Vantage FX | Worries about Septaper dominate trade | 30 July 2013

July 30, 2013

Recap

  • It was a night of concerns about the Fed, growth and Septaper and it seems if I draw a line through a number of markets they suggest it was a bit of a “risk off”  night as well.
  • On the Global FX scene, the Aussie Dollar is the worst performer at 0.9205 this morning (-0.6%) and looking a bit wobbly on the hourly and 4 hour charts. The Euro rejected 1.33 again overnight (1.3295 high) and sits down a smidge at 1.3263, GBP is essentially unchanged (1.5338) but it is the Yen which is suggestive that this is a bit of a safety move as it sits at 97.94 when it should probably be higher based on techs and retail sales yesterday.
  • Stocks were on the back foot again last night in the US as the market gets a little wary of the threat of Septaper later this week and pending home sales pulled back less than forecast (-0.4% v -1% expected) suggesting perhaps the Taper is coming. At the close the Dow (-0.24% @15,522), the Nasdaq (-0.39% @3,599) and the S&P 500 (-0.39% @1,685) were all lower. European stocks, with exception of Milan (-0.89%) performed better though with the FTSE (+0.08%), DAX (+0.17%) and CAC (+0.00%) either flat or ekeing out small gains even though some big M&A activity might have otherwise helped – on another day.
  • In other data retail trade in Japan yesterday for Jun was a little disappointing coming in at -0.2%, but Italian business confidence improved (91.7 v 90.8 expected) and the Dallas Fed unexpectedly fell (4.4 v 7.3 expected and 6.5 last)
  • On Commodity markets gold is at $1324 oz (-0.55%) Nymex Crude is $104.51 (-0.18%), Corn fell another 0.56% but Soybeans bucked the recent weakness printing higher (1.32%) for what seems like the first time in ages.

On the data front today we have New Zealand Building Permits and then South Korean Current Account balance and Industrial and Service sector output. I’ll be watching both these numbers very closely. Then in Japan its IP as well as unemployment and household spending before Building permits in Australia. In Europe we see Spanish GDP, Portuguese Business Confidence, EU Consumer confidence, Business CLimate, Economic and Service Sentiment before German price data. In the US it’s the Redbook, Case Shiller House prices and Consumer Confidence.

There are so many levels close today on the charts in a number of markets – I’ll have a look below and I’ll also have a look at David Rosenberg’s view of the US economy and consumers and what it means for non-farm payrolls this week and the US dollar

Of particular note to the Australian dollar and Australian interest rate traders will be RBA Governor Glenn Stevens annual speech to the Anika foundation. It is always one of his best speeches of the year when you look back on them, normally important structurally so I’m looking forward to it.

There are many great charities out there but is there anything more important than young people and young Australians? The Anika Foundation is dedicated to supporting research into adolescent depression and suicide – if you’d like to learn more here is the link.

In a huge week – levels abound

Where to start? So many markets, so many short term levels just check out the chart below which is my intraday screen on my Vantage FX MT4 platform

You’ll need to click on it to blow it up but what you see in these hourly and 4 hourly charts if you bring it all together, is opportunity.

  • The AUDUSD has support at 0.9178 then 66 if that breaks it gets ugly (I’m short)
  • Euro can drift back toward 1.3218 or up to that 1.3295 region again for a range play.
  • GBP is trying to break lower.
  • USDJPY has 12 hours to turn higher and break 98.18 or it might not (I’m long)
  • Gold needs to hold $1321 or it won’t
  • And so it goes

Plenty of catalysts for trades on a busy day a and busy week but as ever risk management people risk management.

Can the US consumer pick up the Baton

This is clearly a huge weak and while I reckon the Taper is coming, Bernanke to finish what he started, the jury is still out a little about whether or not the US economy is really at an escape velocity from its economic malaise which will allow it to continue in the years ahead.

In many ways it is all about the employment picture feeding back into consumer sentiment, incomes and spending with the question to be answered as to whether or not the US consumer is ready to take up the cudgels.

This morning I saw a really good piece on Business Insider (here) which covered off on David Rosenberg of Glushkin Sheff’s view of where the US is at. As you can see in the chart above Rosenberg reckons that the Government, Manufacturing and Housing have or are doing their part and asks the question whether US consumers can do their bit saying if they don’t the economy will stagnate in the next 12 months. The good news though is that Rosenberg says,

we are settling into payroll numbers of around +200K monthly, wages are beginning to show a pulse and consumer confidence has hit a cycle high.

Friday’s data is really important but if Rosenberg is right then it is Septaper and a stronger US dollar.

Have a great day and good luck

Greg

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