Market Outlook for January 27, 2012
Recap of the Latest Global News
By Cory Vi & Andrew Su on Jan 27, 2012
In a week that the Federal Reserve announced it would keep interest rates low through till at least 2014 and Bernanke said that policymakers are considering further bond purchases to boost growth, markets continued to celebrate as it appears that more free money is about to be pumped into the financial system. Treasury yields dropped to an all time record low as PIMCO’s Bill Gross predicted a third, fourth and fifth round of quantitative easing. The USD has, not surprisingly, taken a pounding over the week as the QE junkies got the fix they had all prayed for. The EUR is trading higher at above 1.3150.
The surprise news by the Federal Reserve had markets reprice the likelihood of further quantitative easing and sparked a flurry of activity by investors to revalue assets. In our opinion, the reaction in the markets has been overdone and we will likely see a retracement of the USD move in the coming sessions. The impact on riskier currencies such as the Australian dollar has seen it rally to as high as 1.0665 in trade today.
US equities fell yesterday after the Dow Jones rose to its highest levels since May 2008 during the day. Financial stocks where hit by worse than expected new homes sales data which showed a fall in December, for the first time in 4 months. US jobless claims rose while orders for durable goods rose more than expected. Asian stocks closed marginally higher while European stocks are soft as the Greek debt swap negotiations continue.
Commodities News
Commodity prices continued to be buoyed by the possibility of further easing by the Fed. The CRB gained for the second day yesterday rising 1.05 points to 317.42. WTI crude oil has risen above $100 despite news of increasing output from Libya. Precious metals have consolidated recent strong rise with gold easing 0.21% to $1,726 and silver losing 0.35% to $33.60. Soft commodities are mixed while copper has gained 0.7%.
FX News
EURUSD
EUR/USD spent the day consolidating after peaking at 1.3183 yesterday. If the technical traders are right, we may have seen the high for a long while and the completion of a technical retracement which began from 1.2624 (16 Jan). However we’re not totally convinced and we cautiously think 1.3244 may be the top if 1.2950 holds. Fundamentally, the latest on the Greek saga is that the Institute of International Finance (which represents the creditors) and Greek officials continue negotiations and may well continue over the weekend. On the radar for the rest of the day is US Gross Domestic Product Q4 (annualised), GDP Price Index (1:.30 GMT) and the University of Michigan Confidence survey (14:55GMT). For US GDP, the market is expecting 3% (last 1.8%) and the Price index is expecting 1.9% (last 2.6%). For the U. Mich survey market expects no change from previous 74. From now until the end of the New York session we see a range of 1.3023 – 1.3170.
USDJPY
Today USD/JPY seems to have taken out short term stop losses below 77.00 after peaking at 78.27 two days ago. The range so far has been 76.88 – 77.49 at the time of writing. News-wise, Japan’s core CPI fell for the third consecutive month in the year to December (-0.2%). Japanese retail trade (YoY)(Dec) rose 2.5% against market expectation of 2.1% and the previous of -2.2%. According to Reuters “The Bank of Japan and the government concede that the economy is in a lull, and they could come under increasing pressure to support it with currency intervention and monetary policy easing as Europe’s debt crisis weighs on external demand.” With that the expected range for the rest of the New York session is 76.54 – 77.72.
GBPUSD
GBP/USD despite the much weaker than expected CBI Realized Sales data has man-aged to hold onto the recent bid tone of the markets whilst other currencies like Euro and AUD have given up some of the FOMC gains. Talk of EURGBP and GBPJPY flow helping a bid market look to be correct but at this stage we have been unable to confirm due to most of our Australian interbank contacts taking an extra long weekend. During the US morning their was a spike to 1.5730 on the back of weaker than expected New Home Sales but as we close the book on Thursday trade the price is just below 1.5700. It has been a level solid week for the majors against the USD with the FOMC surprising everyone for their calls for a longer period of zero interest rates. However, what we can see into the weeks close in just under 24 hours is a market looking to reduce risk with profit taking from the bulls more than likely going to take the price towards 1.5620 today.
AUDUSD
AUD/USD had a very positive climb during the Australia Day holiday thanks to the expectations that US interest rates will stay close to zero until mid 2014. The lift has been solid as the tone of the short end of the markets was already looking for positive European stories and this was the next best. The solid performance in the Euro and Sterling helped drag the thin liquidity AUD above 1.0540 and 1.0620 offers. Option protective offers ahead of 1.0700 and some stretched corporate orders capped the rally and as the dust continues to settle on the FOMC of Wednesday the mixture of better and weaker data in both Europe and the USA has brought price back towards 1.0600 currently. There is no data for the Australia session and with yesterdays holiday most senior traders would be taking an extra long weekend . A fall below 1.0590 should see intraday names target 1.0550 pivotal support and if that gives way a stop hunt should be seen. Topside resistance should remain ahead of 1.0700 till the end of the weeks trading.
