Stocks tank, Aussie rallies and Yen strengthens while Crude looks set to break

January 14, 2014

It was a very poor night for stocks and indeed it has been a very poor start to the year in January. Last night’s weakness flowed once again from the non farm payrolls but equally from a noted Goldman Sachs analyst who said that “stocks are over valued by almost any measure”.

The result of a day of almost universal and unremitting falls on US stock markets with the Dow at the close down 179 points or 1.09% to 16,258. The Nasdaq fell 1.48% and the S&P 500 fell 23 points or 1.27% to 1,819.

Europe proved once again it has the worst timezone for trading while the US is the dominant market on the planet and will have to catch up US falls tonight given it was a day of gains on European stocks after the BIS eased some of the tighter banking rules that were planned

At the close the FTSE was up 0.25%, the DAX climbed 0.39% and the CAC rose 0.29%. IN Milan and Madrid stocks rose 0.65% and 0.73% respectively. For all the trade that happens in the London time zone it really is the worst possible time zone – always a day behind and we’d expect Europe to have a bad day tonight.

On the ASX overnight futures trade on the march SPI 200 contract has seen it lose  48 points to 5211 bid.

On FX markets the US dollar weakness continued but it is the Yen that has pushed all before it over the past 18 hours or so dropping down to 102.88 in USDJPY terms (fall in USDJPY equals Yen strength) from a high of 104.13. The question of course is how low can USDJPY go?

The chart below shows the break yesterday in USDJPY which drove EURJPY and other Yen crosses across the board.

Key support now is 102.54 and if that breaks it calls for a move toward 101ish. But 102.50ish has to break first and as ever we respect trendlines until they break.

EURJPY came under pressure as well and has fallen more than 100 points from lunchtime yesterday to 140.63 this morning. AUDJPY is also down but less so because AUDUSD is up 0.71% to 0.9064. Euro on the other hand hasn’t been able to pick up any ground on the USD and sits at 1.3670 with GBP down 0.58% to 1.6384.

Looking at the technicals for the Aussie we see there has been a break of resistance as a result of the USD under pressure . The break of 0.9025 biases the AUD higher still based on the technicals.

On the 4 hour charts the Aussie looks over cooked and it seems reasonable to expect a retest of the 0.9025 breakout level and should that hold then the target becomes the 38.2% retracement level of the 0.9750-0.8820ish down move in the back end of 2013 which comes in at 0.9175.

The US dollars troubles have been a boon for Gold bulls which, while only up $6 or 0.48%, is crucially above the $1250 sitting at $1252.70 this morning. Crude reversed Friday’s rally as the powers get closer to a Nuclear deal with Iran and the prospect of as much as 1 million barrels a day hitting the market. My own studies suggest that technically Nymex crude is now on its way to $85 Bbl.

This Vantage FX chart speaks for itself.

$83.95 here we come.

Elsewhere Copper lost 1 cent to $3.39 lb, Corn gained another 0.29%, wheat rose 0.79% and soybeans had a good move trading 1.79% higher. Bitcoin sits at $909.

On the data front there is nothing of note in Australia today and then Japanese trade data before a raft of CPI and PPI data in Europe which will give a clearer indication of the ECB’s need, or not, to do something unconventional. UK retail sales are also out and then in the US we also see the very important US retail sales data, business inventories and speeches from Fed Governors Plosser and Fisher.

Have a great day and good hunting

Greg

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