US Equities Continue to Rise
» 12:00am BOC Monetary Policy Report – CAD
» 12:00am BOC Rate Statement – CAD
» 12:00am Overnight Rate – CAD
» 12:30am Crude Oil Invertories – USD
» 1:15am BOC Press Conference – CAD
» 11:30am Employment Change – AUD
» 11:30am Unemployment Rate – AUD
It has been one-way traffic on U.S. equities as US equities continue to rise. One sign that could be worrying according to Rodger Altman, the yield on the U.S. 10-year Treasury note is hovering around 1.5%. “Over the very long term, it’s a sign of weakness. It signifies weak global growth and signifies geopolitical instability as well as a flight to safety.” Altman said on Tuesday. This is not the first time this has come up during the current equity rally. On the rates front, Federal Reserves Kashkari says there’s no urgency to raise U.S. interest rates. Inflation is low and the economy is still short of full employment.
Italy, as mentioned yesterday, the situation in Italy continues to develop. Fears are mounting that a full-blown banking crisis could develop. Bad debts (non-performing loans) held by the banking sector is estimated at 360 billion euros, 17% of all outstanding bank loans. One fifth of the annual GDP. Bank stocks have decreased by more than 50% since the beginning of 2016. Read the full article from the Mises Institute here. On a more positive European note, Ireland’s economy has stunned economists with 26% growth in 2015. Read the full article from Bloomberg here.
The U.S. equity train continues to steam on, with the Dow Jones making new record all time highs. The S&P500 closed at another new all-time high. The Nasdaq set a new 2016 high. I’m still amazed by these turn of events as it feels like just yesterday when we watched those massive falls on that Friday.
The Yen continued to feel the heat after Abe’s stimulus announcement. The USD and crosses all had strong sessions to the Yen. The USDJPY has put on 405 pips since Monday’s open. The AUD continued it’s run overnight closing above .76 cents. Gold selling picked up with a second drop losing over 20 dollars as Brexit fears abate and equity markets continued north. Oil bounced back with new supply concerns. Inventories are due out tonight but the last report didn’t explain the move. Will be interesting to see the markets reaction to tonight’s release.
Today’s Asian session has been weaker with Yen and USD seeing some buying. AUDUSD sitting just above .76 cents. AUS200 started with a higher open but has seen selling currently lower at 5378. A close above 5400 still eludes and this a small worry for me on the short term. With strong leads in the U.S., I’m looking for flat to higher opens in Europe. I seeing signs the UK100 might be running out of short-term buyer interest but this idea still requires confirmation, more below.
AUDUSD – New highs but counter evidence still present. Yesterday’s rally caught me right off guard, I was waiting for confirmation to fill a sell idea. We have made a push up back into .76 area and closed over the last high at .7610. That cancels out a failed high. What worries me on the short term is the divergence building. Still, don’t have confirmation but I’m still leaning to the short side while it’s present. There’s no confirmed yet for a sell idea.
UK100 – Session last night failed to make a higher close, this sets up a failed high. Divergence has set up. With confirmation, I’m looking for a move down to fill the gap and test the last high at the 6605 area. We do have a strong uptrend, retracements are normal in healthy trends. Last two sessions look to be extended with buyer interest dropping. If we do get a move down the last high is an important level for me. I would like to see support come in at that level. A rally above 6705 cancels all short thinking out.
Trading thought for the day.
“That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’”- Paul Tudor Jones
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