Compass Global Markets
DISCLOSURE AND DISCLAIMER
Compass Global Markets Pty Ltd (“Compass Global Markets”) ACN 144 657 885, Authorised Representative No. 377377, is a Corporate Authorised Representative of Calibre Investments Pty Ltd (Australian Financial Services License No. 337927). Please refer to the Financial Services Guide which is available through our website www.compassmarkets.com for more information regarding the financial services that we offer.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.
GENERAL ADVICE WARNING: The advice provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regard to these matters and, if appropriate, seek independent financial, legal and taxation advice before making any financial investment decision.
This report has been prepared for the general use of Compass Global Markets clients and must not be copied, either in whole or in part, or distributed to any other person. This report and its contents are not intended to be construed as a solicitation to buy or sell any security, product or asset, or to engage in or refrain from engaging in any transaction.
Compass Global Markets does not guarantee the performance of any investment discussed or recommended in this report. This report and the information used within may include estimates and projections which constitute a forward looking statement that express an expectation or belief as to future events, results or returns. No guarantee of future events, results or returns is given or implied by Compass Global Markets. Such statements are made in good faith and based on reasonable assumptions at the time of publication. However, such statements are also subject to risks, uncertainties and other factors which could cause actual results to differ substantially from the estimates and projections contained in this report or otherwise provided by Compass Global Markets.
Any information referencing past performance is not indicative of future performance. All information in this report has been obtained from sources believed to be accurate. Compass Global Markets does not give any representation or warranty as to reliability, accuracy or completeness of information contained in this report and therefore all responsibility is expressly disclaimed, whether due to negligence or otherwise. The information presented and opinions expressed in this report are given as of the date hereof and are subject to change without notice. We hereby disclaim any obligation to inform you of any changes after the date hereof in any matter set forth in this report.
Global Compass Markets, its affiliate and their employees may hold positions in the financial products, or securities or derivatives of, in the companies referred to in this report from time to time.
Analyst Certification: The views or opinions expressed in this report accurately reflect the personal views of the analyst(s) and no part of the remuneration of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this report. Any views or opinions expressed are the author’s own and may not reflect the views or opinions of Compass Global Markets unless specified otherwise.
Compass Global Markets Pty Ltd (“Compass Global Markets”) ACN 144 657 885, Authorised Representative No. 377377, is a Corporate Authorised Representative of Calibre Investments Pty Ltd (Australian Financial Services License No. 337927). Please refer to the Financial Services Guide which is available through our website www.compassmarkets.com for more information regarding the financial services that we offer.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.
GENERAL ADVICE WARNING: The advice provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regard to these matters and, if appropriate, seek independent financial, legal and taxation advice before making any financial investment decision.
This report has been prepared for the general use of Compass Global Markets clients and must not be copied, either in whole or in part, or distributed to any other person. This report and its contents are not intended to be construed as a solicitation to buy or sell any security, product or asset, or to engage in or refrain from engaging in any transaction.
Compass Global Markets does not guarantee the performance of any investment discussed or recommended in this report. This report and the information used within may include estimates and projections which constitute a forward looking statement that express an expectation or belief as to future events, results or returns. No guarantee of future events, results or returns is given or implied by Compass Global Markets. Such statements are made in good faith and based on reasonable assumptions at the time of publication. However, such statements are also subject to risks, uncertainties and other factors which could cause actual results to differ substantially from the estimates and projections contained in this report or otherwise provided by Compass Global Markets.
Any information referencing past performance is not indicative of future performance. All information in this report has been obtained from sources believed to be accurate. Compass Global Markets does not give any representation or warranty as to reliability, accuracy or completeness of information contained in this report and therefore all responsibility is expressly disclaimed, whether due to negligence or otherwise. The information presented and opinions expressed in this report are given as of the date hereof and are subject to change without notice. We hereby disclaim any obligation to inform you of any changes after the date hereof in any matter set forth in this report.
Global Compass Markets, its affiliate and their employees may hold positions in the financial products, or securities or derivatives of, in the companies referred to in this report from time to time.
Analyst Certification: The views or opinions expressed in this report accurately reflect the personal views of the analyst(s) and no part of the remuneration of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this report. Any views or opinions expressed are the author’s own and may not reflect the views or opinions of Compass Global Markets unless specified otherwise.
