What a night of crisscrossing headlines and action. BOE and ECB did nothing, which is notable for the ECB was viewed as adding stimulus but didn’t. US trade gap shrunk but the Canadians widened. US also had fewer initial people queuing for handouts than forecasted, the first drop in weeks.
The data provided some interesting and conflicting moves. With the US data one would think that the greenback would strengthen but it has done little if not weakened as all its peers gained apart from the Yen. That said, the US earnings season is going gang busters, which is understandable in the conditions they have, it is what we will have happen later in the year. High productivity with rising inflation and economic growth, coupled with stagnant wages and uncertain employment conditions allow companies to reap large returns. This is giving the stock market a huge boost (+1% again today) so funds are flowing out of cash and safe havens and back into riskier assets. Hence a weakening of the greenback, yen, gold and bonds overnight. Oil was up again as was copper, +1%.
The Euro jumped and jumped further than the pound as the market was expecting Draghi to add more stimulus whilst they did not expect Carney to move. The Eurodollar ran 140pips or so. The Cable did rise 50 pips or so but this was more US$ weakness than anything else. Carney does not want to end the stimulus package yet but it is getting close, his concern lies in European weakness.
I still see the greenback gaining in strength overall but it will be a bumpy ride. As Aunty Janet winds back the US Fed’s Quantitative Easing the dollar will continue to rise and funds will move into the US to participate in that growth and yield. However as the Poms and Europe also gain economic traction and reduce their easing too (known as Asset Purchasing Program and LTRO respectively) funds will be shifted around in what I expect to be a volatile year with very few long term trends. Cable strength and Yen weakness being the exceptions.
DATA HIGHLIGHTS TODAY – AU RBA Statement. UK Manufacturing production. Canadian Unemployment. US Unemployment (Non-Farm Payrolls).
AUDUSD – Held above support and even moved above the 50ema with the trade balance news yesterday and $ weakness. Waiting for a cycle above the ema and if the re-test gives buying signals then we will go with it. Momentum is getting up there though so I am not convinced it is worthy to be in the 90¢ area. There is much yet to do by the government.
EURUSD – A large engulfing bar that tagged the 50ema. Still not ready to go into this but we are looking at cycles of LHLL’s since Dec.
GBPUSD – A little ring low over the key £1.63 level. A higher high today would confirm it as a swing low. Will be looking to get long with that.
NZDUSD – A HHHL over the 50ema and we would well be back in the range now, 82-84.
USDCAD – A wild night on the Loonie with the headlines but looking like a HHHL and yet a seller bar. Has been going sideways for 4 days now. If they’d had some decent headlines this would be under $1.10 but nope, couldn’t do it.
USDJPY – Took the trade long on this as it made a higher high in the wee hours of this morning.
GOLD – 2 consecutive test bars of the resistance at 1265 and the 50ema is now horizontal which gives no indication of trend. I would still prefer to be short and look for such opportunities.
BITCOIN (from Mt.Gox exchange) – Got pummelled $100 as an alternative “safe haven” asset.