US dollar and Twitter tank – Can Yellen rescue the dollar tonight?

May 7, 2014

Wow – what a move in the Aussie overnight.

After making a high of 0.9315 after the RBA decision the Aussie was chased back to the 0.9275ish region but then rocketed to 0.9368 high overnight on a really weak US dollar as fundamentals get thrown out the window and traders focus on the fact that the US 10 year is nearing the low for the year.

Indeed it was a night of absolute carnage for any US dollar bulls left out there. BK Asset management’s Cathy Lein wrote this morning that “The slide in Treasury yields drove the trade weighted dollar index to its lowest level in 6 months…Investors have been selling dollars aggressively over the past month despite better than expected economic data.”

That’s the conundrum and it will be costing a lot of traders a lot of money. Janet Yellen speaks tonight and the last remaining bulls will be waiting to see if she says anything, just anything, they can hang their hats on.

Anyway on the Aussie the little downtrend has been broken and the support from this years uptrend has simultaneously held which has to be a bullish signal.

Having said that though the overall moves looks a little over done on the hourlies this morning with support at 0.9337 already tested this mrning and if it breaks next support is 0.9315/20.

Turning overseas the big story is Twitter and its 18%  fall was a result of the end to the lock up of stock after the first 6 months of trade. Yelp also fell heavily and a general weakness in the tech heavy Nasdq ensued and it closed down 1.38% at 4,081. Elsewhere the Dow fell 0.78% to 16,401 while the S&P 500 dropped 17 points or 0.88% to 1,868.

The result of course is a weaker night’s trade on the ASX futures market with the June SPI 200 contract falling 25 points to 5,445.

In Europe Ukraine tensions and the US sell off weighed dragging shares down across the board except in Spain which has been very quite for the last few trading days. At the close the FTSE fell 0.34% to 6,799, the DAX dropped 0.65% and the Cac lost 0.78% to 4,428. In Milan the FTSE MIB fell 0.55%.

So on FX markets this morning the Aussie dollar is sharply higher at 0.9350, Euro sits atop 1.39 at 1.3927, USDJPY is well under 102 at 101.60 and USDGBP – the Pound – traded at its highest level since 2009 and sits at 1.6973 this morning.

On commodity markets there wasn’t much action in either gold or oil which sit at $1,308.40 and $99.88 respectively. Copper is unchanged at $3.07 lb while corn and wheat ripped higher once again up 1.94% and 1.46% respectively. Soybeans fell 0.54%.

On the data front the retail sales data is due out at 11.30 this morning after the AiG Performance of Construction index at 9.30am. In China we will see the releases of the HSBC Services PMI with a similar index for Hong Kong before we head to Germany this evening for factory orders. Key to the US will be a speech by Fed Chair Janet Yellen.

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