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Despite being closed, China still released its official manufacturing PMI number for April which came in slightly below estimates at 50.4 (versus 50.5 expected). This figure didn’t have much impact at all, leaving the major bourses in the region to their own devices. As a consolation though it showed a slight improvement from the previous reading of 50.3 and perhaps this is the beginning of some stabilisation after a bad run.
While the ASX 200 is struggling, the Nikkei has really taken off and is leading the region after having struggled yesterday. The weak US GDP reading weighed on the greenback but it has managed to stage a bit of a recovery against the yen. The 102 level continues to hold for USD/JPY and perhaps with plenty of key releases out of the US over the next couple of days, traders don’t want to be caught out overly bearish on the USD.
Unemployment claims and a Janet Yellen speech at the Independent Community of Bankers summit will be the key events in the US today.
Euro and pound on the move
Most of Europe will also be closed for the May Day holiday and as a result most of the attention is likely to be on the FX pairs. The highlight of yesterday’s trade was perhaps the pound rallied to its highest level since August 2009 against the greenback, printing a high of 1.69. The high from August 2009 was 1.704 and that 1.70 region is likely to be resistance in the near term.
This level also sees GBP/USD reclaim around 50% of that sharp drop in 2008 from around 2.00 to 1.35. A steady near-term uptrend has also formed on the weekly chart. While there was no data out of the UK to move the sterling, a benign GDP print out of the US seems to have triggered USD weakness which lifted the pair.
Yesterday I highlighted the risks the euro was facing and I was eyeing a close below 1.38 for shorts. Once again, this level held despite a slightly disappointing CPI print. The region’s CPI came in at 0.7%, slightly weaker than the expected 0.8%. However core inflation was up 1% from 0.7% year-on-year, in line with expectations. While this figure didn’t blow expectations out of the water, it seems the market was positioned for a disappointing reading. Additionally the bank lending report showed some positive signs, with lenders anticipating further improvement over the next three months. These two reports saw expectations for imminent ECB action fade and shorts in the single currency unwound.
EUR/USD reversed from a low of 1.3773 to now trading around 1.387. This is where the highs have been capped over the past week and we may see a fairly tight range around here with most of the region closed today for the May Day holiday.
ASX 200 extends losses
The Aussie market has once again struggled to hang onto early gains despite a solid earnings report from ANZ. ANZ shares struggled as profit taking continued to hurt the sector. Even a Credit Suisse report maintaining an outperform rating wasn’t enough to keep ANZ in the black this morning. From a price action perspective, I feel a close above $34 will be key in the short term. An uptrend has been in place since ANZ bottomed at $28.84 in February and the support comes in at around $34. Closing below this level could result in further near term losses.
Westpac reports on Monday and it’ll be interesting to see if investors are confident enough to bid it higher ahead of the results given analysts have tipped it as the most likely to pay a special dividend.