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Shorts cover US Dollar and oil positions

A solid lead from US markets and the ongoing rally in oil prices should deliver another firm start for the share market this morning.

 The question for traders today will be whether the strong buying momentum of the last 2 days will continue and build on this morning’s open on the ASX 200. China’s manufacturing PMI which is due for release at 12pm could have a role to play in how markets end today. If it happens to be strong, it will be well timed to build on buyer on confidence and fuel the upward momentum of the past couple of days. 

The Australian Energy Sector has rallied 6.7% from its low on 22 March but may well build on these gains after another strong performance by the oil market last night.  The market is responding to this week’s news of good demand and refinery runs in the US as well as supply disruptions in Libya.

Short covering is also well under way in the US Dollar after 3 weeks of consistent selling. Strong US consumer confidence data and the likelihood of a steady programme of Fed rate hikes appears to have taken its toll on short seller confidence.

Bellamy’s announcement that it will miss the 1 January deadline for registration of its infant formula product in China is an unwelcome source of risk. Investors now face an uncomfortable delay before finding out whether Bellamy’s is able to establish and register alternative canning facilities for the product it sources from Bega. For technical traders, a break of chart support around $3.76 would be a negative sign of this stock.  

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