Asian markets have the first chance to react to the combined effect of two key events over the weekend - US jobs data and the Greek budget/debt negotiations. So far the scorecard reads
one out of two. In the US, non-farm payrolls grew by 243,000 jobs in January. Expectations were around 145,000, so the reading not only confirmed a pick up in the US economy, but smashed all forecasts.
Not surprisingly, shares, industrial commodities and risk currencies all rose after this reading. The US is still the world's largest economy, and increasing activity is good news for the globe as well as the US. At the New York close, the AUD was at 1.0775, and futures markets were tipping the Australia 200 to open more than 1% higher.
However, markets on Saturday appeared to reflect optimism about Greek agreements. This morning, the Greek Prime Minister announced that negotiations would continue tonight, with the Finance minister suggesting agreement in place "on broad issues". The track record of Greek leadership over the last 26 months suggests we may be setting up for disappointment.
The outlook for 2012 is much improved on last year, particularly given the recovery in the US. I'm expecting the Australia 200 and the AUD to reach significantly higher levels over the next 12 months. In the short term concerns remain.
Despite the success of the European Central Bank's LTRO (quantatative easing by another name) and the fact that Greece is a minor global economy, its ability to dominate headlines and market sentiment mean that a sudden "risk off" may be on the cards this week. Combined with the fact that both the AUD and the Australia 200 are reaching technical resistance levels (see charts below), traders may approach the markets with caution this week despite a longer term positive bias.
Australian Dollar (AUD) Daily
Note the resistance at 1.0756 and between 1.0795 and 1.0808.
Key resistance at 4,367. Several resistance points between 4,400 and 4,440.