On the daily chart the pair seems to be finding support at the March uptrend at 1.6793, with the November uptrend below at 1.6700. The bulls will be hoping this trend support holds. It’s a big night for sterling and the gilt market as well, with employment data due at 6:30pm (AEST) and the UK inflation hearing an hour later. Importantly, wages are increasing and some of the slack the BoE spoke about earlier in the year is abating. There could be a good chance the BoE subsequently speak more positively on the economy tonight and this could reinforce expectations that the BoE could lift rates in Q1. It’s worth noting that the market (looking at short sterling futures) are pricing in a full 50 basis point hike by March, which will naturally divide the market in itself.
The market took last night’s budget as modestly hawkish for AUD, with the ‘aussie’ rallying across the G10 currency spectrum. I don’t think anyone will be too surprised that the government recorded a budget deficit for this year of A$49.9 billion (or 3.1% of GDP), or the fact that its projections are that we won’t see the economy return to a balanced budget until 2017/18. It will be interesting to see how the bond market takes this when it opens today, especially as this budget will likely keep interest rates at current levels until the New Year.
The UK market could take some direction from tonight’s economic update from the BoE, however it seems the bulls are in control for now. Having printed a higher high, the market will now be eyeing the all-time high from 1999 at 6950.
Some may not like the fundamentals of the copper miner, but you have to say the price of late is clearly bullish. Having broken and closed above the March of $4.03, on what was the largest volume since late March price action favours staying long for a move to $4.50.
Running a scan of stocks in the ASX 200 trading at 30-day high, with the MACD above the signal line, while closing two standard deviations from its 20-day moving average, I get MND, SHL, SRX, CPU, AMC, DOW and AWE. These names are showing good strength right now and could be strong candidates to outperform in the near-term.