Global equities are certainly taking their confidence from central banks for a much lower standard with regards to the interest rates despite the appearance to the Fed and ECB as the market done a fairly good job of re-pricing rate expectations for the BoE following last week’s report.
In terms of future Fed action, the market is presently pricing in 61 basis points two years at this juncture. Throw in good earnings from all parts of the developed world and stability in most emerging markets and the resulting consequence is a market seeing new all-time highs in the NASDAQ, while the S&P500 is printing a new all-time high.
There are also strong gains in bloc currencies which was a reversal in CME copper. The VIX was diminishing at a rate of 36 % in less than 10 days and sterling on a trade-weighted basis at multi-year highs respectively.
If analysts are keeping a firm eye on the credit markets as well as corporate credit default switches (CDS) spreads contract then sentiments should be relatively in a stable position. The credit market is generally one step ahead of everyone else and should the spreads fall other risk asset should likewise need to find more buyers.
ASX 200 to hold the multi-month trend break
In Australia, the ASX 200 was able to place 3.7 % last week and when it appeared to be adjusting along with the global markets into AUD terms, the ASX 200 was regarded as the best performer. This was above all something out of the ordinary however what was even more exceptional was the perfect set for the ASX 200 to be appreciated.
When there are strong developed markets, stability in emerging markets and improvements in Chinese data and better corporate earnings despite the recently lowered expectations from sell-side predictions, the ASX is speculated to do well in the succeeding weeks to come. Yet, sceptics are still unconvinced mainly because of the simple fact that the bar had been lowered by the analyst community going into this earnings season is the key.
If they take into account good US leads along with strong China financing data and an upside beat in Japan’s 4th quarter GDP and all other different aspects combined, you have a market that is up 0.4 %. CBA was able to pay its dividend, which has naturally taken some of the wind out of the index sails, however the ASX 200 appears to be holding the former downtrend drawn from last year’s high which could ultimately mean a move to 5,400 eventually.
Tightening the stops and gold longs
The USD/AUD was able to find buyers and is again testing last week’s high of 0.9067 along with the 38.2 % retracement of the October-January sell-off at 0.9079. The Chinese financing members were generally strong as this was when the banks were given with their fresh landing quotas. The fact that gold persists to move higher is attributable to a certain degree wherein Australia is still a major player in the global export market.
On the subject matter of gold, the 61.8 % retracement of the August-December sell-off at $1338 should limit the upside and move in this fitting with an assessment move from the previous December low. Shorting into the strong but short-term uptrend is not advisable, but the chance of a retracement in the short-term is relatively expanding.
The DAX is likewise hazardously so close in making a higher high yet the client base hold a net short bias which was 69 % of all open positions that were short. This is a view that has been built overtime yet clients today have already preferred to make use of the improvement sentiment and majority are currently trading from the long side.
In the FX market, it’s basically all about the sterling right now and while cable is overbought, the pullbacks are an opportunity for most investors. The USD/EUR appears to sell steadily with divergence seen between the price and the oscillators. Moreover, taking a small position around the present levels and placing a sop above the multi-year downtrend would relatively work, yet this isn’t a pair in which it can find any sort of trend at all, hence traders and investors alike must be fairly quick in their decision.