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NCM and Aussie dollar in focus today

Four markets in focus today.

AUD/USD

The pair continues to test the December 2 high of A$0.9168 (the overnight high was A$0.9167), with the USD out of sorts against most G10 currencies. At 10:30 AEDT we get the latest Westpac consumer sentiment survey and AUD will hope the print can continue on from last month’s 1.9% increase.

EUR/USD

The resilience of the EUR continues to be one of the key talking points on the floor. There is a clear positive argument for why the EUR is strong, and a raft of reasons why the currency should be considerably lower, however it’s clear that the EUR simply shrugs bad news off. If you look at the yield spread between Italian and German debt, it is now trading at the lowest spread in a number of years. In European trade we get the final read on German inflation. The market doesn’t expect any change from the prior read of 1.3%, however if we do see a change the EUR could stage a strong move. EUR/USD found sellers as it tested 1.38 (the high was 1.3795) and a break here should see the year’s highs of 1.3832 in play. Interestingly if you include the 1.3% gain we’ve already seen in EUR/USD this month, it means that over the last ten years December is the best month to be long EUR/USD, with an average gain of 1%.

Spot gold

Gold staged a solid rebound in US trade, with traders pointing to USD weakness. The 30-day correlation is still fairly low at 44%, someway below the 73% correlation we saw back in late October, however as we saw USD weakness overnight gold started moving higher. The downtrend drawn from the October 29 high has now been broken, while we’ve also seen a higher high, with the metal breaking above the recent consolidation. The fact US bond yields fell also supported price action.

Newcrest Mining

It should be better days for NCM today given the moves in gold, and there will be traders asking whether it’s a better time to jump into longs in NCM from here. Short interest is not at extreme levels (currently around $6.95 billion), however we could still see those positioned for a move to $1180 in gold cover some short positions. The stock has been in a text book downtrend from the August 27 high, but I’d expect to see good upside here today. Goldman Sachs has upgraded the stock to neutral as well, which may help.

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