Markets are healing and the Aussie dollar is on a tear(ish)

Quick Recap

The market’s recovery from the acute weakness of August and desperate uncertainty of September continues. Last night saw stocks in the US rally, emerging market and commodity block currencies bounce and bonds sell off a little bit.

Parsing what I wrote at Business Insider this morning Ray Attrill, the NAB’s co-head of global currency strategy summarised the moves in emerging and forex markets this morning saying,

The rapid reversal in post-August 11 Emerging Market and commodity currency weakness continued with a vengeance overnight. The Malaysian Ringgit is 3.6% up on this time yesterday and the Indonesian Rupiah 3% higher. At 0.7211, AUD/USD is now 4.1% above its recent (Sep 24) lows, and NZD at 0.6612 some 6% higher over the same period.

 A lot of that change he says is because China looks like it is aiming for currency stability after President Xi’s recent trip to the US.  That means there is less fear and uncertainty.Equally though I still reckon this is a natural snap back to a crash, recovery, massive and frequent retest of the lows, and now the inevitable consequence is prices moving higher looking for resistance.  Anyone who’s been in the markets for a while and a decent chartist can tell you that.A top, or resistance, was found in oil last night (see chart of the day) and European stocks were hammered in the last hour of the day when the US market was having its mid-morning swoon. But, in the end that fall was reversed and US stocks ended up a little under 1%.That all adds up to what looks like another good days trade on the ASX today. The December SPI 200 futures contract rose 32 points last night to 5,221 after the 0.6% rally on the physical yesterday. BHP and Rio both did well again in London trade and even though crude reversed a little from its highs the energy complex is still strong relative to the lows and a week ago.

Elsewhere on commodity markets base metal prices were stronger with lead up 3.1%, zinc 2.2% higher and copper up 0.64%. Iron ore was up a little as well.

Looking specifically at the Aussie dollar it has ripped higher again and is enjoying one of its best streaks in years my colleague David Scutt from Business Insider wrote today.

The overnight scoreboard (9.09am AEST):

• Dow Jones Industrials +0.73% to 16,912
• Nasdaq Composite +0.9% to 4,791
• S&P 500 +0.8% to 1,995
• London (FTSE 100) +0.16% to 6,336
• Frankfurt (DAX) +0.68% to 9,970
• Tokyo (Nikkei) +0.75% to 18,322
• Shanghai (composite) Closed – last at 3,053
• Hong Kong (Hang Seng) +3.13% to 22,515
• ASX Futures overnight (SPI December) +32 to 5,221
• AUDUSD: 0.7204
• EURUSD: 1.1236
• USDJPY: 119.99
• GBPUSD: 1.5313
• USDCAD: 1.3060
• Nymex Crude (front contract): $47.80
• Copper (US front contract): $2.3695
• Gold: $1,145
• Dalian Iron Ore (January): 366.5(denominated in CNY)
• US 10 year bond rate: 2.07%
• Australian 10 year bond rate: 2.67%

On the day

On the data front in Australia there are no major economic data to be released. In Japan we get a raft of second tier economic data including foreign investment, BoJ survey, and machinery orders. German trade is out tonight along with a Bank of England rates decision. In the US, we get minutes from the last Fed meeting.

CHART OF THE DAY: USOIL (Nymex) Again, I know

I used this chart cause it told the story mildly better than my MT 4 chart. But you can see the failed break, so far, after yesterday’s attempt to break out.

Crude was under pressure from the big increase in stocks and that’s the fundamental excuse for traders to have sold but it’s also clear that traders were watching the top of the box.

For the moment then this level, last night’s high, remains the key level to watch.