Changing Fiscal and Monetary Trends Spark Big Market Moves
With 2013 getting underway in earnest this week, indications from governments and central banks on their policy direction for the coming year has sparked significant market action overnight.
After rallying yesterday on the back of strong trade data markets sensitive to China fell back hard overnight including copper, crude oil, AUD, NZD and Chinese indices. The PBOC indicated that it is looking to balance economic growth, inflation control and financial risk management this year. With Chinese inflation starting to creep higher, the street clearly took that to mean that further monetary easing is unlikely any time soon although it may remain on hold for some time.
In Europe, meanwhile, EUR has been screaming higher, propelled by growing sentiment that with the ECB doing nothing yesterday, treasury yields continuing to fall in the continent (Italy near 4%, Spain under 5%, Portugal near 6%) and the Eurozone economy showing signs of stabilizing, further monetary easing looks increasingly unlikely going forward unless something goes terribly wrong. GBP, however, has been lagging behind weighed down by disappointing industrial production data.
On the flip side, JPY is crashing again while the Nikkei bucked a regional trend and posted another strong advance after new Prime Minister announced a $116 billion stimulus program aimed at boosting economic growth. Rumours also continue to fly suggesting that the country’s inflation target may soon be doubled to 2% (which would bring it in line with Canada and other developed countries) and QE could be increased again.
US markets have been quiet this morning consolidating recent gains, but could get much more active next week when earnings season really kicks into gear.
The Bank of Korea maintained its benchmark interest rate at 2.75% as had been widely expected.
More trade numbers are out today, including:
US $48.7B deficit vs street $41.3B deficit
Canada $1.9B deficit vs street $0.6B deficit
India imports 6.3% vs previous 6.4%
India exports (1.9%) vs previous (4.2%)
China announced inflation data overnight. Highlights include:
Consumer prices 2.5% vs street 2.3% and previous 2.0%
Producer prices (1.9%) vs street (1.8%) and previous (2.2%)
Industrial production numbers are out from a number of countries today, including
UK industrial (2.4%) vs street (1.8%)
UK manufacturing (2.1%) vs street (1.3%)
Spain (7.2%) vs street (4.0%) and previous (3.3%)
India (0.1%) vs street 0.1% and previous 8.2%
North American indices
The Dow Industrials (US30 CFD) ran into resistance near 13,500 but is holding well above its 1,450 breakout point, indicating that its uptrend remains intact with next resistance on a breakout in the 13,600-13,660 zone.
The S&P 500 (SPX500 CFD) is holding above yesterday’s 1,470 breakout point, indicating continued underlying support. Next measured resistance appears near 1,490 with initial support near 1,460.
The S&P/TSX 60 (Toronto60 CFD) broke out over 718 yesterday, completing a big ascending triangle but could retest that key level as new support today. Next major upside resistance levels appear near 730 then 750.
Copper failed to overcome $3.70 resistance but remains in an uptrend as long as it can hold above support in the $3.61 to $3.64 area.
US crude fell back from near $94.50 under $93.50 but RSI is holding above 40 and the price has held $93.00 setting another higher low in the process, suggesting that so far this is a normal trading correction within a broader uptrend.
UK crude is having a really tough day. It has been under heavy selling pressure and taken out both channel support near $112.00 and the $111.00 level breaking a month-long uptrend. Next downside support levels in a correction appear near $110.00 and $109.00.
Gasoline has dipped back under $2.80 but is holding $2.75 as its seasonal base building process continues.
Natural Gas has rebounded toward $3.20 but remains in a downtrend with resistance near $3.30 and support near $3.05 then $2.75.
Heating Oil fell back under $3.10 on warming temperatures and may have staged a head fake false breakout. So far, trend support near $3.05 is holding but if that fails, $3.00 or $2.90 could easily be tested.
Corn failed to retake $7.00 and has turned down from another lower high keeping its primary downtrend intact setting up a potential retest of $6.75. RSI continues to climb though suggesting we may be near a washout.
Soybeans are breaking down again today, taking out $13.75 to signal the start of a new downleg on trend with next support near $13.25 then $13.00.
Wheat continues to stabilize near $7.40 as RSI remains oversold.
Orange Juice is consolidating above 110 while RSI remains above 30 suggesting that this may be a normal pause within an emerging upswing. Next upside resistance near 115 then 122.
Arabica Coffee continues to trend higher and appears poised for a breakout. Having already broken out of a downtrend, a move through 148 would complete a bullish ascending triangle and confirm the start of a new recovery trend with net resistance near 152 then a measured 160.
FX this morning
Gold has stalled near $1,675. Although its up from recent lows near $1,625 and holding above $1,660 initial support, it still really needs to break through $1,695 to call off the current downtrend.
Silver is steady near $30.75 today as rising RSI suggests upward momentum continues to build. A break of $31.25 would signal the start of a new upswing within the current $29.00-$35.00 trading channel.
Platinum failed to break through $1.645 and has dropped back toward $1.625 with more support possible near $1,600. Some consolidation in this range may be needed to work off an overbought RSI condition.
USDCAD is testing the low end of its $0.9830 to $0.9880 trading channel with next support on trend near $0.9800 then $0.9760.
EURUSD is breaking out from an ascending triangle today, clearing $1.3300 which may now become new support. Next upside resistance levels appear near $1.3480, a measured $1.3600 and then $1.3850.
GBPUSD is getting kicked around today in the $1.6100 to $1.6180 range.
USDJPY is consolidating yesterday’s breakout, trading above 89.00. It’s next upside resistance hurdle appears near 90.00 then 92.00 on trend with support moving up toward the 88.70 breakout point.
AUDUSD continues to struggle with $1.0600 resistance. Initial support appears near $1.0555 and $1.0530 but as long as it holds trend support closer to $1.0400, it continues to form a big bullish ascending triangle.
NZDUSD failed to break through $0.8475 and has fallen back toward $0.8400. It may have completed a double top. RSI peaking at a lower high also suggests upward momentum may be slowing. Next support in a correction near $0.8320 then $0.8260.