Originally published by Rivkin Securities
Globally equity markets were little changed on Wednesday as volumes continue to recede prior the festive period and little economic data to guide markets. In the US the S&P 500 was -0.25% lower, the Nasdaq 100 down -0.10% and the Dow Jones Industrial Average -0.16% weaker. In Europe it was a similar story, the FTSE100 was -0.04% weaker, the Euro Stoxx 600 finished -0.21% lower and the DAX gained modestly, up +0.03%.
The U.S. dollar index pulled back from 14 year highs to trade -0.27% weaker this morning as a result of gains in the euro (+0.39%) and yen (+0.30%). Euro-zone consumer confidence (MoM Dec) was slightly better than anticipated at -5.1 from -6.2 previously and estimates for -6.0. Given the light amount of data overnight that could have been the reason from the Euro gains however from a technical perspective, at least in the short-term the price is susceptible to a bounce higher.
The first chart below highlights the EUR/USD which has recently pushed below key support, now resistance, between 1.0460 and 1.0500. The new lows below this region are a bearish sign, and with both the dominant and intermediate trends remaining down, there is the decent probability of reaching parity in the coming months. In the short-term, these new lows are yet to be confirmed by momentum indicators, with failure to do so forming what is referred to as bullish momentum divergence. While too soon to confirm this formation, a close back up towards the 1.05 level would likely form this divergence and imply the risk of a sharp bounce higher in the coming weeks towards the 1.07 level.
In oil news a report by the US Energy Information Administration showed that crude inventories increased by 2.3 million barrels for the week ended December 16th. Expectations were for a 2.5 million barrel decrease and this unexpected rise weighed on oil prices with both Crude Oil & Brent crude oil down -1.37% & -1.54% respectively shown on the second chart below.
Locally the S&P/ASX 200 index was 22.40 points higher (+0.40%) at 5,613.47. Meanwhile this morning we can expect a flat start to trading with ASX SPI200 futures down 8 points in overnight trading.
Chart 1 – EUR/USD
Chart 2 – WTI (Purple) & Brent (Blue) Crude Oil
