A relatively quiet night overnight on the data front; UK CPI under expectations but still healthy at 2.9%, whilst US CPI came in on the money at 0.2%. This is clearly a lot weaker than the UK but also under what Ben would consider healthy and therefore all the more reason to keep up the printing. Most of the moves seemed stemmed from a weaker US dollar and US stocks reporting their earnings.
The S&P pulled back from the highs to print a modest loss on the day. The interesting thing is that it has done it near the highs in May and therefore starting to form a double top just under 1700. European stocks also had minor red days, whilst Asia had minor green days yesterday. The seller sentiment in stocks, whilst not strong, will continue into the Asian session today.
Commodities: Oil rolled over but is still well over $100/barrel and near 2012 highs of $110, currently trading at $105 area. We are getting close to the cyclone season in the Mexican gulf which seasonally creates some volatility for oil.
Copper was up a healthy 1% and seems to have formed a base of $3.05, currently at 3.17. The day chart looks uncannily like the AUDUSD chart. Copper being kind of a bellwether for the Aussie this makes sense. Copper, being the most heavily used industrial metal is seen as a proxy for the Aussie’s commodity currency. Other industrial metals had an ordinary night though. Precious metals meanwhile had modest gains.
Agricultural prices all had healthy gains with biggest moves in the “softs” and “grains”. Remember peoples, everyone needs to eat and mankind is doing a great job of destroying the food bowls around the world.
So, with Ben testifying tonight the US$ got a bit weaker as traders prepared for any revelations in the two day sitting. Being official, therefore liable, he cannot be too vague. The testimony is a prepared speech by him on the Monetary Policy followed by question time. Again the question time will be the most revealing. I don’t foresee any major volatility out of this session. However be prepared because he could give hints as to the Fed’s view of the US economy and therefore an end date for QE. Unfortunately we are currently living in a time of instant news and markets trading from headlines. Welcome to the new world.
DATA HIGHLIGHTS AHEAD (times are in AEST) – 630pm UK Claimant Change & Asset Purchase Votes & Bank Rate Votes. 1030pm US Building permits. 12am UNCLE HELICOPTER BEN BERNANKE TESTIFIES day 1. 12am CANADIAN INTEREST RATES & STATEMENT. 1230am BOC MONETARY POLICY REPORT. 115am BOC Press Conference.
AUDUSD –The Aussie did touch 90 before the 50ema as I thought, but had a healthy day yesterday thanks to the US$ weakness. Has been chopping about b/w 93 and 90 for a month now providing little attraction to trend traders like myself. I still see little reason to get into the Aussie on any time frame.
EURUSD –Similarly to the Aussie, I see no reason to get into the euro. The 200ema is as flat as the Hay plains I grew up on and the 50 & 20ema’s have been oscillating over/under it so much it’s starting to look like some seismic wave experiment.
GBPUSD –Is still well under it’s ema’s and stopped overnight on the 38.2% retracement from the June highs. I am still bullish up to £1.63 and have a position since buying in at 1.4970 on 9th July. I see the double bottom (March & July lows) as key support for a larger move to upper side of the long term range of the cable.
NZDUSD – Choppy like the Aussie and like the Aussie I would be looking to sell any rallies.
USDCAD –This had a great setup yesterday so I took the trade at what turned out to be the high (almost) as the Loonie couldn’t crack through 1.0450 as US dollar weakness. Being an engulfing bar (a higher high and lower low) I am not going to close the trade just yet. My stop is hidden behind protection of the recent swing low and until I see further selling I will leave the stop there. One day of selling (yesterday) does not make a trend, so no need to panic yet.
USDJPY – Was also subjected to the US weakness and had pretty much a nothing day with being caught b/w the 50ema and the long term fib at 99.80.
GOLD – The range I called on Friday of 1300-1270 was pretty good uh. Has been held under the 1300 for several days now and I cannot see any reason to want to play in this market. Would still look for shorting opportunities.
David Long/ Proprietary Trading Manager