Australian-denominated assets were higher overnight on the stronger than expected employment figures released during the session. Markets were looking for a negative release, with a net decrease in jobs and a higher unemployment rate but the actual figures showed a rise of 15,500 and a drop in the jobless rate to 4.9 percent. Consensus estimates were looking for a net decrease of -5,000 jobs and a jobless rate of 5.3 percent. The market reaction was a strong rally in the AUD/USD and support in regional equity markets. With these latest numbers, market analysts are now more likely to forecast no further interest rate decreases from the Australian central bank (RBA).
Sentiment was tempered through the session, however, when the monthly Trade Balance release from China showed only small gains in export growth and little change in import trade. This is a negative for the Australian economy, which sells most of its commodity resources to China and if this continues, it will be viewed as a negative for copper and iron producers. If this does wind up being the case, this aspect of the equation will be the only supportive factor for additional RBA interest rate decreases, after the substantial 50 basis point rate reduction seen at the last meeting.
Ahead today, traders will likely find some level of encouragement in the confirmation that Greece will receive its next loan disbursement, calming worries that the country would be unable to meet its bond redemption payments that are scheduled for May 18th. Any upside in regional equity markets and the Euro will be contained by the uncertainty generated by the latest election results in Greece, as this will probably lead to some sort of alteration in the bailout programs that are currently in place. Some of these changes are already being seen, as the most recent loan disbursement was cut by 4.2 billion Euros due to the possibility that the next government will reject some of the austerity measures that were previously agreed upon.
Today will also see some major headlines in another region, as the next monetary policy meeting from the Bank of England. Recent comments from voting members suggest that there will be no mention of additional stimulus but given recent macro data, there is the possibility for a surprise decision.
The EUR/JPY is continuing to post losses in its short term downtrend, with prices first failing at resistance in the 111.40 region. Given the proximity to moving average and Fibonacci resistance, this is now seen as the major area to the upside when constructing longer term direction bias. A break here will be significant but at the moment, markets are focused on a retest of support at 96.50 and looking at the RSI reading, there is plenty of room to extend into this area.
The Nikkei 225 has seen a relentless downtrend but there could be some difficulty going forward as prices are not dangerously close to Fibonacci support in the 8910 region. We are likely to see some bounce here on the first test but the longer term momentum is clearly to the downside, which is suggestive of an eventual downside break.