Originally published by AxiTrader
Quick Recap
A marginal new high for the US dollar, as bonds stabilise and stocks steady after the recent big moves. Signs are that OPEC is still serious about stitching up a production deal.
What You Need To Know
International
- The US dollar is stronger against the Euro and Yen but stocks have had a bit of a breather overnight and are down a little. The S&P 500 is down 5 points at 2175 while the Dow Jones Industrial Average has dipped 55 points.
- That dip could be a precursor for more selling if Carl Icahn is right. Remember, he's the fellow who left the Trump celebrations in New York and headed out to buy a casual $1 billion worth of stocks (futures I'm guessing) near the lows because he thought the market was overreacting. This morning he told an audience in New York that stocks have run ahead of themselves. That's something you might have heard me say all week but it has more gravitas when it comes from a billionaire - :)
- US 10 year bonds are sitting largely unchanged at 2.22%
- US president elect Donald Trump is meeting with Japanese prime minister Abe on Thursday.
- A US panel has said that Chinese SOA’s should not be allowed to buy US firms.
- The central bank in Malaysia is panicking a little. Reuters reports Negara is seeking assurances that banks who have access to it and the Malaysian financial system have been asked by officials to stop trading in the unofficial Ringgit market. I find this really interesting and while I understand it it has echoes of the Asian crisis of the 1990’s so bears watching.
- Sweden’s central bank is looking at issuing an “E” currency Reuters reports.
Australia
- A bit of a disappointing performance from the S&P/ASX 200 yesterday finishing up just one and a half points at 5327. While the index level didn’t move much this is a market characterised by stock and winner picking. So there is still lots of money moving around beneath the surface of an otherwise relatively stable index level.
- The miners were under pressure yesterday and again in London overnight. Gold did better but that sector could slip today a little while energy could be becalmed given Crude Oil neither moved higher or lower after the previous night’s massive rally.
- On balance the futures traders are better that the market will be a little lower with the December SPI off 18 points this morning. It’s hard to disagree really given the SPI couldn’t get back above the 5370 level and is struggling to even break back up into the old uptrend.
- On the day though it will be all about employment with October jobs released this morning at 11.30am. The market is looking for an increase of 20,000 jobs. But there will also be a lot of attention paid to the part time/full time split given the RBA has wondered, and worried, out loud about the real state of the labour market.
Forex
- Lots of chat this morning about the US dollar making a new 13 year high in dollar index terms – although the headlines never mention it’s a marginal high. All very exciting of course because it means Euro is down below 1.07, the Yen has drifted to 109 and the Aussie is back under 75 cents. But in a long term sense the marginal new high for the US dollar is yet to actually break out and up. We’ll see if the bulls have the gumption to kick higher soon I’m sure. Here’s the US Dollar Index chart from my Reuters Eikon:
- Looking at the moves of the Yen and the Euro specifically there is every chance that even if the bond market sell off reverses a little and stocks falter that the US dollar remains strong. That’s because traders are clearly making a bet – a trade – that not only will the Fed hike rates in December but it will move a number of times in 2017. Throw in a stronger US economy, inflation and the like and US markets, and the US is the place to be in the year/s ahead. So whatever hurdles the dollar may have right now they’ll flush away in the medium term if Trump delivers on his economic promises.
- That means that Euro could break down and through this long term trendline I’ve been talking about recently. 1.0650/60 remains the level I’m watching anf then if that breaks 1.05 seems like a Death Star tractor beam at the moment.
- The Aussie dollar doesn’t seem to have been able to avoid the US dollar strength. But with a fall of 1% it’s easily the worst performer of the G10 overnight. Why that is is best explained with reference to the continued unwind of the iron ore and other metal rally we are seeing this week. It’s at 0.7478 this morning having failed to get back above the 2016 uptrend it broke out of last week. That’s an ominous technical sign and the dip below the 200 day moving average won’t have escaped the notice of the bears – or even the very long speculative market.
- 7440/50 is the key now. If it breaks the Aussie could fall right out of bed as sellers look to see where the real level of support is. While the US remains strong…even if it doesn’t rally further, and while the commodity retracement continues the Aussie could remain pressured.
Commodities
- You know it’s a bull market when a massive 5 million barrel increase in stocks doesn’t knock the price of Crude Oil lower. That’s what happened overnight as traders continue to bet that the end of the month OPEC meeting will deliver a deal on production. Last night Russian oil minister Novak said he was on board with a deal and Russia was ready to support such a move. Likewise Venezuela’s President Maduro said he is going to catch up with OPEC sec-gen Barkindo overnight.
- So this morning we have Crude Oil crude siting largely unchanged at $45.84 while Brent Oil is at $46.88. In technical terms $46.50/$47.00 is the resistance zone.
- Gold is becalmed around $1224 an ounce
- Copper is lower by 1.5% as the retracement from last week’s ridiculous move higher continues. The focus is turning to commentary noting that the US is not a big user of copper relative to China implying that Donald Trump’s expected infrastructure spend won’t really move the needle on demand.
- But copper’s rally wasn’t really about Trump, not the original break out a couple of week’s ago anyway. But as other metals have pulled back in China, and across the globe copper is being dragged lower as well. My sense is still that prices will move into the $2.35/40 region
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Today's key data and events (all times AEDT)
- Australia - Employment Change s.a. (Oct), Unemployment Rate s.a. (Oct), Participation Rate (Oct), Fulltime employme