Asset markets are trading mixed overnight, with Asian equities closing lower and European index futures seeing gains ahead of today’s macro data which will center on the Consumer Confidence survey, New Home Sales, and Richmond Fed Manufacturing report, which will come during the New York session. The Dollar is also trading mixed against its major counterparts as political uncertainties prevail in both France and the Netherlands. Both countries are conducting presidential elections and this is calling into question the level of political consensus that will be seen once new people assume their leadership positions. The uncertainty that is being created will weigh most heavily on equity markets and high yielding currencies.
Both the Euro and Pound are trading sideways against the US Dollar, holding near the 1.3150 and 1.6130 levels, respectively. The Aussie Dollar, however, did see bigger losses (of roughly 0.5 percent) as the first quarter Consumer Price Index (CPI) showed that inflation levels were lower than previously thought, and this is leading to renewed speculation that the Reserve Bank of Australia (RBA) will have the flexibility to lower interest rates at its next meeting.
In the UK, FTSE 100 futures are suggestive of a moderately higher open (showing gains of roughly 20 points) and today’s economic figures will be seen with the release of Nationwide Home Prices, Public Sector Net Cash Requirements and Public Sector Net Borrowing numbers. Corporate earnings will be released from Associated British Foods, Highland Gold Mining, ARM Holdings, Highland Gold Mining, Smiths News, and Carrs Milling Industries. In Japan, Nippon Steel was lower after Moody’s downgraded its unsecured debt rating by one notch to A2, and this matched the broader Asian indices which were negative on the day.
In the US, corporate earnings have once again been one of the main success stories, and in addition to the housing numbers released today, we will also see earnings reports from Apple, AT&T, United Technologies, 3M, Amgen, and McGraw-Hill Companies, among others. Apple tends to get a lot of attention (indeed probably more than it deserves) when producing its earnings results so it would not be surprising to see this being one of the key drivers of sentiment in equity markets on the day. Equity markets are looking vulnerable after recent rallies, and today’s earnings will likely set the trading tone for the remainder of the week.
Technical Analysis:
The AUD/USD remains caught in its daily downtrend channel, with prices continuing to make lower highs and lows en route to a test of key Fibonacci support at 1.0120. We have already broken moving average support and with the MACD indicator showing prices in negative momentum, there is little else holding up the pair from a test of this level. A modest bounce will be expected into this area but a break would be a very bearish event and suggest a drop back below parity.
The Nikkei 225 is coming into some very critical historical and Fibonacci support levels at 9415. We have seen something of a bounce from this area on the first test but upward momentum was minimal and prices have since consolidated in sideways fashion. A break here looks imminent and will be very bearish as this is also where the 100 and 200 day EMAs are clustered. Any rallies should be sold, only a break back above 9700 turns the bias back to neutral.
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