Vantage FX | USD weakens a little as stocks rally | 9 July 2013

July 9, 2013

Recap

The afterglow of the non-farm payrolls Friday resonated around markets overnight with Europe and the US higher even though Asia was under pressure. Accompanying this was a weaker US dollar which allowed Euro, GBP and AUD a little respite and allowed gold to rally back away from $1200 once again.

Datawise in Germany Exports were down 2.4% while imports were up 1.7% – some bad and some maybe good but negative for the GDP growth input with industrial production also down. Both numbers were weaker than expected.

USD rally takes a breather

As you can see in the German data above it doesn’t make too much sense that the USD lost a little ground against the Euro but in truth the sell off to 1.28 low yesterday from the high above 1.34 has been fairly relentless since mid June and some sort of retracement before it heads lower is always expected. And as you can see in the chart below the support was right on an old trendline and then last nights high around 1.2882 was equally and old trendline.

Based on my usual trading system if Euro can get through 1.2890 and 1.2915 it might run toward 1.30 but resistance is expected to be fairly solid around that level.

Sterling was also a little higher and if it can take out last nights high at 1.4966 it could run to 1.5060 but just like Euro resistance overhead looks solid for the moment. The Yen just can’t get back above the uptrend line (or should I say USDJPY can’t) which suggests that the overall retracement of USDJPY may not yet be over. Personally I think USDJPY is going to settle into a wide range for a while and we are just looking for the top again – probably 94-104 is the range I’m expecting.

Closer to home the Aussie Dollar also caught a lift with the US dollar’s weakness rallying to 0.9145 which is right on a little hourly resistance line. I went short this morning at 42 with a stop at 56 looking for a selloff back toward 91.00/05 at some stage today. On a slightly longer daily time frame overall though if the Aussie can have another positive day to build on the gains from Friday’s close tonight then a bigger rally might be in the offing perhaps even targeting 0.9227 and then 0.9300. But remember the NAB business Survey is out today and already yesterday’s ANZ job ads told us what we already new about the slowing economy so I am still overall looking for lower levels in time.

Stocks bounce as earnings season kicks off

I noted yesterday we’d get to test the overhead resistance this week in US stocks and it’s one down and one to go in the S&P 500 as you can see in the chartt below. Overall the Dow finished up 0.59%, teh Nasdaq rose 0.16% and the S&P 500 was 0.50% higher. Alcoa issued its earnings report after the bell and managed to beat downgraded expectations by a penny. This is really important because the negative guidance has been so intense it may not actually take to many, or too much, positive surprise to kick things higher in the very short term. This is a critical period for the market.

1638.42 is the trendline resistance and level to watch tonight and in coming days.

In Europe it was a good day as Friday’s weakness reversed in light of the US strength Friday and then again overnight. The FTSE closed up 1.17%, DAX 2.09%, the CAC was up 1.87% while stocks in Madrid and Milan rose 1.902% and 1.71% respectively.

Commodities 

Gold made a low of $1207 yesterday before USD weakness saw some buyers in the market pushing the yellow metal back up $30 oz. Gold range over the last few weeks has been $1178-$1268 oz and while it has been very oversold on both daily and weekly charts support at $1150 and $1180 needs to hold otherwise Gold will simply get more oversold. But the clear support zone does give levels to trade off.

Crude was barely unchanged at $103 Bbl, silver was up 1.60%, Gold 1.81%, Dr Copper up 1.02% to $3.11 lb and Corn, Wheat and Soybeans rose 1.02%, 0.61% and 1.34% respectively.

Data

Today sees the release of Electronic retail sales in New Zealand, Money Supply and machine tool orders in Japan, CPI in China and the most important data outturn in Australi in the NAB Business Survey. In the UK we see industrial production data and the trade balance as well as the NFIB business optimism index.

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