Macro Morning: Higher and higher

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The focus has rightly been on Ben Bernanke this past two days and the Fed Chairman faced the Senate overnight for the second day of quizzing and questioning. As with the previous session in front of the House Bernanke gave soothing sounds about the difference between tapering and tightening rates and made it clear the latter was not going to occur any time soon. Last night also saw a big rise in the Philly Fed index which at 19.8 was a full 12 points higher than the markets expectation and up on the last read of 12.5 for an unequivocally good result. At the same time jobless claims fell back from last week’s big jump to 360000 printing a lower than expected 334,000.

s&p 500, spx, s&p 500 chart, weekly

So between Bernanke and better data US stock traders had little impetus to do anything other than hit Cramer’s buy, buy, buy button and the S&P 500 and Dow both made new all-time intra-day highs before retreating a little to close at 15549, and 1689 up 0.51% and 0.48% respectively. The Nasdaq was only up 0.03% lagging because of specific components such as the selling in Intel which held it back.

On the technicals for the S&P and by extension stocks around the globe, last night’s was a fresh high but as I wrote earlier in the week I need to see a weekly close through the top  of the recent high in order to turn the outlook more bullish.

In Europe it was a sea of green with the FTSE up 0.94%, the DAX up 1%, CAC up 1.45%, Milanese stocks rose 2.29% while those in Madrid were up 1.85%. The Portuguese opposition’s no confidence motion failed which is a good thing but concerns remain about the southern European states and where they are at with regard to growth and debt – on the back burner rather than off the stove so we are keeping an eye on things closely.

On FX markets the US was a little stronger but still within recent ranges but this morning I want to focus on both the Aussie dollar and the Yen

Last Friday night was a horrible week’s end for the Australian dollar with trade under 90 cents briefly before it roared higher to the top of the box it is in at the moment  making a high of 0.9290 earlier in the week and it sits mid rangeish now around 0.9160/70. Obviously US dollar moves have been important but so too was the squeeze that accompanied the RBA minutes on Tuesday.

However two things have happened in the past day which high just how vulnerable Australia and the Aussie dollar remain.

The first was the NAB quarterly survey which has a bigger survey audience than the monthly one and showed that employment conditions continue to weaken and that employers may be needing to cut workers soon, that business conditions and confidence fell along with trading and profitability. The NAB said that there was “Little sign yet that lower interest rates and AUD are helping” which I believe continues to build the case for further monetary easing in the months ahead. For a full look at the NAB survey here is a link.

Equally interesting and important to the Australian economy and the Aussie were comments from the Chinese Finance Minster that there won’t be any fresh stimulus this year. This is important because also part of the Aussie rally earlier this week was Chinese Q2 data that was not as bad as feared and “clarification” about what the targeted rate of growth is going to be this year.

As you can see in the chart below the Aussie is both in its box but also resting on a little 4 hour uptrend – just like last Friday I might add.

aud, audusd, australian dollar, australian dollar price quote, audusd 4 hour

Support is at 0.9142 today.

In other FX pairs the euro remains becalmed realistically between the 1.3050 and 1.3130 short term range with support at 1.2980 and resistance in the 1.3175/1.3210 region. GBP looks interesting against the US dollar and a push through 1.3270 opens up a 60 point run to major short term resistance at 1.5330.

The USDJPY is also on the march again having flirted with a downside break it has now run into resistance again overnight. This tells me for all the ex-poste rhetoric about the Japanese election and the increased chances of a renewed Abe mandate for aggressive change coming next week the technical and short term traders have the USDJPY in their grasp and are just pushing it around.

jpy, usdjpy, yen, dollar yen (jpy) price quote

While I think the USD is going to push Aussie and euro lower I still reckon that USDJPY is going to be a big old range for a while. A 25% depreciation is putting a lot of pressure on Japan’s neighbours particularly China and Korea and any further weakening would be resisted by global policy makers I reckon.

On other markets bonds in Europe fell but were a little higher in the US with the 10 year up 5 points to 2.54% while on commodity markets Nymex crude continues to close the gap on its Brent counterpart and now sits above $108 Bbl in what might be a big hand break for growth down the road.   Gold is up about 10 buck on yesterday morning at $1284 this morning.

 Twitter: Greg McKenna