March 06, 2019Market review and metrics for Forex, Oil, S&P500 & Yields.

Pivot points, Support, Resistance & Fibonacci Reversal levels; Chart of Interest – <AUDJPY>. {updated 5PM EST }

FX Performance (Strongest to Weakest)
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  • Market performance (DAILY)

    Market Performance (click to enlarge)

Market Comments
Forex The Aussie fell sharply across the board after dismal economic data reinforced the growing notion that the slowdown in domestic growth will force the Reserve Bank of Australia (RBA) to resume cutting interest rates sooner rather than later. Australia’s Q4 GDP posted +0.2% q/q -vs- forecasts of +0.5% and below last quarters’ reading of +0.3%. Bank of Canada (BOC) left rates unchanged at 1.75% and stated that “it now appears that the economy will be weaker in the first half of 2019 than the Bank projected in January“. The implication is that they have also shifted to a longer than expected neutral policy which raises the possibility that the next move might be a cut. Market interprets this as dovish.

First it was RBA and now BOC signalling a potential change in their monetary policy initiatives. Next up on the market-moving event docket is the ECB and at this juncture it would be a major surprise if they did not follow suit. In fact, conventional market wisdom (which is NEVER WRONG !!) is on the side of a delay in raising rates until next year and the re-launch of long term refinancing operation (LTRO), a cheap loan scheme to bolster bank liquidity thus enabling them to increase lending activity. Factor in BREXIT issues, FED extolling the virtues of “patience” and the seemingly ever present Japanese doldrums and the major that might have the most upside could be the flightless bird, Kiwi.

S&P500 The US trade deficit, which measures the difference between US exports and imports, surged to a 10-year high in 2018. The deficit with China was not only the largest component of the overall figure but it also set a new record despite tariffs imposed by the Trump administration. Consolidation was the dominant theme again as S&P500 index languishes below 2800. The heavily-weighted health care sector, which has been dealing with consumers clamoring for lower drug prices, in particular, and affordable health care in general, has been weighing down the overall index. Additionally, lack of global demand and growth concerns has contributed to dampen sentiment in energy stocks. The feeling here is that the market is just not comfortable breaching the 2088-20 resistance zone just yet, trade deal or no trade deal..
Oil & Yields
Crude oil inventories rose by a much higher than expected amount largely offsetting last weeks’ sharp decline. Traders are caught between OPEC-led cuts and a weakening Chinese & global economy. Citing “High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown” the Organization for Economic Co-Operation & Development (OECD) cut its global economic forecasts for 2019 in its economic outlook released earlier on Wednesday.

Both German and US 10 Yr yields were lower (make of that what you will)

  • Chart of Interest – AUDJPY (Daily)
    The possibility of RBA resuming monetary easing and safe haven flows into Yen, a byproduct of the general uneasiness in global markets, has pressured this pair. The ascending trend-line has been breached conclusively as the market shifts its’ focus to moderate support at 78.30. A break will bring 77.40 into play. A reversal through 79.85 will be needed to negate the bearish sentiment.

    (click to enlarge)

  • Pivot Points & Fibonacci Retracement Levels
    A technical analysis indicator used to try and determine the short-term trend of the market. The pivot point is the average of the high, low and closing prices from the previous trading period. If the market on the following period trades above the pivot point it is thought to be exhibiting bullish sentiment, whereas trading below the pivot point is seen as bearish. The Fibonacci retracement is the potential reversal of a financial instrument’s original move in price.

    Market Metrics (click to enlarge)