Whatever the excuse the US dollar selloff was a technical move that was due

August 4, 2014

I’m still short Euro on a longer run time frame but as the day went on Friday it became clear to me that the Euro was likely to rally and as a consequence I low balled my non-farm payroll bet below 200,000.

While it is below 1.3464 then the big move lower is still intact but for the moment my system suggests more Euro strength in the days before the ECB meeting later this week.

Anyway looking at the data  on Friday US non-farm payrolls appeared to disappoint but the 209,000 rise in July with 15,000 upward revisions to the two previous months gave a 277,000 pace of growth in Q2 2014 from 189,000 in Q1 – that’s solid.

Indeed even though the 209,000 was well down on the 298,000 in June and below the 233,000 expected every sector showed positive gains. Solid.

At the close the Dow was down 70 points or 0.42% at 16,493 but 60 points off the low. The Nasdaq fell 0.38% to 4,353 and the S&P 500 fell 6 points to 1,1925 for a loss of 0.29%. At one stage however the S&P was a further 9 points lower at 1,916 before recovering.

In Europe weaker than expected Markit Manufacturing PMI’s, particularly Germany which printed 52.4 versus 52.9 expected, knocked stocks which fell heavily. The FTSE was down 0.76% at 6,679, the DAX fell 2.10% to 9,210 and the CAC dropped 1.02%. Stocks in Milan fell by 1.02% also while in Madrid stocks were 1.80% lower.

The impact of the moves in the US has knocked local futures trade with the SPI 200 September contract down 26 points to 5,472. This on top of the 1.4% loss on the physical Friday is not a good sign for a week packed with local data.

Asian stocks were lower Friday and are likely to be pressured again today. The Nikkei closed off 0.63% to 15,523, the Hang Seng lost 0.91% to 24,532 and the Shanghai exchange lost 0.75%. Data is quiet in Asia today.

In FX markets the weaker than expected non-farms combined with a technical outlook suggesting a bounce in the Euro and Aussie dollar to drive the US dollar lower. Euro had a strong bounce and sits at 1.3424 this morning, the Aussie is back above 93 cents at 0.9307 and traders will be eyeing retail sales today at 11.30 (even though it’s a bank holiday). Sterling couldn’t raise its head and is sitting at 1.6825 while the USDJPY is back at 102.51.

On commodity markets September iron ore fell $1 to $94.50 tonne while Newcastle Coal for the same delivery rose 30 cents to $69.30 tonne.

Nymex August crude continued to tank falling to $97.62 Bbl, gold is bouncing up and down at $1,293 while silver is at $20.30 oz. Copper closed at $3.21 lb while the Ags were mixed with corn down 1.26%, soybeans off 0.78% while wheat rose 0.75%.

On the data front today retail sales in Australia will be the local focus but the TD inflation number and ANZ job ads are very important in giving a picture of where the economy is at present. PPI in Europe will be interesting in the run up to this week’s ECB meeting and in the US the ISM New York index is out.

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