Macro Morning: US retail sales were good

The Dow closed higher again overnight, just, for the 9th straight day posting a rise of 0.03% 14,455. A rally of this length hasn’t happened since 1996 according to news reports out of the US. The bear in me wants to say the last couple of days aren’t much of a rally anyway but that would be disengenuous because the trend is still higher based on our usual indicators even if it is like old father time and a bit long in the tooth.

The key driver, or at least the fuel for the increase at this mature stage of the rally was the retail sales data out of the US which printed stronger than expected and gave succour to those who think that the US consumer might have gone into it shell recently. Overall retail sales rose 1.1% against expectations of a 0.5% increase. Much of the rise was on the back of gas prices but if we strip out Auto’s and Gas the rise was still 0.4% against 0.2% expected.

This data had been hyped by many in the US as the most important out turn of the week and we guess it probably is insofar as it supports the notion that US growth is ok but not spectacular enough to get the Fed worried about things getting too hot too fast.

At the close of play the S&P and Nasdaq were also higher rising 0.16% and 0.08% respectively while in Europe only the DAX was able to end the day in the Black up 0.6% while the FTSE fell 0.44% and Milanese stocks were slammed down 1.74%. The CAC was 0.1% lower and Spain fell  0.4%.

On FX markets the early morning European traders took both the euro and Aussie sharply higher driving EUR up to 1.3064 and Aussie up to just below the previous days high at 1.0333 before the sellers entered the fray and smashed both back lower. It was a classic early Europe move and as transparent as they come at that time of the day. It is actually one of my favourite trades to go counter to the early morning European moves.

Anyway euro then came under heavy pressure from the better US data and fell all the way down to a low of 1.2922 before recovering into the 1.2950/70 zone this morning which had previously been support.

eur, eurusd, euro, euro (eur) price quote

First, support for the euro is now the 200 day moving average which comes in at 1.2847 and should it fall through here then its on its way to our eventual target of 1.2650ish.

The euro’s weakness also took the wind out of the pound’s rally and it retreated from a high of 1.4981 to sit at 1.4925 this morning for a gain of 0.17%. This is the first day on day gain for Sterling for more than a week now as its downtrend gets a little long in the tooth. USDJPY is largely unchanged but the low of 95.43 had us encouraged that the worm had turned for the yen and by inference the Nikkei we talked about yesterday however the return of strength to the USD saw USDJPY rally back to 96.04 this morning largely unchanged on the day.

nikkei, japanese stocks, nky

Looking at the Nikkei chart above the level we talked about yesterday as a precursor to a break down is evident and, in terms of MT4 tradeable Nikkei, served as the low over the past 24 hours. A break of this level opens up the 11,860/90 region.

Now of course none of this matters for the Aussie Dollar at the moment as it battles the US dollar and is held up by the weakness in other currencies which is feeding back into Aussie buying through the crosses.

aud, audusd, australian dollar, australian dollar price quote, audusd

As you can see in the chart above the Aussie pulled up at an old trend line yesterday. This trend line happens to go go all the way back to the low in 2009, so if the Aussie can’t get back above it it might be important to note. Also worth noting is that having not traded or closed above our slow moving average since January 22 the Aussie’s strength has so proved a one day wonder and it has slipped back below it over the past 24 hours.

What this also means for now is that the negative trend continues but it has been a fractious trading period for the Aussie and there is another catalyst today with the release of the vitally important employment figures. FXStreet says that the market is looking for a risk of 9,000 jobs and an increase in unemployment from 5.4% to 5.5%. above 20,000 or below 0 will get things going as will the composition of any change so watch out at 11.30 Sydney time today.

On commodity markets the bigger than expected build in crude stocks announced overnight knocked Nymex crude a little lower to $92.43 Bbl. Gold is down 0.2% at $1,588 and silver is really interesting on the charts as it has been trying to break back above an old trend line for a couple of weeks now to no avail. It fell 0.72% overnight to $28.87 oz. Soybeans fell 0.99% while wheat climbed 0.96% and Corn was largely unchanged .

Data

Australian unemployment data as mentioned above will be key today for Australian markets. Pan-European employment data and jobless claims tonight in the US will be worth watching also.

Twitter: Greg McKenna

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Comments

  1. Probably due to the fact I did a years worth of retail spending in 3-4 days in San Fran a few weeks ago!!!
    .
    I dont even consider aussie retailers anymore, their days of ripping me off have long gone!

  2. I outdid the wife for once in the shoe department this year. In total we came back with 20 pairs of shoes. Idiotic I know!