US dollar reversal lifts the Euro, Aussie Dollar and Pound out of the mire

Quick Recap

The price action in the Aussie dollar, Euro and Sterling last night is a particular example of why technicals are important and why you shouldn’t get too bearish at bottoms or too bullish at tops. Remember what I wrote yesterday morning about the Euro on the advice an old trading mentor always used to give me, ““Barney, always looks good at the top and <insert colourful word> at the bottom.”

Wise advice as the reversals in these prices show.

What drove the moves against the US dollar was a combination of a massive outsized print for EU industrial production for February, with a print of 1.1% against 0.4%, combined with the weaker than expected print of 0.9% for US retail sales and the downgrading of US growth expectations for the next two years by the IMF which was announced last night. The  IMF downgraded its US growth forecast for 2015 and 2016 to 3.1% (down 0.5% and 0.2% from previous forecasts). That has impacted thoughts about when the fed will first move and then by how much. So the foot is lifted of the throat of the Euro and Aussie – for now.

The Yen did better both on the US dollar move but also comments from Abe advisor Amari which were republished in Asia yesterday. he said that the USDJPY rate around 105 might be more appropriate. Of course, this suggests a massive overshoot at 119/120 and perhaps its time for another downside probe.

On other market stocks on Wall Street were mixed with Energy stocks and a couple of earnings beats helping the big indices end the day in the green. The Nasdaq was lower, as was most of Europe. Although the FTSE managed to finish higher.

On commodity markets the iron ore rally continued in Asia yesterday and energy had another solid move overnight after both the US dollar move and comments from Iran that OPEC should cut production by at least 5%. Gold slipped under support at $1,190 in early Europe but has clawed back above it on the US dollar move. Dr Copper is lower at $2.71 on the back of the IMF growth forecasts I’m guessing.

Also worth noting is that the IMF said Australia is going to struggle under the weigh of lower metals prices for at least another 12 months before they stabilise. Here’s the article I wrote at Business Insider this morning.

On the day

On the data front today we get the Westpac Consumer Sentiment data in Australia at 10.30 am this morning. At midday we get the Chinese GDP and associated data while tonight we get German and French CPI and an ECB statement and Press conferrence. Tonight we also get a Bank of Canada decision along with US industrial production, a speech from James Bullard and then the Fed Beige book in the morning.

My colleague David Scutt from Business Insider has a great preview for the Chinese GDP you can find here.

Here’s the overnight scoreboard (8.31 am AET):

• Dow Jones up 0.33% to 18,036
• Nasdaq down 0.22% to 4,977
• S&P 500 up 0.16% to 2,095
• London (FTSE 100) up 0.16% to 7,075
• Frankfurt (DAX) down 0.9% to 12,227
• Paris (CAC) down 0.69% to 5,218
• Tokyo (Nikkei) flat at 19,908
• Shanghai (composite) only up 0.34% in the end at 4,135
• Hong Kong (Hang Seng) down 1.62% to 27,561
• ASX Futures (SPI June) +11 to 5936
• AUDUSD: 0.7618
• EURUSD: 1.0650
• USDJPY: 119.39
• GBPUSD: 1.4773
• USDCAD: 1.2488
• Crude: $53.44
• Gold: $1,193

CHART OF THE DAY:

Nymex Crude: Trying to break out – this could be a big and decisve move.