Forward momentum distinctly lacking

15.16 AEST, Wednesday 11 July 2012

Forward momentum distinctly lacking
By Tim Waterer (Senior Trader, CMC Markets)

Financial markets do not need much convincing to be in selling mode this week. Despite some relief on the Spanish yield front, the ESM court case in Germany and doubt over how well US earnings season will pan out has traders cagey about buying again.

The Greenback continues to be the currency of choice in the current trading environment, particularly given that US corporate earnings results are predicted to come up short. Add into the mix the fear of further stagnation among EU leaders and it becomes apparent why traders are leery of going long on the EURUSD pair at this stage of proceedings. However any introduction of QE3 over coming months would significantly change the dynamics of the Euro-Dollar movements, so the current downtrend of the EURUSD pair could reverse course quickly if the Fed happen to get trigger happy on more quantitative easing.

Signs of forward momentum have been distinctly lacking from the Australian market this week, with the ASX200 seemingly stuck in reverse gear courtesy of the international headwinds. We have not exactly been receiving fantastic leads from the US market lately which has been putting the local index on the back foot right from the get-go. The bellweather mining stocks on the Australian market have been susceptible to the lower commodity prices resulting from US Dollar strength over the past week, with BHP and RIO dragging the chain to a large degree as a consequence.

Another factor weighing on the ASX200 market today, and indeed on the AUD, was the prospect of more alarming Chinese economic indicators with GDP due on Friday. US Trade Balance data tonight as well as the FOMC minutes closely watched this evening as will the continuation of earnings season.

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