US dollar pressures Aussie and Euro lower still

October 30, 2013

Fresh highs overnight in the US with stocks stronger across the board.

At the close the Dow up 111 points or 0.71%, the Nasdaq is up 0.30% and the S&P 500 is up 10 points to 1772 closing on its high for a gain of 0.56%.

It is truly hard to fathom the move in anything other than a QE-non taper sense at the moment. But then again the data overnight wasn’t too bad with the Case Shiller Index was a bit stronger than expected printing a 12.8% year on year gain while retail sales printed as expected once autos were removed with a rise of 0.4%. Unsurprisingly though consumer confidence fell to 71.2 from 80 last.

Specifically there was plenty of individual news  with IBM announcing a $15 billion buyback, Dell now private once more and BP getting a few traders excited over in the UK. Apple was under a little pressure though and Nokia Phone’s earnings were lower than expected – but hey, they are part of Microsoft now so it’s not too much of a worry.

Across the Atlantic the FTSE was 0.73% higher, the DAX is getting comfortable above 9000 with a rise of 0.48% and the CAC was 0.62%. In Milan stocks were 2.27% higher while the IBEX in Spain rose 1.31%.

On the Sydney futures exchange it has been another solid night for the SPI 200 contract up 21 points to 5429 bid after yesterday’s weakness on the local market. Looking at the technicals the SPI 200 is near but not through resistance.

With the move in the S&P 500 last night and as it bangs up against its own resistance and with the SPI 200 contract coming back strongly in overnight trade it is somewhat pre-emptive however it continues to look like the Australian market is going to struggle at present to get much through current levels.

You can see the resistance – so while I’m not bearish per se I would have cover on board.

On Forex markets it was a night of general US dollar strength but that’s not to under sell Glenn Stevens verbal intervention in the Aussie dollar yesterday morning which hit the mark with the Aussie falling to a low of 0.9469 roughly 110 points below the high yesterday before the RBA Governor gave his emphatic message to the bulls of a “material” shift lower eventually. 94 cents seems more likely than not now.

Yesterday we suggested that 0.9476 was on the cards which we saw overnight with a low of 0.9469 but while the Aussie has pulled up roughly at our slow moving average as is usual it looks like it is still headed lower.

The combination of indicators that are my system suggest a pullback now to the start of this recent rally if this 0.9465/75 zone gives way because it is also the 61.8% retracement of that move. That level is below 93 cents but for now we’ll target 94 and then see where it goes.

Elsewhere the Euro (1.3742) slipped back a little, GBP likewise and its back near 1.60 trading at 1.6040 this morning, USDJPY was higher also reflecting the overall US dollar stronger tone – USDJPY sits at 98.16 this morning.

Looking technically the Euro also rolling over and not to talk ourselves up because we have been doing this long enough to know today’s rooster is tomorrow’s feather duster – but Euro is moving lower as expected.

Target for the moment is 1.3679 and then we’ll see where Euro goes.

On commodity markets it was fairly quiet day on day with Nymex crude down 0.42% at $98.27 Bbl, Gold is still in the $1350’s closing at $1359 oz, Copper closed at $3.28 lb, and even the Ags were quiet. Bitcoin however continues to rally and it is back up at $213 this morning.

Looking at the data over the next 24 hours the Fed’s FOMC decision is the key tomorrow morning but before that we see Korean and Japanese industrial output, German unemployment, EU business confidence and climate before ADP employment in the US along with US CPI.

Have a great day and good hunting

Greg

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