A raft of manufacturing PMI figures yesterday showed us that apart from some sections of Europe, the global scene is growing. From China to USA all were over the 50 line between contraction and expansion. So this saw a rise in investor confidence which saw stock markets rally up to over 1% across the board, the only red being at home here down almost 2%.
VIX (the volatility index and a gauge on investors insuring against a plunge in stocks) has pulled back from recent highs as stocks bounce (remember, this is not a dead cat bounce). The Baltic Dry Index is peaking but indicates a good healthy global economy. US dollar is head-butting recent resistance at 83.50 and the CRB looks to have bottomed. So, all this indicates to me that the global economy and investment community have calmed down and looking to get on with things, bullish mode is back on, risk is off.
Today at 230pm AEST we have the RBA monetary policy statement. I have said it before and will again, Monetary Policy (and interest rate announcements) are the biggest news item each month. Glenn “6-months-behind-the-curve” Stevens is not expected to lower rates today, with the savvy Futures market indicating a 81% chance of NO CHANGE.
If he commits employment suicide and lowers rates the Aussie will make new recent lows as the market is not expecting such a bearish outcome when the global economy is bullish. If there is no change I expect we will be testing 93¢ today. IF they raise rates (highly unlikely) then we would be at 95 or 96 very quickly.
My tip is no change and we will be testing resistance of 94 cents this week, the 50ema late this week or next week.
DATA HIGHLIGHTS AHEAD (times are in AEST) – 11am China Manufacturing PMI. 630pm UK Manufacturing PMI. 12am US Manufacturing PMI
AUDUSD –Has posted what some like to call “train tracks”, which combined is a low test bar and bullish signal. With RSI divergence just visible, a HH/HL today would see an entry signal to get long.
EURUSD –A very bullish bar, closing 3.8 pips (AxiTrader pricing) or 6% off the high. Also closed above support level and 200ema. Still, it is an inside bar therefore a HH/HL today would be the signal to get into a long trade.
GBPUSD –An inside high test bar does not tell me anything about the sentiment of the market, therefore must use the previous sentiment which is bearish. Only thing is that it held above 1.52.
NZDUSD – Really looks sideways but has just managed a HH/HL. No indication of a signal yet.
USDCAD –Is trying to decide what to do, but I would like to see a pull back to 1.04 and trend line to get another long trade on.
USDJPY – Tested 100 overnight and ideally I little pull back and swing low would be the perfect efficient entry, but with 4 days of HH/HL after low test we may not get that. If it breaks 100 we will have to trade it on the shorter time frames.
GOLD – It seems to have turned the corner but like a Mallee bull I wouldn’t be turning my back on it. Still, I got long yesterday on the hourly test of the 50ema at 0100 GMT, to trade it back up to 1320 resistance.
David Long/ Proprietary Trading Manage