TRADESETUP

September 12, 2019

The Morning Jumpstart

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OVERNIGHT MARKET SNAPSHOT (as at 7am AEST)

  • SPI200 (Sep) overnight futures up 17 pts to 6634
  • SP500 up 21.54 pts to 3000.93
  • NASDAQ up 85.53 pts to 8169.68
  • Dow Jones up 227.61 pts to 27,137.04
  • FTSE100 up 70.08 pts to 7338.03
  • DAX30 up 90.36 pts to 12,359.07
  • GOLD futures US Session (December) up $5.30 to $1504.50 an ounce
  • COPPER futures US Session (Comex Dec) down $0.0110 to $2.6170 a pound
  • OIL futures US Session (Nymex Oct) down $1.45 to $55.95 a barrel
  • CRB Index down 1.21 pts to 173.73
  • AUDUSD trading at 0.6863
  • EURUSD trading at 1.1010
  • GBPUSD trading at 1.2331
  • USDJPY trading at 107.8000
  • USD Index (ICE Sept) trading at 98.612 up 0.305

In the US, Indexes continued on their merry way higher as expectations increase for the Fed Reserve to cut rates to stimulate the economy. Trump went on another twitter rant pressuring the Fed to cuts rates down into negative territory which is a move only used by other central banks to combat weak economic growth. The problem the Fed has is that the economy is still growing at a modest pace which was supported overnight as Producer Prices data came out better than expected. Supporting buyers was a move in good faith on the trade front from China as they announced tariff exemptions for a basket of US goods. The DOW closed up 0.85% while the broader SP500 was up 0.72% and the Nasdaq also ended up 1.06%. In Europe, Indexes also rallied on the back of hopes for further stimulus from the EU and also on hopes for a potential resolution sooner rather than later on the trade war.

US bond yields rallied after the positive data release took pressure off the inverted yield curve. The Fed and Trump are still at odds over interest rate cuts as data does not point at the need for cuts to bring the rate below zero as Trump would like. If rates were to be cut below zero, this may be a catalyst for a major correction as traders bail on risk and yield curves invert severely. Japan and other major economies already have negative rates and as far as economic policy tools go, negative interest rates have a checkered track record in achieving any of the expected goals for growth.

The USD moved higher overnight to pressure major currency crosses. The move started prior to the European session and saw dollar buyers jump into the action ahead of the ECB meeting tonight. The EURO came under pressure as the Dollar rallied and on expectations that the ECB will restart an asset purchase program at a time when the EU’s biggest economy, Germany, could be slipping toward recession. There is risks for a bounce into the Euro after recent selling pressure if the ECB do not come to the party as expected and sellers get squeezed out of the action. The GBP also came under some pressure from USD buying but remained focused on Brexit issues. The AUD tested support during the day and managed to react higher with buyers pushing price up through previous highs at 0.6875 as the pair continues to benefit from positive trade war sentiment. The USDJPY pulled back into the US open but again managed to rally as the USD pushed higher.

Gold interestingly reacted higher off support and pushed back above the $1500 level on the futures contract even as the USD rallied. The bull move may not be over as safe haven traders may see a bargain and expect some volatility from the ECB statement. Oil moved lower to give up some of the recent gains even as US inventories came in more negative than expected. The move seemed to be more due to profit taking than concerns for the economy. Copper found sellers to push price down to test the previous lows when it found support from buyers. Buyers and sellers seem content with current levels just below resistance and may be happy to await further news on the trade war.

Cryptocurrencies were again steady overnight and lacking any major volatility. Bitcoin is currently trading at $10105.6 up 0.40% while Ethereum is at $177.01 down 0.80% and Ripple is at $0.25244 down 1.25%.

The ASX200 had a very choppy session yesterday after the open but then managed to match 17 points higher at 4:10pm. In the end the index finished up 23.9 points to 6638. The materials and Metals and Mining sectors did most of the heavy lifting while IT lagged. Interesting to note the Gold stocks held up well even after another down night for Gold futures (in the previous overnight session). Rising stocks outnumbered declining ones by 676 to 471 and 379 ended unchanged.

The ASX200 is expected to open up 20/25 points as the SPI200 drifted higher in a positive overnight session.

ECONOMIC DATA OUT TODAY (AEST)

AUD MI Inflation Expectations 11am

EUR German Final CPI Data 4pm

EUR Industrial Production 7pm

CNY New Loans 12th-15th

EUR Main Refinancing Rate and Monetary Policy Statement 9:45pm

EUR ECB Press Conference 10:30pm

USD CPI Data and Unemployment Claims 10:30pm

USD Federal Budget Balance 4am

SPI200 INTRADAY LEVELS TO WATCH

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