I closed out my long position in ‘one to watch’ yesterday for a small profit and it seems to have been a smart move. The fundamentals have clearly added to the long NZD bias, although that has clearly been a theme for some time given the pairs 22% decline from March 2011. Having traded to a low of 1.0675 overnight, there has been a modest rebound, but the bears are now eyeing the 2008 lows of 1.0675 in earnest. A break of this low would see little support down to the 1997 low of 1.0285. There’s plenty of event risk over the next couple of weeks, with Aussie jobs out tomorrow, New Zealand CPI next week and subsequently RBNZ central bank meeting on January 31.
Anyone looking for volatility should look no further than the Japanese market, although I could have said that a year or so ago. After falling over 3% on the day, we should see a more positive price action today. In terms of the cash session, we should see the market open 1.7% higher, with USD/JPY moving aggressively higher. There has certainly been a bias in Japan to sell any rallies of late, so it will be interesting to see price action today, as any signs of weakness into the afternoon could have ramifications on US futures and the ASX 200.
JPM fell overnight after reporting earnings that were hit by legal issues. BAC is expected to report adjusted EPS of 27c, on revenue of $21.1 billion. There will be a focus on legal reserve build, operating efficiency and capital levels. Fundamentally the stock is not expensive relative to its peers or against its long-term average. Technically the daily chart is about as healthy as it gets. The 21-, 50-, 100- and 200-day moving averages are in alignment and headed higher and there are no signs of divergence in the oscillators, while the RSI’s are not at extreme either. The stock is trading at a reasonable premium to the consensus 12-month price target, however given the trend pullbacks should be bought by traders.
In terms of intra-day drivers, one thing I will be looking at closely today will be the three major credit numbers coming out of China today. There is no set time for the release, so it will be hard to react quickly, but places like Twitter will be a good source for the numbers. On the docket we get new yuan loans, aggregate financing and M2 money supply. Given one of the reasons the Chinese market has done so poorly is because of the likely signs of consolidation in credit to avoid future bubbles, however a slowdown in credit naturally brings slower growth. Hence these numbers are important.