Here's your 20-second guide to what Aussie traders will be talking about this morning

Getty/ Jeff J Mitchell

Good morning. Here comes the weekend.

– The US dollar is the big winner overnight. The dollar started rallying from the moment US traders walked in. This was in contrast to European weakness which saw the Aussie dollar above 79 cents and euro close to 1.14 for a time. But, for reasons that are substantially unknown – don’t believe headlines that say it was about the CPI – the US dollar rose sharply. The euro fell close to 200 points and the Aussie dropped more than 130 points.

– Ex-poste rationalisation (trying to explain a move after the event) in currency markets and for currency moves is always rife. That’s because it’s the biggest macro market in the world, and sometimes it’s hard to figure out what drove things. Which is why Ray Attrill, NAB’s co-head of Currency Strategy, wrote this about the “data-driven” US dollar rally:

The history books that are today’s newspapers are already writing that the sharp recovery in the US dollar during last night’s offshore trade was primarily the result of US inflation data….If only FX was so simple. In truth, the EUR/USD led moves (the latter is almost 200 points lower than where we left it yesterday) was underway before the first of last night’s US data release hit the screens. Order flow – in structurally less liquid markets post the January SNB shock – looked to have got the ball rolling.

That means there is still some inherent US strength in the market. The big question now is will the euro crash to new lows and will the Aussie, amongst others, be dragged along for the ride?

– On the data front, the irony of the move, according to NAB’s Attrill, is that German unemployment actually fell by a larger than expected 20,000 last month. UK GDP printed on expectations of 2.7% year on year after a rise of 0.5% on the quarter. EU economic sentiment rose a little more than expected to 102.1. But it was the US CPI which we are most interested in given it will help inform Fed tightening expectations. The headline CPI fell 0.7%, much more than the -0.4% expected for January. Abstracting food or energy, the CPI for January rose 0.2%. Initial jobless claims rose to 313,000 while durable goods orders ex-transportation rose 0.3%.

– The other big news last night was the big fall in Nymex crude prices. After the Saudi Oil Minister suggested the market was stabilising the day before, prices have fallen 3.9% to $49.00. Reversing the reversal – the battle rages in the oil market and these volatile markets feed on themselves.

– US stocks were relatively calm compared to currencies and at the close, the scoreboard in the US reads:

  • Dow Jones down 0.06% to 18,214
  • Nasdaq up 0.42%, 21 points to 4,988
  • S&P down 3 points to 2,111

European markets at the close:

  • London(FTSE 100) up 0.21%, 15 points to 6,950
  • Frankfurt (DAX) up 1.04%, (WOW) 117 points to 11,327
  • Paris (CAC) up 0.59%, 29 points to 4,911
  • Milan (FTSEMIB) up 1.04%, reversing the previous day’s weakness to 22,165
  • Madrid (IBEX) up 0.82% to 11,140/li>

– Locally, after yesterday’s dip, SPI March futures traders have rallied prices 6 points to 5,882. That is consistent with the positive mood in other Asian futures markets overnight.

– In Asia yesterday, the delayed impact of the positivity in stock markets that occurred while Shanghai was on holidays turned up and traders took the market up a solid 2.14% to 3,298. In Tokyo as well there was another rally and another 15-year high with the market up 1.08% to 18,786. Reuters reported that “sentiment was also lifted by news that the Federation of National Public Service Personnel Mutual Aid Associations, the body managing Japan’s national civil service pensions, will raise its target allocation for domestic stocks to 25 percent from 8 percent”.

– The move in US bond rates supports the US dollar move with the 10s up 6 points to 2.03%. German 10s finished at 0.26% and Gilts closed at 1.73%.

– On commodities, crude dropped as discussed above but copper’s recovery continued up 1% to $2.6905. Gold is at $1208. On the bulks, iron ore for June rose 57 cents to $62 while Newcastle coal for the same delivery was up $1.15 to $60.40.

– On the data front today we get Private Sector Credit out in Australia while Japanese CPI in our time zone is worth watching. German import prices are out tonight as is Italian CPI, Greek GDP and German CPI. Then the big one – the second read of US GDP at 12.30am.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

Bank of Queensland

BOQ was in the news yesterday reporting that it has written off the new Customer Relationship Management System it had been piloting. More significantly, it also provided guidance that its first half cash earnings are likely to be in line with average expectations at around $362m when they are announced at the end of March.

Not surprisingly, the BOQ chart has a similar look to the NAB chart I wrote about yesterday. The BOQ MACD indicator is also showing signs of divergence with price. The black MACD line is rolling over and starting to head lower while the price chart has still been making higher highs.

The difference between this chart and NAB is that it’s not as advanced. This potentially makes it more interesting from a trader’s point of view. The MACD indicator has not yet provided a sell signal. This will happen if the black line crosses below its moving average (red line). This will be illustrated by the histogram bars moving below zero. At the moment they are just above (.004).

So BOQ would have to close a bit lower to trigger a MACD sell signal at this stage. A close below the 10 day moving average shown on the chart would probably do the trick.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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