Macro Morning: Chinese Data v the fiscal cliff

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So is it going to be the fiscal cliff or improving Chinese data or Europe that dominates trade this week? Or could it simply be the poor and deteriorating price action in the US stock market that will dominate trade?

University of Michigan Consumer Sentiment data on Friday was a welcome bright spot after the week we had and showed that, some how, Americans felt more optimistic about their prospects of employment and the overall economic outlook. But concerns over the fiscal cliff knocked stocks and other risk assets off their highs on Friday night after a speech by President Obama reinforced the issues.

Chinese data over the weekend was also encouraging and suggests that the much anticipated soft landing is being pulled off by authorities in the world’s second largest economy. The trade surplus released showed exports grew 11.6% yoy in October up from 9% at the last print. Imports are only growing at at 2.4% pace down from the 3.1% yoy pace previous. This data is good news and combined with the CPI data we got last week suggests that for the moment the Chinese economy is in a fairly good place and growth of around the 7.5% target for the years is now expected to be achieved.

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At close of play Friday European stocks were mixed with the FTSE off 0.11%, the DAX off 0.58% while the CAC rose 0.47%. Madrid was up 0.08%. In the US the early rally in the S&P 500 to 1391 petered out during/after the Obama speech and the obvious argument coming over the fiscal cliff. On the day the SPX rose 2.34 points or 0.17% to 1380. The Dow was up just 0.03% at the close of Friday while the NASDAQ rose 0.32%.

Crude oil futures had another positive session rising 1.27% to $86.17 BBl, with gold up $5 oz. or 0.29% to $1731. Silver continued to outpace the yellow metal rising 1.11% to $32.66 oz. Copper was lower by 0.61% but my sense is it might do better today with the Chinese data and the Ags were all lower with soybeans in particular getting poll-axed by the boost in the harvest forecasts which coincided with a break of the bottom of the recent range. At the close of play soybeans were 3.15% lower and looking weak. Corn was down 0.34% and wheat off 1.77%.

On global FX markets the US dollar is doing better against the euro whose sell off looks to be accelerating but highlighting the uncertainty in the market the Yen continues to outpoint the USD and most other currencies for that matter. The AUD continues to do well given no credible alternatives for placing funds around the globe and the Chinese data and problems of the fiscal cliff and Europe simply reinforce the AUD’s status as the least ugly.

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Lets have a look at some Meta 4 charts from my AVATrade platform.

EUR/USD: EUR as you can see below is slipping lower and 2 of my systems are now short (different parameters). Support is at 1.2600 and then below 1.25 at 1.2472 which is the 61.8% retracement of the recent rally. We could see a bounce at some stage but the overall trend looks to be still pointed lower:

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AUD/USD:  AUD continues to stand out head and shoulders above the crowd making a low of 1.0358 which was just above my target of 1.0350. As you can see above it is a messy, trendless market for the AUD at the moment and it looks to me that only a move below the 1.0328/38 region would open up further downside as this is a confluence of a number of technical supports:

Data: The market is going to ebb and flow I think with the expectations and movements in view about the fiscal cliff and any resolution or not. But on the data today we have the release of home loan data in Australia and GDP data from Japan. In France it is Armistice Day, in the US Veteran’s day so things might be a little slow over the next 24 hours.

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Here is how the markets looked Saturday morning.

Twitter: Greg McKenna.

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