Article / 04 February 2015 at 23:52 GMT

Today's Trade: Subdued trade expected; choppy AUD action

Trading Desk / Saxo Capital Markets
Australia
  • S&P/ASX 200 Index futures contract rose 0.1% to 5,732
  • Iron ore was down 0.9% to $62.58 as structural oversupply exists.
  • December’s retail sales are released today at 11:30am

By Saxo Capital Markets (Australia)

A mixed bag of performance was seen overnight with the Dow Jones Industrial Average squeezing out a mere 6.62 points, or less than 0.1%, to close at 17,673.02 after abruptly giving up a 116-point gain as the European Central Bank increased pressure on the new Greek government to come to terms with its creditors.

The European Central Bank said Wednesday it would suspend a waiver it had extended to Greek public securities used as collateral by the country’s financial institutions for central bank loans. The S&P 500 fell 8.52 points, or 0.4%, to 2041.51, and the Nasdaq Composite Index lost 11.03 points, or 0.2%, to 4716.70. European stocks rose, with France’s CAC 40 up 0.4%, Germany’s DAX 30 gaining 0.2% and the FTSE 100 dropping 0.17%.

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 Stronger Australian retail sales figures may boost the AUD temporarily. Photo: iStock

News out of China overnight regarding the relaxing of the amount of reserves commercial banks are required to hold - effectively free up more than $100 billion – gave a temporary boost to the markets however, was not enough to fight the ECB’s decision on restricting access to its direct liquidity lines.

Local markets

  • The S&P/ASX 200 Index futures contract rose 0.1% to 5,732 on the back of a mixed and volatile trading night despite the end result being rather flat.
  • Bank of New York Australia ADR Index -0.9% with BHP ADR down 2.3% and RIO down 1.9%
  • Gold futures rose for the first time in three days, up 0.2% to $1,266. Stocks to watch: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Iron ore was down 0.9% to $62.58 as structural oversupply exists. China’s steel sector PMI was 43 – the lowest in almost a year. Exports were affected by the removal of the export rebate and the number of mills who has finished goods on hand. Stocks to watch: BHP, RIO, AGO, FMG, BCI
  • The four-day oil rally has finished on day 5, with Brent down 5.5% to $54.61 with inventories hitting another record high of 413.1m barrels. Stocks to watch: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Echo Entertainment (EGP): CEO says the company is taking more China high-rollers as Macau revolution drops; raised to outperform against neutral at Credit Suisse (Note: EGP was down 2.3% yesterday after their interim results)
  • News Corp (NWS): Saudi billionaire Alwaleed cuts stake in company to around 1% against 6.6% previously
  • Qantas (QAN): Company's path to escaping junk debt status clears as costs tumble


Be aware that December’s Retail Sales are released today at 11:30am. Market expects a mild increase to 0.3% month on month. JP Hi-Fi’s interim report reflected relatively poor December figures and stronger January numbers. For those holding our Myer (MYR) or JB Hi-Fi (JBH) trading ideas, give consideration to data that slightly disappoints and the small knee-jerk reaction that could follow. SMH Business printed JBH had an outperform from Macquarie at $19.38.
 
Data points (Asia)

Thursday (Australia): Retail Sales m/m (11:30am);  NAB Quarterly Business Confidence (11:30am)

Friday (Australia): RBA Monetary Policy Statement (11:30am)

Current Trades

  • Myer (Ticker: MYR:xasx): Entered long position on the February 3 at AUD1.60-1.61. First profit target was reached on yesterday at AUD1.69 (5.6%) and second profit target at AUD1.76 (9.3%) remains in place. Stop loss trailed to entry price of AUD1.60.
  • (30/1) JB Hi-FI (Ticker: JBH:xasx): Entered long position January 30 at AUD16.70 as stock has been forming a Bullish Wedge leading into their reporting. First profit target at around AUD17.47 (about 4.4%) and second profit target around AUD17.90 ( about 6.9%). Stop loss set at AUD16.38 (around -2%)
  • (22/1) Bluescope Steel: BSL is heading back up to its resistance level at about AUD5.37 where there has been quite a lot of noise since January 14. Should it fail to push higher above this level, a Head and Shoulders pattern will be completed where a quick and swift sell-off is expected. Sell Limit: From about AUD5.33 to AUD5.37 with a stop loss above AUD5.62 (-5.4%). First profit target at about AUD4.70 [December 14 low] (11.8% profit), Second profit Final Target: AUD4.04 (24% profit)
  • (21/1) Accumulation of the big four banks. Buying is coming back in the past couple of days and it appears as if our dividend yielding banks are back on investor radars: ANZ, CBA, NAB, WBC

Broker downgrades / upgrades:
     
  • Downer (DOW): First half results expected; cut to hold vs buy at Morningstar
  • Santos (STO): In no immediate risk of further cut, S&P says. AFR says reduce from a buy to a neutral according to Goldman Sachs

AUDUSD

The AUD had a relatively weak overnight session, although there was a moment of a temporary spike towards resistance level 0.7851 but it failed to stay up and sold off almost 100 pips below 0.7800. This spike was a reaction on the People's Bank of China's cut on its reserve requirement ratio. We remain bearish for the medium to long term perspective, but choppy price actions are expected between 0.7733 and 0.7830 in the near term.

If today’s retail sales figure comes out better than expected, then AUDUSD would push up again up to the resistance level 0.7851 which then would provide an opportunity to short.
Buy: AUDUSD

Entry: limit 0.7750-0.7760

Target: 0.7820

Stop loss: 0.7729

Please see video on Tradingfloor.com here

AUDUSD

AUDUSD DO
 Source: Saxo Bank
 

ASX/S&P200

The Australian stock market has been very strong forming a nice uptrend channel in the last three weeks. Yesterday we witnessed profit taking which was not surprising as the recent rally has been very aggressive and it touched the upper uptrend channel.The ASX/S&P 200  made a fresh high with a brief 50 points rally when the PBOC announced their RRR cut overnight.

Considering the US market was weak, we would be surprised if the ASX makes another fresh high. The swing high 5,781 would be resistance level and we expect more profit taking today with support level at 5,700.

Sell: ASXSP200

Entry: Limit 5,765 if this level is reached

Target:
5,713

Stop loss: 5,784

ASX/S&P 200

SP200 DO
   
Corporate news out this week:

Thursday: Tabcorp Holdings Interim; National Australia Bank Q1; Downer EDI Interim; FlexiGroup Interim; News Corp Q2

Source: AFR, SMH, CNBC, BBG, WSJ

-- Edited by Adam Courtenay

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets

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