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Friday’s US payrolls was enough to cause a few strategists to change their tapering call to December, however it was the reaction in the market to the strong number that has everyone talking today. After the strong number we saw a spike in the USD and bond yields, however as traders dissected the numbers the consensus trades (or the one’s you’d expect to do well or badly on a good non-farm payrolls) reversed course. AUD/USD rallied and has continued its move higher in early Asia trade thanks largely to a strong Chinese export print released on Sunday. At 11:30 AEDT we get ANZ job ad’s, while in China (12:30) we get the latest read on Chinese CPI and the market expects a slight slowdown to 3.1% (from 3.2%). A number above 3.2% could send the AUD lower. AUD/USD bulls will be wanting to see a break of 0.9168 (the December 2 high) for a sustained move higher.
Given today’s Chinese CPI print I think this index is certainly worth keeping an eye on today. A move in this index could heavily influence price action in the likes of AUD or the ASX 200 given the correlations seen between these markets.
There’s quite a bit of data out of Japan today with its current account (adjusted) likely to swing back into surplus, while we also get the final read of Q3 GDP. Growth is expected to be revised down slightly to 1.6%. Weaker-than-expected numbers could put a bid into USD/JPY as it would re-enforce the idea that the BoJ need to be more aggressive with policy settings in 2014. I like the pair higher over the coming weeks, although in the short-term the pair seems to be finding good supply around 103.
The German index pulled back 3.8% from the recent high, but looks ominously set to make a tilt at the high set on December 2 of 9424. Our opening call (as things stand) is a for a positive open, with traders eyeing the latest release of Germany’s current account balance, while a little later (22:00 AEST) we get German industrial production (expected to fall 3.1%). The fact that the S&P 500 rallied strongly after the US payrolls print was really positive and suggests that investors and traders are now finally ready to accept tapering.
I’ll be looking at this stock in ‘one to watch’ given the expected downgrade to guidance to be released in trade today.