A day when fear or caution won the day as traders found it difficult to push prices higher. Stocks were lower and the USDJPY continued its recent reversal. The Aussie is essentially becalmed but wanting it seems to break higher at some point.
It’s hard to know what’s different on a Monday that isn’t apparent on a Friday because nothing really happened over the weekend to cause stocks and risk to go off. The answer is that nothing really fresh happened but traders just wanted to focus on the negatives over the past 24 hours. Feeding that negativity was the release overnight of the German Gfk Consumer confidence survey which was weaker than expected at 5.9 from 6.1 last and 6.2 expected. We are also a few days closer to the fiscal cliff, and another day without a resolution to the Greek issue if you add the Catalan election which seems to imply some sort of move toward autonomy plus weaker than expected Chicago Fed (-0.56 v 0.00 last) and Dallas Fed indices (-2.8 v 1.8 last) and there is probably enough marginal negatives to combine to a dour day’s trade.
Equally it could simply be that given the thinness and low volume of last week’s stock rally, markets will really need to see confirmation to kick higher. So when there were no positive catalysts over the weekend or yesterday the short term focus turned negative.
The big news overnight was the announcement that the Bank of Canada Governor Mark Carney was to succeed Mervyn King as the Governor of the Bank of England. Global FX traders got a bit excited and took GBPCAD sharply higher which also put upward pressure on the USDCAD rate. As you can see in this chart USDCAD is right on trendline support from the low of early September. This is a good catalyst for trading with the line looking solid for now but a break looking also likely to prove decisive for a change in trend.
Whatever your view on USDCAD there looks likely to be some action here soon.
So with negativity to the fore European bourses were lower across all the markets. The FTSE fell 0.56%, the DAX dropped 0.23% and the CAC was 0.79% lower. Everything I read is about the Cliff and Greece.
In the US, the S&P 500 clawed its way back to 5 plus points down. The Dow is down half a percent the NASDAQ up slightly.
Global FX traders also decided it was a good night to take some money from the table as the strength in the EUR, EUR/YEN, GBP and AUD were all sapped in different degrees. USDJPY looks like it is going to continue its pullback – if you are into swing lows and swing highs then you can see in the chart above that USDJPY certainly has a tradable peak against which positions can be placed.
Crude fell a little as the US dollar did a little better dropping 0.60% to $87.75 bbl, gold was essentially unchanged at $1750 oz and silver closed at $34.00 oz. Yesterday we noted that silver had big trend line resistance at $34.21 and this was the high overnight as silver tried but failed to push through. As we always say, respect the trend lines unless or until they break but a move through here plus say 8-10 cents oz would open the way to a move toward the recent range top at $35.35.
Otherwise it was a fairly quiet night on commodity markets except for coffee which dropped 6.96%.
Lets have a look at some Meta 4 charts from my AVATrade platform.
EUR/USD: Quiet night’s trade with EUR still constrained below the trend line we pointed out yesterday. If this trend line gives way euro can run to 1.3090/95.:
AUD/USD: The outlook remains clouded while below 1.0480 which was the recent high but if it can get through here then it can run to the important trend line resistance at 1.0545/50:
Data: In New Zealand today the trade data which will be interesting as well as the RBNZ inflation expectations. Tonight we have German import price index and UK GDP. In the US it’s durable goods and Case Shiller house prices.
Here is how the markets looked at 7.30 this morning.
Twitter: Greg McKenna.
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