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USD strength driving markets

Five key markets in focus today.

AUD/USD

The pair has been on the back foot this week, with US dollar strength being the primary driver of price action in the FX space. Disappointing new loans data out of China also put some pressure on the pair as it traded down to 0.934. Today could be a big day for the AUD, with traders keeping an eye on any commentary from China’s third plenum. Any commentary on how structural reforms will impact the mix of growth, inflation and the credit cycle going forward will drive price action. At 11.30 AEDT NAB business confidence will be released and any indication of further improvement could give the pair some near-term strength. However, resistance in the 0.94 region could see sellers re-emerge.

USD/JPY

The triangle compression pattern which has emerged on USD/JPY seems to have resulted in a break higher for the pair. USD/JPY has managed to close above the top range of the triangle and it could now be gearing up to extend its gains. On the calendar today we have Japan’s consumer confidence, tertiary industry activity and preliminary machine tool orders due out. This could lead to some volatility for the pair today with the potential to see these gains extended.

EUR/USD

There is limited action that the ECB can now take in terms of monetary policy and this should see further profit taking in the EUR. Traders have been keen to sell rallies in EUR/USD, although a lot will hinge on price action in the US bond market which re-opens today after being shut for Veterans Day. Over the coming days we get final inflation reads out of Europe, although these aren’t expected to change, while we also get Q3 GDP on Thursday and growth on the quarter is expected to expand at a meagre 0.1%.

Orica (ORI)

Orica is one of six stocks in the ASX 200 trading over two standard deviations from its 20-day moving average. However, while this can mean the stock is overbought,  the break-out we saw yesterday highlights strength, and traders were happy to buy into the name after earnings were taken very positively. Cash flow increased 95%, while productivity improved and guidance remains in place. Traders will stay long this name, although watch for signs of a reversal on the daily chart.

Incitec Pivot

IPL has reported its full-year results today, which at first glance seems to have come in ahead of consensus. Net income of $298.4 million was ahead of an analyst average of $295.8 million, while sales of $3.4 billion also beat expectations of $3.34 billion. Additionally IPL has announced a restructure which will result in $20 million in annual cost savings. From a price action perspective, the stock will have to come off a really low base. There has been support in the $2.60 region and we could see a bounce/relief rally today, just like we saw in Orica.

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