The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
I like the price action on AGO from the short side, with the miner breaking the March uptrend and now looking like it wants to test the recent low of 88c. Iron ore is back in focus, having fallen a further 2.2% yesterday to $108.60. Measures from the China Banking Regulatory Commission to clamp down on lending to the steel industry have clearly hurt the spot price.
I suggested going long on this pair on April 14 and that strategy continues to work well, with the pair hitting a high of 1.4985 overnight, just below the 38.2% retracement of the March to April sell-off at 1.4991. The pair looks overbought at present; however it did print a bullish outside day, highlighting the control the bulls are exerting. I tightened my stop yesterday to 1.4865, so was unfortunately stopped out for a profit of 0.8%.
Hawkish comments from ECB members , pushing back on quantitative easing expectations, have seen better strength in the EUR and it’s hard to see the EUR falling too far anytime soon, that is unless we see a poor eurozone CPI estimate this week. I will look to buy pullbacks to 1.4910, however a close above 1.4991 would be positive and I would look at longs on this development too. Keep an eye on German inflation at 10pm AEST, which is seen as a good lead in for the broader euro area CPI print. The market expects a big increase in headline inflation to 1.4% (from 1%), while the EU harmonised print should rebound forty basis points to 1.3%.
Hong Kong HS50
It’s not just earnings season in the US that is worth paying attention to, but we are seeing earnings from companies in China, Japan and Hong Kong too. In Asia trade today we get numbers from ICBC bank and the Bank of Communications, with the former having a 4.8% weight on the market.
It should be a positive open in Australia with our call at 5562. Running a scan for companies that are two standard deviations from their 20-day moving average, the MACD above the signal line, the five day moving average above the 10-day average and where price is trading at a 30-day high, the system highlights NAB, ANZ, IAG and HZN. These are the names currently showing the greatest short-term momentum.