Team Australia under pressure as Aussie and ASX fall.

November 27, 2013

The US markets looked good all day until the close.

Half an hour before the close the Dow was at 16,114 up 0.26%, the Nasdaq is above 4000 at 4,026 for a rise of 0.79% and the S&P 500 is up 6 points at 1,808. BUT at the close the Dow fell back to 16,074 for a rise of just 0.01% on the day, the Nasdaq fell back to 4,018 up 0.59% and the S&P 500 closed at 1,803 up 0.03% 

So the notion that 1,800, 4,000, 16,000 satisfied a trigger for a rollover is clearly proved wrong for the moment but will it be in a few days?

last night’s moves higher seem to have been fed by the enduring rise of the Case Shiller house price index which is now up 13.3% year on year. Also aiding the more positive tone was the big jump in building permits back above the 1 million mark in October. But consumer confidence and the Redbook index both fell.

In Europe traders didn’t get the buy telegram and with the exception of the IBEX in Spain (+0.27%) the big bourses of Europe were all lower. The FTSE fell 0.88%, the Dax was 0.11% lower, the CAC fell 0.56% and the FTSE MIB in Milan was just 0.05% lower.

On the ASX the SPI 200 contract overnight is down 11 points at 7.30am AEDT and sits at 5,370 bid.

On currency markets the Aussie dollar continues to be under pressure with yesterday’s rally up into the 0.9190 region reversing under heavy selling pressure last night making a low of 0.9086. Perhaps some of the selling was related to Goldman Sach’s bearish outlook for Australia but regardless the outlook remains one the RBA will be pleased with.

It is probably worth thinking about what drove the market reaction over the past 24 hours with regard Australian markets and ask is the worm turning.

Yesterday at Business insider I wrote up the key economic themes in their outlook for 2014 – it’s the link above.

The key here is that Goldies have a really jaundice view of the economy for the next year and even with that bleak view are still saying the risk is to the downside.

The way Goldies work is that when they have such a big piece of research they make a big splash with it – as you would when you have put so much work and effort into a piece so it’s reasonable to assume that the 53 page report that they issued and which hit offshore investors inboxes over the past 24 hours could have in some way contributed to the lack of follow through in the Aussie’s rally and the fall in the ASX overnight.

So I have one trade right and one trade wrong.

I let my Aussie trade run overnight and I’m now about 26 points out of the money. It’s a bad trade because I wasn’t paying attention yesterday and I should have cut it at the Sydney close given the time frame of the trade.

Proof that you shouldn’t put short term intraday trades on when you are doing other things – like working on an unrelated tender.

Anyway the Aussie should rally back toward 50/60 today and then we’ll see how it looks. Longer term 88 cents will trade eventually.

My SPI 200 short is looking better however as you can see below.

5,325 seems to be the key level the SPI needs to break down through to kick on but we’ll respect the support unless or until it breaks.

In other forex pairs USDJPY is back down at 101.20 from a high of 101.71 yesterday, Euro is a bit higher at 1.3562, while GBP is back above 1.6205

On commodity markets Bitcoin has made a new all time high this morning at 945 as all the coverage and the discussion amongst central banks has elevated it to the mainstream media and as such with a limited supply and increased demand where else can it go? It’s a classic corner in the old style of 100 years ago and it will just keep rising until it stops.

Elsewhere more traditional commodities are positively boring, which could be part of Bitcoin’s attraction. Nymex Crude is down 0.4% at $93.71, gold is largely unchanged at $1,243 oz, copper is at $3.22 lb while in the Ags corn fell 1.65%, wheat dropped 0.62% but soybeans were largely unchanged.

On the data front in Australia we get construction work done after the Kiwi trade data this morning. Tonight we see consumer confidence in France UK Q3 GDP (huge) and then some big partials in the US with the release of the Chicago Fed national Index, Durable goods, jobless claims and for crude oil watches inventory data tonight will be of great interest.

Have a great day and good hunting

Greg

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