problems. The Dow closed up 18 points or 0.11% to 16,531, the NASDAQ gained 0.34% to 4,138 and the S&P 500 rose 4 points or 0.21% to 1,885.

Which adds up to a solid lead for the ASX this morning with SPI 200 Futures up 12 points to 5,462 bid.

In Europe the UK was out for the May Bank Holiday but German shares fell taking the DAX down 0.27% to 9,530 off its lows thanks to the pick up in the US. The CAC rose 0.11% while the Spanish index was flat and shares in Milan fell 0.65%.

Forex markets were a bit mixed with the Aussie recovering from a low of 0.9250 as AUDJPY was pressured lower by USDJPY weakness. It sits around 0.9270 this morning waiting for the RBA this afternoon. Euro hardly moved and sits at 1.3875 while the Pound is also becalmed at 1.6865. USDJPY rallied off the low of yesterday and is back in this 102.15/30 tractor beam area it has been hanging in for some time now.

On commodity markets with London and the LME closed volumes were much lower. Ukraine tensions have lifted gold almost $30 an ounce over the past two trading days to $1,309.80 this morning. Nymex crude was down 0.38% to $99.38 on the back of the weaker Chinese data but copper held in only losing 1 cent to $3.07 lb. On the Ags the wild ride continues with corn up 1.87%, wheat rose 1.91% while soybeans fell 0.59%.

On the data front today the Australian trade balance is out with the market is expecting another surplus which seems likely. Then at 2.30pm we get the RBA.

Tonight we see a raft of services PMI’s in Europe and then the trade balance in the US.

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