Axi | Jun 20, 2018 09:14
Originally published by AxiTrader h2 Market Summary (7.39 am Wednesday June 20)/h2
It’s somewhat difficult for me to say exactly why the funk markets were in during European trade has abated. So I won’t try and fit a narrative to the price action. But, if I was going to have a guess it would be that like Pavlov’s dogs, market are conditioned. In a trader's case it’s to buy the dip because let's face it, the world didn’t end. It’s just a trade war between the US and almost everyone else on the planet.
To wit, I forgot to mention yesterday the Indians are retaliating, overnight the Russians are doing likewise, and of course the Chinese have said they respond if the US goes live fire with President Trump’s latest threat of another $200 billion.
The chances of that seem high if you listen to Trump trade adviser Peter Navarro overnight (more on that in the full note below). So the probability of further escalation remains elevated. The US will not back down and countries - as the Canadian Foreign Minister Chrystia Freeland said last night – have no choice but to respond.
Anyway, to the markets and the S&P 500 has lost about 0.4% as the slide continues. Sure the close at 2,762 is well off the low of 2,743 (for the third day in a row) but the price action continues to drift. In that vane the sell off of the Dow continued as it lost another 1.15% to close at 24,700 while the Nasdaq 100 fell 0.32% to close at 7,218.
The moves in the CAC and the DAX were more like the Dow with losses of 1.1% and 1.22% respectively while in the UK the FTSE was only down 0.36%. Asia yesterday, China in particular, had a very bad day. The Shanghai Composite lost 3.82%, the Hang Seng lost 2.78%, the Nikkei dropped 1.77%, the KOSPI was 1.52% lower and the STI in Singapore was off 0.68%.
We’ll likely see some bounce back today given US traders sutured the bleeding. That’s a bet SPI traders have taken with the September contract up 40 points after the very solid performance of the ASX 200 yesterday which was only down 2 points for a very strong close at 6,102.
To forex then, and the US dollar is stronger but not yet strong. Yes, it’s up around 6% in the past couple of months. But, with the US Dollar Index at 95.04, the US dollar has once again failed to close above the 95.20 level which is needed to ignite the next wave of technical buying. The corollary, of course, is the euro still holds above 1.15. It’s at 1.1582 this morning off a low around 1.1530.
Likewise, the forex risk trades of USD/JPY and the AUD/USD are off their lows as well as tension – at least in markets – has eased. USD/JPY is back above 110 at 110.05 off a low around 109.54 while the Aussie is trading 0.7379 after bouncing off trendline support in the mid 0.7340’s. The yen lost a little less than half a percent the Aussie a little more. The kiwi is down as well at 0.6896, off 0.66% while the Canadian dollar lost a similar amount with USD/CAD at 1.3278.
On commodity markets, the big news is not that oil fell another 1% as traders worry their customers will go into a cave and not buy given the uncertainty the trade war causes and the threat to global growth and thus demand. No. The big story in oil is that the Iranians appear to be ready to throw the toys out of the cot and has rejected any compromise at this week’s meeting. The Saudis are still said to be peddling a 300-600 thousand bpd increase. Anyway WTI is at $65.08, down 1.15% while Brent is at $75.09 down 0.33%.
In other commodities copper's capitulation from recent range highs near $3.30 continued overnight as it lost another 1.4% to $3.06. Gold is still irrelevant to most traders and is languishing at $1275. Bitcoin is at $6,727. A little stronger but not as strong as I thought it might have traded given everything that’s gone one.
It’s another fairly quiet day on the data front, but we naturally have to watch out for trade war rhetoric and stories. The Reuters Tankan for Japan and the BoJ minutes are out along with German and EuroArea PPI data. In the US it’s existing home sales. We also get a speech each from Fed chair Jerome Powell and ECB president Draghi.
h2 Here's What I Picked Up (with a little more detail and a few charts)/h2 h2 International/h2h2 Forex/h2
Have a great day's trading.
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