Equity markets in Asia have followed the positive lead of their North American and European counterparts. The AUS200 is being bolstered by gains of around 1.35% for the banking sector and it is the biggest gainer amongst the major markets in Asia. Chinese markets are again bucking the trend by refusing to follow the rest of Asia, with the Shanghai Composite Index currently in the red by around 0.4%.
Nevertheless, the gains for Asian stocks are likely being limited by concern over the European crisis. Last night, Fitch spooked the market by announcing that there is a significant chance that Italy could be downgraded and that a Greek exit from the euro is a possibility.
Falling Chinese stocks might be an insight into tomorrow’s inflation figures. We are expecting the headline CPI figure to fall for the fifth month in a row, shrinking from 4.2% in November to 4.0% in December. The Chinese economy continues to suffer from decreasing levels of demand for its exports and importers are feeling the heat from decreasing levels of domestic demand for foreign goods and services.
When combined with this week’s trade balance data out of China the inflation figures could increase speculation that the government will soon loosen anti-inflation policies to spur growth, including cuts to the required reserve ratio.
In the US, it was announced that Mitt Romney won the New Hampshire primary and Ron Paul placed second, followed by Jon Huntsman Jr. Romney is now a clear front runner for the Republican Presidential ticket and he knows it, with most of his post win comments focusing on attacking Obama.
In currencies, the aussie faced some sharp selling pressure early on in the session and AUD/USD soon broke below 1.0300, before creating a low around the 200-hr SMA. The pair is looking like it is poised for further downside, unless it can manage to break back above 1.0300. EUR/USD might not be willing to follow commodity currencies up but it looks willing to follow them down, given that it shot below 1.2700 today.
Ones to Watch:
EUR/AUD is looking poised for more downside. The recent break-off of the euro from trading in unison with risk currencies could be a fatal blow for the pair, with EUR now only seemingly following commodity currencies down. It is a simple equation, if the euro’s gains are limited but its losses are not then there is only one way EUR/AUD can go, down, but we don’t think the reality is that simple. The euro could break its current trend at any time, especially if Europe manages to find a solution to its debt crisis.
Technically, EUR/AUD still looks fairly shaky. However, if the pair manages a sustained breakthrough of 1.2400 then we may see it push back towards 1.2500.
EUR/AUD – Hourly " title="EUR/AUD – Hourly " width="529" height="461" />
Nevertheless, the gains for Asian stocks are likely being limited by concern over the European crisis. Last night, Fitch spooked the market by announcing that there is a significant chance that Italy could be downgraded and that a Greek exit from the euro is a possibility.
Falling Chinese stocks might be an insight into tomorrow’s inflation figures. We are expecting the headline CPI figure to fall for the fifth month in a row, shrinking from 4.2% in November to 4.0% in December. The Chinese economy continues to suffer from decreasing levels of demand for its exports and importers are feeling the heat from decreasing levels of domestic demand for foreign goods and services.
When combined with this week’s trade balance data out of China the inflation figures could increase speculation that the government will soon loosen anti-inflation policies to spur growth, including cuts to the required reserve ratio.
In the US, it was announced that Mitt Romney won the New Hampshire primary and Ron Paul placed second, followed by Jon Huntsman Jr. Romney is now a clear front runner for the Republican Presidential ticket and he knows it, with most of his post win comments focusing on attacking Obama.
In currencies, the aussie faced some sharp selling pressure early on in the session and AUD/USD soon broke below 1.0300, before creating a low around the 200-hr SMA. The pair is looking like it is poised for further downside, unless it can manage to break back above 1.0300. EUR/USD might not be willing to follow commodity currencies up but it looks willing to follow them down, given that it shot below 1.2700 today.
Ones to Watch:
EUR/AUD is looking poised for more downside. The recent break-off of the euro from trading in unison with risk currencies could be a fatal blow for the pair, with EUR now only seemingly following commodity currencies down. It is a simple equation, if the euro’s gains are limited but its losses are not then there is only one way EUR/AUD can go, down, but we don’t think the reality is that simple. The euro could break its current trend at any time, especially if Europe manages to find a solution to its debt crisis.
Technically, EUR/AUD still looks fairly shaky. However, if the pair manages a sustained breakthrough of 1.2400 then we may see it push back towards 1.2500.
EUR/AUD – Hourly " title="EUR/AUD – Hourly " width="529" height="461" />