Market Movers of the Day
Asia-Pacific
Australian Unemployment surprisingly fell to 5.7%
Japanese Eco watchers outlook at 43.1
Japanese Machine tool orders fell -61.9% YoY
Japanese Core machinery orders rise 0.5% surprising for the better
Europe
UK Rate decision with rates left at 0.5%
ECB rate decision with rate left at 1%
German Industrial Production rising 1.7% versus 1.5% expected
Speech by ECB president Trichet
Americas
US Initial Jobless claims at 521k versus 541k expected
US Wholesale inventories drop -1.3%
The Overall Sentiment
Sentiment was bullish as risk appetite pushed equities higher with most major indexes in the money. The opening data for the Day was the Australian unemployment which surprised investors for the better by declining to 5.7% against analysts’ surveys which expected a climb to 6%.The positive surprise which comes not so long after the surprising rate hike of the RBA has spurred more assessments a cycle of rate hikes around the world is getting closer. Sentiment for the Aussie was strongly bullish pushing the Australian Currency above the 0.9 mark with markets eyes on the currency reaching parity with the dollar in the not so distant future. The broad Sentiment in Asia-pacific also reacted positively to the data with the Nikkei climbing 0.34% and the Hang Sang gaining above 1%.Another factor fuelling the market was market growing expectations for a positive earning season as Alcoa the world largest aluminum producer surprised by returning to the black for first time in a year spurring optimism among inventors.
Moving to the London session market eyes were focused mostly on the rate decisions by the BoE, the ECB and the speech by ECB president Jean Claude Trichet that followed. Rate on both the UK and EU were left unchanged as expected but expectations by market players the ECB will suggest an exit plan have been in vain. ECB president Trichet has stressed key rates in the ECB are “appropriate” and will remain low as to avoid a regression in the fragile recovery of the EU economy and ease the negative economic effect the Euro appreciation has on the region.
In the US initial jobless claims were at the centre of market attention with a surprise figure of 521K versus an expected 541k by investors’ surveys. The better than expected Job data has helped to lift markets expectations for theQ3 earnings season with investors continuing to buy into equities. As risk appetite was elevated investors sold the Dollar rather strongly moving the Dollar index to a 14 month low in a broad anti Dollar rally. The Euro revisited the 1.48$ zone and the Sterling edged above the 1.6$ mark.
In commodities sentiment for metals was largely led by higher inflation expectations and reacted in tandem with a large Dollar selloff. Gold surged to yet another record reaching 1060$ an ounce. In the Petroleum arena Oil futures moved above the 72$ before retreating lower and Natural Gas hovered around 5$.
The Day Ahead
Sentiment could be modestly negative as markets strong run for the week and risk of profit taking in short dollar positions potentially ignited by the speech of Fed chairman, might move investors to the sidelines and risk off the table. The opening data for the Day will by German CPI and trade balance which will reflect on the inflation level of Europe’s largest economy and the negative headwinds the strong Euro has on EU exports. In the UK the PPI will reflect on potential inflation, a looming problem for the UK in the not so distant future. Later in the day ECB chairman Trichet is expected to speech which might affect sentiment on the Euro. The concluding data for the day and the week will be the US trading balance with investors surveys pointing an expected increase of the deficit to -$32.7B as a larger trade deficit in associated with better US economy.
Technical Analysis
EUR/USD
The pair is currently in a strong rally toward a retest of the 1.5 resistance. However the 1.5 zone is significant moreover the pair has failed to break the resistance for several times before. The pair has currently topped around 1.48 and is showing signs of creating a double top pattern. If this is the case the pair might pull back to gain support around the 1.45-1.46 area. Although this technical adjustments if not likely to signal the end of the overall bullish trend the 1.5 resistance is a good contender to be the top mark for the pair in the near term and a failure to break that level for several times could spark a much more massive bearish adjustment.
Market Analysis provided by eToro
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