Investors Cheer China’s Data

Investors were surprised with the, surprisingly strong, trade data out of China. Exports were up 5.1 percent in July as economists expected a 3 percent print. This number is way above the 3.1 percent shown in June.

Both the Australian benchmark and Japanese equities led the Asian Pac Rim higher today. Japanese investors were happy with the Bank of Japan (BOJ) policy decision and the yen weakened.

The export data is, seemingly, good new out of China after the poor PMI numbers which showed contraction in the world’s second largest economy. However, investors are waiting a dirge of data due out Friday.

STOCKS
The Nikkei has approached the 14,000 level again after rising 166 points on the day. The Australian benchmark, the S&P/ASX, rose above its two week low gaining 62 points to 5,073.90. The KOSPI was also up from its two week low. The Shanghai Composite, on Chana’s mainland, has crossed 2,050 and has approached a three week high on the news imports rose 5 percent and exports jumped 10 percent.

U.S. markets did recover from their worse levels but still closed in the red as Fed officials continue to “jawbone” about the imminent tapering of the monetary stimulus package. The Dow Jones was down 48.07 points on the day. The S&P 500 lost nearly 6.50 points to close at 1,690.91 and the NASDAQ was down 11.76 points to 3,654.01.

The FTSE led European markets lower after concerns were raised that the bank of England and the European Central could tighten monetary policy early than expected. The FTSE was down 1.4 percent on the day and the DAX lost 40 points. The CAC in France was unchanged.

CURRENCIES
The U.S. dollar was weaker overnight against most of its major trading pairs. We should note that the U.S. Dollar Index is now trading around 81.30, down from the high of 82.50 seen on August 2. We see support at 81.10.

The EUR/USD (1.3334) has risen overnight, see the below chart. We are now testing the range resistance and can now test 1.3400, which is the 200 WMA. The GBP/USD (1.5496) saw a high of 1.5531 at one point. We have strong resistance at a cluster region found at 1.533 to 1.5546.


The USD/JPY (96.76) tested the support at 96.50. We did see a low at 96.31 before some recovery. There is support at 96.20 which should be watched.

Since we do have support at 81.10 on the Dollar Index, the G-3 currencies could see some profit taking tomorrow as investors cover gains.

COMMODITIES
Copper (3.241) has recovered! It rose convincingly above 3.20 and this will relieve downward pressure on the embattled commodity for now. We are still cautious.

Gold (1292.00) has recovered as the buck has weakened. We see resistance at 1300.00 coming up. Brent WTI (107.84) looks weak and could test support at 102.55 before the end of the week. We are trading below 108.00 which is bearish and we see intraday support at 107.50.

TODAY’S OUTLOOK
European markets could get a temporary boost from the strong import and export data out of China today.

Later in the day, the United States will release jobless claims, natural gas inventories and we will see the Fed’s balance sheet/money supply.