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It’s all about the DOW

Published December 28, 2018

by Nicholas Cork

Equity volatility remained the theme overnight following yesterday’s first ever 1000 point gain for the DOW, with the index being down over 600 points early in the NY afternoon, weighed down by U.S. consumer confidence posting its sharpest decline since mid 2015. A late NY afternoon recovery followed with the DOW eventually closing 250 points higher, a lazy 900 point turnaround from the low point. (I neglected to mention yesterday that Treasury Secretary Mnuchin had convened a meeting on Christmas Eve with the  president’s Working Group on Financial Markets, referred to as the “Plunge Protection Team”. It appears they have been in action.)

The USD index traded lower across the evening however those losses were not reflected against commodity currencies which have remained in risk-off mode despite the late DOW rally. AUDUSD failed to close above 0.7075 yesterday and any hope was dashed after Chinese Industrial profits showed their first year on year loss since 2015. Risk-off trading in NY saw it trade down toward 0.7020 where it currently hovers near, and traders will be paying attention to where the AUD last trades in NY as it has not closed lower than 0.7030 since Jan 2016, and to do so will be seen as very technically weak. AUDcrosses have worn the worst of the risk-off selling with AUDEUR,CHF and JPY seeing over 100 points sell-offs before partial recovery’s with the DOW rally. This month those crosses have lost  roughly between 5% and 8% respectively.

No local data today, Japan has CPI and Employment releases. The DOW rally may give AUD some respite at the lows, but the thin holiday market may tempt some traders to hunt for stop loss sell orders below 70 cents.

Have a nice weekend.