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Global markets are focused on tonight’s ECB meeting at 9:45pm and Mario Draghi’s subsequent press conference at 10:30pm. It is the most anticipated central bank meeting of the year and it’s hard to believe there will be another with so many permutations and scenarios which could really throw so many asset classes around. Recent data has been weak, so the ECB should cut its various interest rates, including pushing the deposit rate (the rate it charges banks to hold funds on its balance sheet) to a negative number. There are other measures which I have detailed in my playbook, so it promises to be a lesson in positioning and understanding exactly what is priced in. Will the ECB surprise the market? There seems to be a growing scepticism that the bank will meet the markets high expectations.
Whilst the EUR promises to be at the centre of moves driven by actions (or inactions) from the ECB, other assets which will be closely watched are German bonds (IG offer various maturities including the Bobl, Bund, Schatz and Buxl), Long-term BTP’s (Italian 10-year bond) and OAT French Government bond, as well various Euribor futures. Of course European indices could also react depending what is announced as well.
After the raft of domestic data out this week traders are probably keen for a rest and a chance to re-assess where the AUD is likely to go. Today we get the latest trade balance figures and the market expects a narrowing of the surplus to a$510 million, so anything larger than that could see AUD/USD test key resistance at 0.9305 (the 50-day moving average and top of the ichimoku cloud).
David Jones (DJS)
While there are issues taking place affecting the Woolworths bid, technically DJS looks weak and could be headed lower over the medium-term. The stock is now two standard deviations from its 20-day moving average, while the MACD is below the signal line. The stock is also below its five-day average today, so traders have increased bearish positioning around this name of late.