Australian Dollar Morning Report - Dow above 14,000 drags Aussie off lows, Euro top in?

Non-farm payrolls released Friday supported the stock rally with an outcome that was close to consensus with a print of 157,000 but with positive revisions to the last couple of months of 127,000 jobs. This helped the US stock market rally all day with the Dow climbing 149 points to 14,010. The S&P was of course also higher closing at 1513 for the best close since December 2007.

The more ebullient mood in stocks also heavily impacted Global FX markets dragging the Aussie off its lows as markets, somewhat incredulously if you are a fundamentalist, put the US dollar under intense pressure with the Euro rallying up through 1.37 at one point.

And it's difficult for stocks not to rally when they are being driven by the sorts of inflows that are being seen at the moment. Bloomberg reported over the weekend,

Equity funds lured six times the money that went into bonds in the week ended Jan. 30, according to a Citigroup Inc. report that cited EPFR Global data.

Stock funds drew $18.8 billion, exceeding the $3 billion that went into bonds, Markus Rosgen and Yue Hin Pong wrote in a report today. Fifty-eight percent of the equity inflows went into North American funds, the largest weekly inflows since September 2011, with exchange-traded funds being the largest beneficiaries, the analysts wrote.

Money flowing into ETF's mean that money has to be put to work in short order so it's not hard to see why the bid tone remains for stocks. Equally a good performance relative to expectations half way  earnings season is also a key psychological driver of stocks in a week were the Fed reiterated their commitment to open ended bond purchases - well at least until the 7.9% unemployment rate which accompanied the release of non-farm payrolls on Friday night.

Indeed job growth without a fall in unemployment is almost stock market nirvana as it shows a healing economy but keeps the Fed at bay.

Also out was a raft of Markit PMI data again with Germany bouncing nicely at 49 and getting closer to 50. France is struggling though with its PMI falling again - on the whole though global PMI's are heading in the right direction.

Stocks

So at the close of play it was cheers all round for global stock investors with the FTSE up 1.12% at 6347, the DAX rose 0.73% and France managed a 1.11% rally. Stocks in Italy were under pressure from the financial sector with Milan falling 0.69% and Spanish stocks fell 1.58% after a short selling ban was lifted.

In the US as noted above it was a solid night with the Dow up 149 points and the S&P up 15 at 1513. The Nasdaq rose 37 points or 1.17%.

In Asia today we are likely to see a very positive tone with catch up to the Friday moves in the US being signalled by futures moves.

GlobalFX

Euro made a high of 1.3711 before pulling back to close at 1.3664 for a gain of 0.65% on the day and well above the 1.3571 low. It is a little lower at 1.3640 this morning. GBP was smashed lower falling to a low of 1.5705 before closing at 1.5711 for a 0.91% loss. It is down below 1.57. The AUD broke lower to 1.0358 before recovering back above 1.04 and USDJPY was on a tear rallying to a 92.80 high before dropping back a little for a 1.17% gain.

Looking at the Technicals we see the boxes getting smaller and occupying less time. So Euro might potentially have signalled short term high above 1.37. 1.3592 is support on the day in Asia.

The Aussie broke lower through the box and looked like it was going lower before finding support. The bounce isn't overly encouraging at this point but it is back inside the box so fo now the 1.0360/80 region remains support.

Commodities

Some of the best performing markets last week were the commodities and silver and copper lead the charge higher on Friday rising 1.94% and 1.40% respectively. Gold was more subdued up just 0.53% to $1667 oz. but well off its highs.

Data

In Australia today we have ANZ Job ads and Building Permits before a fairly quiet 24 hours on the economics front internationally. Perhaps factory orders in the US might get things going but its "Super Bowl Sunday" Asian time today so it might be quiet once equities catch up.

RBA Day tomorrow - no change expected.

Catch me on Twitter @gregorymckenna or @FX_Global