The S&P rallies strongly, EuroAussie looks set to bounce

April 2, 2014

Stocks in the US and Europe were higher overnight which has given a solid lead to local markets in overnight trade and the positive tone on Wall Street will likely resonate locally with Australian stocks expected to open strongly. Overnight the June SPI 200 futures contract on the ASX is up 27 points to 5409 while the Aussie dollar is a little lower at 0.9245 which will likely help at the margin as well.

Key to the positivism was the data from the US which showed a big lift in automobile sales to an annualised 16.33 million units. On the other side of the ledger the ISM manufacturing was higher than last month at 53.7 but undershot expectations of 54. The Markit PMI for the US was also a little weaker than last month but still solid at 55.5.

I must say – and I know I sound like a sad sack but the PMI’s look poor to me – have a look though but in the end traders don’t care.

So at the close the Dow is up 0.46% to 16,533, the Nasdaq jumped 1.64% and the S&P finished at 1886 up 14 points to post a gain of 0.73% for a new high close.

The interesting thing about the chart above is the strength in the bars here over the last 3 days relative to the last time the S&P 500 got up here. It hasn’t broken yet – so this is a closing high not an all time high – but if it does stocks might go for a gallop.

Turning to Europe we see that European Markit PMI’s were roughly in line with expectations and German unemployment a little lower so there was no reason for UK and continental stocks not to follow the US market higher. At the close the FTSE 100 was up 0.83%, the DAX rose 0.5% and the CAC was up 0.81%. Stocks were a little more ebullient in Milan and Madrid rising 1.03% and 1.18% respectively.

On currency markets the RBA’s a bit too subtle attempt to weaken the Aussie dollar with the Governors statement yesterday had some marginal impact with the Aussie under-performing against the Euro, and Canadian dollar sitting at 0.9244 this morning down 0.21% but off the high of 0.9297.

Looking at Euro/Aussie it’s clear that the 200 day moving average is supporting along with the fact that it has become oversold on the daily time frames. A move to 1.5070ish looks on the cards

Euro itself is back near 1.38 this morning while the Pound is down 0.16% at 1.6632. USDJPY continues to rally up 0.47% to 103.68. On commodity markets gold’s fall continues and while it sits below $1285 the technicians are saying it looks weak. Speaking of weak Nymex crude was down 2% to $99.55 Bbl but copper was unchanged at $3.05 lb. On the Ags prices were mixed with wheat down 1.61%, while corn was 1% higher along with soybeans which rallied 1.4%.

On the data front today building permits are out before EU wide GDP tonight and the ADP employment change in the US in the run up to non-farm payrolls on Friday.

Have a great day and good hunting

Greg

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