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Nikkei retraces lost ground

Five markets in focus today.

Japan 225 (Nikkei)

The index is at a key juncture, having retraced the ground it lost after gapping lower last week. A rejection of 15,661 would be highly negative from a price action perspective and would suggest a potential correction is on the cards. A close above 15,661 would suggest the index is ready to make a move to the recent high of 15,794 and as things stand, our opening call is right on this key resistance. USD/JPY is testing the December 3 high of 103.38 and a break here could help the Japanese stock market.

AUD/USD

After Friday’s bullish key day reversal the pair looks like it can squeeze modestly higher, although I would be looking at new shorts around A$0.9200. There is a slight change in momentum and a move above A$0.9168 (the December 2 high) would be positive for the bulls, thus printing a higher high. It could be a fairly busy day for the AUD, with NAB business confidence due at 11:30 AEDT, while in China we get retail sales (expected at +13.2%), fixed asset investment (+20%) and industrial production (+10.1%).

High grade copper

Given the raft of Chinese data out today copper will clearly be in focus and for me one of the clearest indications of exactly how the market interprets the data. The A50 index and other Chinese markets will be thrown around on the perception of what the data means for future central bank policy, however copper is a clear expression of how the market interprets the data as a sign of future demand.

EUR/USD

The pair has once again struggled to convincingly break the 1.3800 level and while the ECB really don’t have a huge amount of ammunition (a EUR positive) there are a number of other things going on behind the scenes which is holding the single currency back. Greece believes they can come back and fund its deficit through the issuance of debt next year (as do Portugal); however there is still strong disagreement between the Greeks and Troika on a range of issues. It’s worth pointing out that Greece’s CPI fell 2.9% (annualised) and clearly EUR/USD at 1.38 is not at all helpful. Throughout European trade today we get industrial and manufacturing production from France, Holland and Italy, while in Italy we also get GDP number. These three countries are firmly on my radar as key areas of concern in the Eurozone and unless we see a markedly weaker EUR then manufacturing will continue underperforming that of its German neighbours. Again this plays in political issues in 2014.

QBE

QBE finished on its lows yesterday and there’s a strong possibility we could see this down again on the open. Traders need to be nimble on this stock and my personal preference would be to wait and let the market tell you that it has reached a bottom and the mass shake-out of over owned positions have been cleaned out.

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