Quick Recap
Commodities are under pressure at moment with selling across oil, precious and most of the base metal complex. Copper, in particular, has broken down sharply in the past 3 days. Stocks were a little lower as well along with weakness in the EUR/USD.
The Aussie dollar AUD/USD held in well at 76 cents all things considered.
What You Need To Know
International
- Jackson Hole seems to be given a lot of the excuses for the moves overnight across markets. The fact that Fed chair Janet Yellen could signal rates will be going higher with her address this weekend might actually be the reason for the little bit of weakness across markets. But the reality is that it's just a reminder that when interest rates rise in the US, let alone globally, the game for traders will fundamentally change.
- You get a sense of how things are i the market when you read the intro to one of the Major bank's morning notes this morning. Here's what one of my mates wrote - "Only on line one and I already feel like I’m making this up, such is the state of market torpor in front of the Fed’s Jackson Hole symposium and as Sothern England basks in 30 degree summer sunshine."
- I also like what he said about the overnight price action - "Partly because of the dollar but also perhaps the confluence of several unrelated Emerging Market incidents, commodity prices are in a sea of red, including oil (down over a $1) traded metals and agriculture, the exception being iron ore which continued to display resilience above $60 (the China 62% fines import price closing virtually flat at $61.70)".
- The emerging markets stuff he's talking about is the South African Finance minister's troubles, the north Korean sub based ballistic missile test, and Turkey belting the Syrians with artillery fire.
- What's interesting about this is that these issues are at the margin for markets at the moment. But the reaction is consistent with a market that has had a fairly muted volatility range and is ready for a break out - something to watch.
- In the end stocks in the US were a little lower as well with the S&P 500 ending down 0.52% continuing its remarkable run of super low volatility. But that fall hardly dented the enthusiasm of local traders in the September SPI 200 which dip just 0.1%, 6 points, overnight.
Australia
- Australia's construction work done, released yesterday, was weaker than expected which highlights the headwinds the economy still faces. Local traders will start to think about 2nd quarter GDP to be released in a week or so.
- On the SPI 200 we've seen a retest of the recent high. If it breaks that would regate my bearish bias. Unless or until it does I retain that outlook.
Forex
- The GBP/USD is back toward the top of its post Brexit range. A couple of tests to the downside and now a test or two to the upside suggests Sterling is going to break out big time sooner or later. I prefer a topside break and run toward 1.35/36...but the trendlines constraining it need to break first.
- Euro has backed off nicely from the overhead resistance we've been watching. 1.1220/25 is the support zone at the moment.
- The Aussie did reasonably well all things considered last night given the weakness in commodity prices. It got thumped at one point but is back just above 76 cents again this morning as it holds the short term support I talked about earlier this week. But as I wrote then looking at my charts suggests the Aussie is going to drift lower in the days, and week, ahead.
Commodities
- Is the collapse of the copper price this week sending a signal about growth? Copper is one of those commodities to which traders attribute mystical powers. Dr Copper, the commodity with a PhD, they call it. Why? Because the ubiquitous nature that copper played in so many facets of the global economy meant it was seen as a lead indicator of global growth.
Copper is down 5% this week, back at $2.07 in US dollar terms per pound. It’s also butting down toward the 12-year uptrend. As copper’s own price action this week shows, after an extended period of quiet trading a break out, and a sharp move, can happen. Traders should keep an eye on copper – it could be the canary in the global markets mine.
- Crude Oil was the other big mover falling to $46.79 while gold dropped through the $1329 level I signalled as support and is at $1325 this morning with a downside bias.
Today's key data and events (all times AEDT)
- Australia - Private Capital Expenditure (Q2) (11.30am)
- New Zealand - Nil
- China - Nil
- Japan - Corporate Service Price (YoY) (Jun), Foreign bond investment (Aug 19), Foreign investment in Japan stocks (Aug 19) (9.50am)
- Germany - Import Price Index (MoM) (Jul), Import Price Index (YoY) (Jul) (4pm); IFO - Business Climate (Aug), IFO - Current Assessment (Aug), IFO - Expectations (Aug) (6pm)
- EU - Nil
- UK - CBI Distributive Trades Survey - Realized (MoM) (Aug) (8pm)
- Canada - Nil
- US - Jackson Hole Symposium (24h); Initial Jobless Claims (Aug 19), Continuing Jobless Claims (Aug 12), Durable Goods Orders ex Transportation (Jul), Durable Goods Orders (Jul) (10.30pm); Markit Services PMI (Aug) (11.45pm); EIA Natural Gas Storage change (Aug 19), Kansas Fed manufacturing activity (Aug) (12.30am); 7-Year Note Auction (3am)
Have a great day's trading
Greg McKenna
Chief Market Strategist AxiTrader
www.gregmckenna.com.au
Please note: I usually look at 2 or 3 charts each day. These will not always be the same charts and the above is meant to help guide traders thought processes not offer advice.
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