The Chinese data changed the whole game plan yesterday with the much better than expected outcomes of +5.1% for exports and +10.9% for exports igniting rallies in the Aussie and the commodity bloc currencies, in copper and other global metals and overnight giving a more positive tone to stock markets.
Data in Germany though was pretty poor with exports rising only 0.6% (1% expected) and imports falling 0.8% (+0.5% expected). But it was all about China and the DAX (+0.7%), CAC (+0.63%), Milan (+1.83%), Madrid (+1.14%) and the FTSE (+0.29%) all higher. In the US stocks were a little less excited although the 3 major indices were all higher with the Dow up 0.18%, Nasdaq up 0.41% and the S&P 500 was 6 points higher for a a gain of 0.36% to 1,697 breaking the 3 day losing streak.
On FX markets the Chinese data ignited a rally in the Australian dollar (0.9100, +1.16%) and set a tone of US dollar selling. So this morning the euro (1.3386, +0.37%), sterling (1.5541, +0.35%) and Canadian dollar (1.0321, +0.97%) were all higher. The yen strengthen to push USDJPY down to a low of 95.79 before rallying back to 96.63 this morning for a US gain of 0.33%.
The Chinese data buoyed the Aussie dollar and the commodity bloc and copper yesterday as noted above there is some hope that the Chinese slowdown is abating. This took the Aussie up and back into the 90-93.50 box it was in before the recent break lower as you can see in the chart below.
There is now clear support in the 0.9000/30 region which was the bottom of the old box. Short term resistance is around the 0.9140/50 region which is where I have the stop for my short instituted this morning. 0.9092 is very short term support and a break of this would be a signal that we are in for the pullback that my set-up suggests.
Euro might have found a short term top as well
As you can see in the chart below the Euro has a nice little short term channel it is in and when I look at USDJPY’s recovery overnight and I add a bit of rhetoric around Greek unemployment and the weaker than expected German data last night I reckon a reversal is in the offing back toward 1.3355 and we’ll see how support looks there.
On the data front today is huge with a raft of Chinese data including CPI, PPI, retail sales, trade balance, industrial production and urban investment before we head to Europe for French IP, Italian and UK trade data and Italian CPI before rounding out the week with Canadian employment data and US wholesale inventories.
My guess is the market will be looking for any reinforcement of the apparent strength seen in yesterday’s Chinese data to push trade into the end of the week. It could be another interesting day.