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

US Dollar under the microscope (Getty/Mark-Wilson)

Good morning.

– An interesting night’s trade with competing cross currents across asset classes. The US dollar weakened, US bonds sold off but US stocks are mostly higher. In Europe, stocks were under pressure and yesterday, just as everyone is getting hot under the collar about QE Chinese-style, the Shanghai composite fell more than 1%. The fact that different things are driving different assets and asset classes could actually be good for markets as it suggests traders are comfortable enough to focus on market-specific news which reflects a lowering of systemic risk. Anyway, to the specific.

– The big news locally is the sell-off in the US dollar which has allowed the Aussie dollar to surge up and through 80 cents. That’s the first time since late January this year. I’ve had a look at the Aussie move in a separate piece this morning. but suffice to say this is mostly, but not entirely a US dollar move. Indeed, the euro is closing in on hitherto impossible resistance in the mid to high 1.10 region, the Canadian dollar is breaking higher and sterling managed a rally even though UK GDP came in with an anaemic print of just 0.3% for Q1. Key to the move in the US dollar appears to have been the huge miss on expectations about consumer confidence which printed 95.2 against the increase to 102.2 from March’s 101.3. “That’s the weakest reading for the year but still higher than December 2014,” according to Imre Spiezer from Westpac New Zealand.

– While the dollar focused on confidence, the Case Shiller 20-city house price index showed a rise of 5% against 4.7% expected while the Redbook was stronger than expected at +1.4% year on year and 0.2% for the month of April. That combination has left US stocks a bit mixed with the Dow and S&P higher but the Nasdaq marginally lower. In Europe, stocks fell heavily under the weight of some poor earnings news even though Greece feels like it is heading toward a resolution. Greek PM Tsipris has sidelined Finance Minister Varoufakis and believes a deal this month is do-able. But, he has also threatened a referendum if the creditors are too tough on him. So risk remains.

Here’s the overnight scoreboard (7.21am AEST):

  • Dow Jones up 0.4% to 18,110
  • Nasdaq down 0.1% to 5,055
  • S&P 500 up 0.28% to 2,114
  • London (FTSE 100) down 1.03% to 7,030
  • Frankfurt (DAX) down 1.89% to 11,811
  • Paris (CAC) down 1.81% to 5,173
  • Tokyo (Nikkei) up 0.38% to 20,058
  • Shanghai (composite) down 1.13% to 4,476
  • Hong Kong (Hang Seng) flat at 28,442
  • ASX Futures (SPI June) +11 to 5,937
  • AUDUSD: 0.8015!!!
  • EURUSD: 1.0976
  • USDJPY: 118.84
  • GBPUSD: 1.5334
  • USDCAD: 1.2025
  • Crude: $56.93
  • Gold: $1,211

– On the local ASX 200 yesterday, we saw another rejection of the 6,000 level after the implied break in futures trade on Monday night. Yesterday’s trade took its lead from the US trade the day before but clearly the Aussie market needs an offshore catalyst to drive up and through the overhead resistance at the moment. Futures are indicating a better day – we’ll see.

– In Asia yesterday, there was increasing talk of a vast China QE program but the Shanghai market ended weaker regardless. Key to the disconnect, I think, is that local traders understand that while it looks a little like QE in what it does – in terms of buying assets by the PBOC – it looks and feels more like another plank in the overall restructuring of the Chinese economy. That’s the point Morgan Stanley analysts highlighted yesterday.

– Bond markets in the US seemed to march to the beat of their own drum. Certainly the 9-point selloff in the yield for US 10s which took them back to 2.01% is inconsistent with the US dollar’s move and the dovish expectations about the FOMC tomorrow morning our time. German Bunds stayed at 0.16% and UK 10-year gilts remained at 1.72%.

– On commodity markets, there was a little excitement last night and a spike in crude oil after news hit the wires that Iranian forces had boarded and seized a ship – initially thought to be US flagged. By the close however, Nymex crude had slipped back a little and is at $56.93. Like the ASX 200, Nymex Crude has pretty solid resistance overhead which it hasn’t been able to break yet. The US dollar’s fall helped gold rally back to $1,211 while copper rests at $2.78 this morning. On the bulks, Dalian and Nymex iron ore slipped back overnight for what seems like the first time in ages. Dalian September closed at 328. Newcastle Coal futures for June were 5 cents lower at $59.30.

– On the data front today, there is nothing out in Australia but plenty of Kiwi data with trade, activity and confidence data all to be released. Tonight there is a raft of EU data including business, consumer and economic sentiment. In Germany, CPI is due and then the big data for the night is the US Q1 GDP at 10.30pm Sydney time. The FOMC statement will follow at 4am.

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

Woodside Petroleum

Woodside’s share price continues to oscillate within a triangle pattern while investors wait for a clearer view of where oil is going to settle and what that means for LNG prices.

At the moment Woodside looks to be heading back towards resistance which could be a useful benchmark for technical traders. This resistance is around $36.40 and is formed by the triangle resistance line. This would also represent a neat ab=cd pattern, as I’ve drawn on the chart below.

From a trading point of view, this might be a level to take profits or tighten stops for those who bought on the bounce off the triangle support when I highlighted Woodside as a stock to watch a few weeks ago. However, a clear break through the top of this pattern could also be interpreted as a bullish development for the medium term.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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