It's been relatively sluggish today compared to last week but plenty of news was abound and no more so than the recent combination of Chinese and Australian data, which yet again painted a somewhat grim picture for the Australian economy. NAB business confidence slipped even lower to 2 (3 exp), which shows there is very little confidence in the current state of affairs for the Australian economy. While over in China we saw CPI data came in much weaker than expected at 1.3% y/y, a significant drop compared to the last reading, and a tell tale sign that things are certainly not heating up any more in the Chinese economy. This low reading will certainly be in part to the much cheaper energy prices, but they could also be a symptom of the underlying problem that China is indeed slowing down which can be seen in all the metals traded on the markets.
So far the AUDUSD has managed to hold itself steady in the markets, and I am a little surprised by this, but there is still some appetite for risk out there. How much risk remains to be seen, and with the prospect of further cuts by the Reserve Bank of Australia we may see some capital flight. For me the AUD still looks a little to strong, and support at 0.6979 is likely to be a candidate for some pressure in the near future if the recent trend is anything to go off. Below this level a push down to 0.6903 is likely to struggle to find further momentum unless we have a major fundamental catalyst to cause a break of the support level which has held under heavy pressure previously.
The S&P 500 is something I've been commenting on and watching for some time after it's very strong bullish movements, which saw it climb back up towards record highs, as the market continues to believe that we will see a lift in interest rates. However, the S&P 500 has stalled and is now looking like it's going to play the ranging game again. Historically speaking after every sharp drop we have seen a sharp recovery which in turn has been led by higher highs, and certainly this does look like a real possibility given the recent non-farm payroll data which showed the American labour force was looking healthy. What will be a genuine catalyst to move Yellen away from her Dovish nature will be a boost to the current inflation rate in America - a hard ask given how low oil prices are.
However, I am inclined to swing now towards the believer camp of a possible rate rise, albeit a small swing. Looking at upward momentum it's clear that the trend line was steep and the market is looking for a chance to crash through resistance at 2103, and then onto record highs above resistance at 2130. Certainly the trend line that has formed and is quite bullish (but very steep) is what I will be focused on in the coming days to see if the market respects it thus far, and if there is any further momentum to be squeezed out.
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