The Aussie only has Glenn Stevens between it and a 2 month high

March 7, 2014

I got hosed last night by Mario Draghi – I simply did not see him being so bull headedly sanguine about the Eurozone’s economic and inflation outlook so I took a bath on EURJPY. It was Draghi’s rebuttal of any threat of deflation in the Eurozone has had the most impact driving the Euro sharply higher to 1.3856 which also took EuroYen all the way to 142.79. The key here was that Draghi said, “Both upside and downside risks to the outlook for price developments are seen as limited and are considered to be broadly balanced over the medium term” which means no QE as many had thought might be coming.

The Bank of England did as expected by the market leaving Sterling up on the day at 1.6743 but lagging Euro by a long way.

Ukraine continues to be interesting and the Crimean decision to call a succession vote in the next few week’s has served to escalate tensions a little with US President Obama saying this is outside international law. It is also very problematic for Governments around the world of all kinds of stripes who themselves have autonomous regions or those that would like to break away.

looking at the data overnight jobless claims dropped to 323,000 from 338,000 last week but non-farm productivity undershoot expectations decelerating 50% from last time to 1.8% while factory orders fell 0.7%. In contrast German factory orders rose 8.4% yoy from 7.5% expected.

At the close of play though the Dow is up 0.3%, the Nasdaq largely unchanged and the S&P 500 at another new closing high, up 3.6 points or 0.1% to 1877.4.

In Europe stocks were also higher with the FTSE up 0.19%, the DAX was unchanged. The CAC rose 0.59% after the French unemployment rate fell to 10.2% from 10.9% while stocks in Milan and Madrid rose 0.39% and 0.87% respectively.

Locally the ASX is set to open up 12 points with the March SPI 200 at 5453 this morning.

On global FX markets the Aussie shot higher after more good data yesterday rising 1.2% to 0.9092 from a low of 0.8970 yesterday. RBA Governor Stevens talks to Parliament this morning on the economy and he is likely to address the Aussie recent strength.

Just a few days back the RBA said that the Aussie was high by historical standards but since then it has rallied another 1.5 cents as a combination of a generally weaker US dollar and some very strong, unexpectedly so, Australian data has reinforced the notion that the Australian economy has turned the corner to more balanced growth.

But the question is what will the Governor say this morning when he addresses the Parliamentary committee on Economics. We’ll know in an hour but in acknowledging the data which Stevens must do he may undermine the message he is trying to give on the need for a lower currency.

Anyway looking at the technicals the 4 hours are a little over cooked but the weeklies say more rallies are in train.

Resistance – probably decent is between 0.91 and 0.9150.  Support 0.9000/20.

The Euro shot higher as discussed earlier and clearly the EURJPY move has dragged the USDJPY up to 103.02 this morning.

On commodity markets gold is up again and sits back above $1350 at $1351.60 for a gain on 411.50 or 0.86%. Crude rose 0.48% to $101.94 while copper rose back to $3.27 lb. The Ags had a big night again with corn ripping 2.21% higher, wheat rose 0.67% and soybeans are 1.23% higher.

Datawise the key events are th RBA Governor’s address to the Parliamentary economic committee this morning and markets will be in tenterhooks for his comments on the Aussie and the recent strong economic data. Tonight in the US non-farm payrolls are released which should be huge for traders but in the meantime we see the AiG performance of construction index in Australia, Japanese leading indicators and German wholesale prices and industrial production tonight.

Have a great day and good hunting

Greg

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