US equities attempted a small comeback today after yesterday's depressing kick-off to the corporate earnings season, but other earnings news streaming in today failed to generate enthusiasm and they dumped lower into the close. Adding to the negativity may be the Obama administration's announcement that it is considering levying a special tax on banks that were bailed out in an effort to cut the fiscal deficit and recoup some of the cost of the bailout. This is clearly an attempt at damage control from public outrage as the big banks are soon set to announce their bonuses .
Significantly, commodities also joined the risk sell-off. Crude oil sold off as warmer weather is sweeping across the US again after a recent cold snap that saw temperature records falling across the nation. Gold plummeted more than twenty dollars today as an official at China's CIC sovereign wealth said that gold is too expensive and stated that the lows are in for the USD.
China is increasingly worried about its potentially overheating economy and announced another credit constriction attempt by raising bank's reserve requirements today. A debate is raging concerning the degree to which the Chinese economy faces a bubble in asset markets. Not so long ago, the impressive Jim Chanos weighed in on the issue (the famed short seller believes China is in a bubble state), while a Forbes article out yesterday specifically rebutted Chanos' claims. None other than the famous China cheerleader Jim Rogers has also put down Chanos' claims, saying that Chanos is a China neophyte that couldn't spell China 10 years ago.
Technical and other developments
USD - the USD was rangebound vs. the Euro and slightly weaker vs. the pound, but saw reasonable gains against the higher beta risk currencies. The performance was actually relatively solid considering the successful conclusion of the latest US treasury auction and the market likely expecting that tomorrow and Thursday's auctions of 10-year and 30-year debt will also go well. (By the way here's a handy link that shows the dates for upcoming treasury auctions, an important thing to track this year with all of the heavy public issuance.
USD - the USD was rangebound vs. the Euro and slightly weaker vs. the pound, but saw reasonable gains against the higher beta risk currencies. The performance was actually relatively solid considering the successful conclusion of the latest US treasury auction and the market likely expecting that tomorrow and Thursday's auctions of 10-year and 30-year debt will also go well. (By the way here's a handy link that shows the dates for upcoming treasury auctions, an important thing to track this year with all of the heavy public issuance.
AUD - looking very shaky suddenly on the move to risk aversion and the sharp sell-off in gold. Further downside is certainly a possibility if risk continues to turn tail, which would abort any full attempt by AUDUSD to have a go at a double top. Thursday's employment report is a big test of the situation as well.
Chart: AUDJPY
JPY crosses very much in focus at the moment with bonds rallying and risk selling off. Friday's hanging man in AUDJPY wasn't much of a signal for yesterday's action, but today saw a very steep sell-off. Interesting that this sell-off comes after an attempt at attempt at a new 15-month high.
JPY crosses very much in focus at the moment with bonds rallying and risk selling off. Friday's hanging man in AUDJPY wasn't much of a signal for yesterday's action, but today saw a very steep sell-off. Interesting that this sell-off comes after an attempt at attempt at a new 15-month high.
JPY - swooped sharply stronger across the board on the trifecta of weak commodity and equity markets (and therefore weak higher risk currencies) and strong bond markets. USDJPY is fast approaching a key support area we mentioned in this morning's report at 90.00.
EUR - is performing relatively well as it has become a bit more negatively correlated than previously with risk appetite - rising sharply vs. the AUD, for example, over the last couple of days.
CAD - pulls higher through the weekly pivot at 1.0375, an interesting swing level for the rest of the week. Short term vulnerability in CAD with combination of sharp energy market consolidation
NOK - we finally see a bit of a rally in EURNOK with oil dumping today - it would seem short term risk remains to the upside, though we have to watch out for Thursday's ECB meeting.
Chart: EURNOK
EURNOK nodded its head at the oil sell-off over the last couple of days, further short term upside may be in order here as the sell-off has been long and persistent and we are headed into a major inflection point on Thursday with the ECB meeting.
EURNOK nodded its head at the oil sell-off over the last couple of days, further short term upside may be in order here as the sell-off has been long and persistent and we are headed into a major inflection point on Thursday with the ECB meeting.
Looking ahead
Some interesting vibes coming from the intermarket action today, where risk looks a bit shaky all of a sudden after day after day of upside in equities. It would seem that the potential for volatility expansion is high. This would play most to the Aussie and Kiwi's detriment. Be careful out there as always.
Some interesting vibes coming from the intermarket action today, where risk looks a bit shaky all of a sudden after day after day of upside in equities. It would seem that the potential for volatility expansion is high. This would play most to the Aussie and Kiwi's detriment. Be careful out there as always.
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