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EUR/USD rallied to 1.3607 overnight

Four key markets in focus today.

EUR/USD

Two things immediately stand out from recent trade. Firstly, Enricco Letta managed to hold a confidence vote. Secondly, the ECB made no announcement of additional non-conventional measures at all. We did see forward guidance re-affirmed with regards to keeping rates low for longer, but this was fully expected. We note that a number of economists have expressed that Mario Draghi expressed no concern around inflation at all, and even talked up a number of positive developments. EUR/USD rallied from 1.3517 to 1.3607 on the back of the night’s events and momentum traders should continue to buy dips.

Spot gold

Spot gold hit our ‘one to watch’ target from last week of $1278, although has seen a strong rebound in US trade. USD weakness certainly helped, while the market seemed to also wake up to the fact that the US is fourteen days away from hitting the debt ceiling. With the daily MACD still firmly below zero, our bias is to be short, but we would look to exit trades on a close above the August 28 downtrend of $1344. Traders will be looking out for details later today on the weekly jobless claims, as well as Russian gold holdings, which are announced at 21:00 AEST.

Hong Kong HS50 cash

Given the Chinese equity market is closed today, we will be keeping an eye on the Hang Seng as a proxy of Chinese data. At 11:00 we get the latest China non-manufacturing report, and while there isn’t a survey, the market will be keen to see if the pace of expansion (previous read was 53.9) will hold up. We also get Hong Kong retail sales (value) at 18:30, which could influence trade.

Leighton Holdings (LEI)

Leightons is expected to find sellers on the open, after the Sydney Morning Herald reported allegations of corruptions at Hoctief’s Australian unit. Hoctief has a 56% stake in Leighton Holdings. In reaction, LEI has refused to comment, but it will be interesting to see if LEI faces strong downside pressure, which in theory could happen given Hoctief was sold down 7.9% in German trade. Momentum favours buying dips and we note key support on the daily chart resides at $18.40, where both the 38.2% retracement of the August to September rally and September 23 low reside.

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