Vantage FX | Worries surface, stocks and USDYEN off | 27th November 2012

November 27, 2012

Europe and US markets weren’t so keen on buying stocks in the manner that they had last week as risk appetite went off a little overnight. The Aussie Dollar held in reasonably well although it is down and the USD benefited particularly against the Yen which continues to consolidate from recent highs.

It’s hard to know what’s different on a Monday that isn’t apparent on a Friday because nothing really happened over the weekend to cause stocks and risk to go off. The answer is that nothing really fresh happened but traders just wanted to focus on the negatives over the past 24 hours. Feeding that negativity was the release overnight of the German Gfk Consumer confidence survey which was weaker than expected at 5.9 from 6.1 last and 6.2 expected.  Of course we are also a few days closer to the Fiscal Cliff, and another day without a resolution to the Greek issue if you add the  Catalan election which seems to imply some sort of move toward autonomy plus weaker than expected Chicago Fed (-0.56 v 0.00 last) and Dallas Fed indices (-2.8 v 1.8 last) and there is probably enough marginal negatives to combine to a dour day’s trade.

Equally however it could simply be that as we noted yesterday given the thinness and low volume of last week’s stock rally markets will really need to see confirmation to kick higher. So when there were no positive catalysts over the weekend or yesterday the short term focus turned negative – so after last night’s price action as we also noted yesterday we remain wary.

The big news overnight was the announcement that the Bank of Canada Governor Mark Carney was to succeed Mervyn King as the Governor of the Bank of England. Global FX traders got a bit excited and took GBPCAD sharply higher which also put upward pressure on the USDCAD rate.

As you can see in this chart USDCAD is right on trendline support from the low of early September. This is a good catalyst for trading with the line looking solid for now but a break looking also likely to prove decisive for a change in trend.

Whatever you view on USDCAD there looks likely to be some action here soon.

Stocks

So with negativity to the fore European Bourses were lower across all the markets I follow. The FTSE fell 0.56%, the DAX dropped 0.23% and the CAC was 0.79% lower. Everything I read is about the Cliff and Greece.

In the US with 40 minutes before the close the S&P 500 has clawed its way back over 1400 and sits down 5.79 points or 0.41% at 1403.36. The Dow is 0.50% lower but the NASDAQ is up on 0.11%

In Asia yesterday most markets had a better day as they caught up with the strong moves in Europe and the US from Friday. Monday Asian trade can often be fraught with getting the wrong signal or message from the Friday close and so it seems was the case yesterday. The Nikkei was up 0.24%, the ASX All Ords rose 0.27%, the Straits Times was 0.51% and Taiwan surged 1.11%. Both Hong Kong and Shanghai were lower however dropping 0.24% and 0.49% respectively.

FX Markets

Like stocks Global FX traders decided it was a good night to take some money from the table as the strength in the Euro, Euro Yen, Sterling  and AUD  were all sapped in different degrees. It was hardly a big or exciting 24 hours by any stretch of the imagination with EUR only trading a 1.2942-1.2984 range and it is right in the middle as I write. Equally the AUD only traded 1.0432-1.0467 to be essentially unchanged on the past 24 hours.

USDJPY however looks like it is going to continue its pullback – if you are into Swing Lows (no not the Sweet Chariot song) and Swing Highs then you can see in the chart above that USDJPY certainly has a tradable peak against which positions can be placed. I have gone a little early on this one based on my usual indicators – my MACD indicator is yet to confirm a pullback is due, the moving averages that I use still signal and uptrend and the +DMI at +26 is not extreme – so I am out on a limb but with a clear stop level above the recent high.

For the Aussie traders the outlook remains clouded while below 1.0480 which was the recent high but if it can get through here then it can run to the important trendline resistance at 1.0545/50.

Commodities

Crude fell a little as the US dollar did a little better dropping 0.60% to $87.75 Bbl, gold was essentially unchanged at $1750 oz and silver closed at $34.00 oz. Yesterday we noted that Silver had big trendline resistance at $34.21 and this was the high overnight as Silver tried but failed to push through this important level overnight. As we always say respect the trendlines unless or until they break but a move through here plus say 8-10 cents oz would open the way to a move toward the recent range top at $35.35.

Otherwise it was a fairly quiet night on commodity markets except for Coffee which dropped 6.96%.

Datawise In New Zealand today we the trade data which will be interesting as well as the RBNZ inflation expectations. tonight we have German import price index and UK GDP. In the US its Durable goods and Case Shiller house prices.

Thoughts, comments, queries together with frank and fearless feedback all welcome. I’m happy to answer questions or comments on the comment stream wherever I can

NB: Please note all references to rates above are approximate and should not be used for trade reference.

Catch me on Twitter @gregorymckenna or @FX_Global

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