US dollar loses its mojo, crude cant break

Quick Recap

US stocks were under a little pressure last night for no big reason although biotech came under some pressure. But Europe ripped higher on the back of hopes that Greek shifting the deck chairs on its negotiating team and the direct relationship between PM Tsipras and German Chancellor Merkel will get the deal done.

That’s helped the Euro a little at the margin over and above the reduction in love for the US dollar which was evident in the CFTC data released on Friday night. Last night the Euro couldn’t quite hold above 1.09 but its still doing well.

On commodity market Nymex crude still can’t get through the top of this current wedge formation. Have a look at your charts – it’s a nice set-up. Gold bounced back strongly with a gain of $20 an ounce and copper rallied as well.

Shanghai is still doing what Shanghai does and printed another massive 3% gain eysterday but the local ASX lagged. The gain of 0.83% is nothing to sneeze at however and in futures trade overnight there was an implied break of this 6,000 level that is constraining the physical market. Whether or not it can open and hold above the level – as the futures close this morning suggests it can – is still open to debate. BUt it is a strong set up it it can power higher.

Just quickly – I have no idea what the Fed is going to do on Thursday morning at 4am. That’s not quite true – I know they won’t be raising rates but I’m not sure what they will say. I do think there is a risk of negative growth when Q1 GDP is released at 10.30 pm Sydney time. At the very least we are likely to get a weak annualised growth number for the quarter.

That suggests that the FOMC is going to need to acknoledge the slowdown even though they might say they accept a rebound.

So I am backing the technical break out of the Euro and Pound and the potential for the USDCAD to start to break substantially lower. The Aussie and other should get dragged along for the ride.

But the key to everything is that Euro needs to break 1.1050/90 if the US dollar is doing anything other than a shallow swoon.

On the day

On the data front today the RBA Governor Stevens speaks at 8.40 this morning. There is some doubt he’ll say anything market moving given the proximity of next week’s RBA meeting but we’ll have full coverage regardless. UK GDP is out tonight along with US Case Shiller house prices and the Redbook.

Here’s the overnight scoreboard (7.47am AEST):

• Dow Jones down 0.23% 10 18,037
• Nasdaq down 0.63% to 5,060
• S&P 500 down 0.41% to 2,108
• London (FTSE 100) up 0.47% to 7,103
• Frankfurt (DAX) up 1.93% to 12,039
• Paris (CAC) up 1.3% to 5,268
• Tokyo (Nikkei) back below 20,000 with a close at 19,983
• Shanghai (composite) up an amazing 3.06% to 4,528
• Hong Kong (Hang Seng)up 1.33% to 28,433
• ASX Futures (SPI June) up 17 to 5,921
• AUDUSD: 0.7850
• EURUSD: 1.0882
• USDJPY: 119.07
• GBPUSD: 1.5225
• USDCAD: 1.2085
• Crude: $56.66
• Gold: $1,201

CHART OF THE DAY:

USDCAD: Even though GBP (see below) is consolidating its break out USDCAD is the big one I’m watching at the moment.

It’s grinding toward key 1.2046 support.

GBP – Weekly: As discussed yesterday after a two-week rally GBP has broken out of the 9-month downtrend. Ast night that rally continued and the Pound is starting to look really good.