Asia Pacific markets drifted lower after a negative close in US equities yesterday. The Nikkei 225 was the biggest loser, falling to its lowest level in three months, off by more than 1.5% on the session. The S&P/ASX 200 index and the Shanghai SE composite were lower by 1.6% and 1.2% respectively.
Gold prices continue to fall, dipping as low as $1182.35, late in the Asian session. The metal has pulled back more than 5% off its' May 14th high at $1249.40, and is approaching our entry points around the 50% Fibonacci extension taken from the Dec 3rd and May 14th crests, at $1160. Crude oil is softer after rallying nearly 5% off of yesterday's five month lows, just above the $68 figure, but remains heavy on continued dollar strength.
Euro Fragility
The euro pushed higher today, marking a 2.25% jump from the 4-year lows made yesterday at 1.2142. The rally is likely to be short lived on continued concerns regarding sovereign debt as well as a lack of cohesion among EU members. Yesterday's ban by Germany on naked shorts on European sovereign bonds, related CDS and certain stocks, took investors by surprise. More disturbing than the actual move, was the fact that the decision was made unilaterally, and did not have the support of other eurozone countries. Officials seem to be sending mixed signals to markets, with French Finance Minister, Christine Lagarde insisting that, "the euro is a solid and credible currency," only one day after German Chancellor Angela Merkel urged that the currency was "in danger." It is this lack of clarity that has investors fleeing out of the euro and into safer, lower yielding assets such as the greenback and the yen. Greek unions held general strikes in Athens today, as workers continue to protest the newly implemented austerity measures. Meanwhile the euro will remain heavy, encountering resistance at 1.2430, followed by 1.2510 and 1.2570. Downside targets are eyed at the 1.2220, backed by 1.22 and 1.2145. A breach below this level sees targets below the 1.20 handle at 1.1970.
The Battered Aussie
The aussie paired some of its losses, after falling more than 12% in the last two weeks on weaker commodity prices and lingering concerns over the growing sovereign debt crisis in Europe. With relatively high interest rates, the commodity based currency has been battered by risk aversion trades, as traders seek so called 'safe haven' assets. The aussie remains under considerable pressure as uncertainty about possible tightening in China, as well as new financial regulations in Europe, leave investors concerned over global demand and the pace of the recovery. Targets are eyed at .8250, followed by the .82 handle and .8160. A breach here risks losses past the .81 figure to the 161.8% Fibonacci extension taken from the Nov 20th and April 16th crests at .8050. To the topside, resistance is seen at the .84 figure, backed by.8460 and the 85 handle.
Today's economic calendar sees leading indicators from Canada, with the figure seen lower at 0.7% from 1.0%. Initial jobless and continuing claims for the US are out at 8:30am, with initial claims called lower by 4k to 440k. Tomorrow, GDP data from Germany is seen unchanged, with the headline figure holding at 0.2% q/q. Later in the day, German manufacturing and services PMI data, and the IFO business climate surveys are due out, with the Eurozone reporting on current account balances and PMI soon after. European markets turned negative early in the session, with US equity futures also pointing to a weaker open, early in London trade.
