Chinese Trade Balance could be momentum shifter

15.37 AEDT, Friday 12 October 2012

Chinese Trade Balance could be momentum shifter

By Tim Waterer (Senior Trader, CMC Markets)

Upcoming Chinese Trade Balance data (due Saturday) will likely shape sentiment heading into next week for a market which is still searching for conviction. While the US Dollar retreated thanks in part to a four year low in the jobless claims data, there is an air of uncertainty about how accurate this reading was and as such traders soon curbed their enthusiasm.

The Euro absorbed the news of a Spanish downgrade quite well however the situation regarding a timeline for a potential bailout request remains quite blurred, which is acting as a ceiling on movements higher in the EURUSD rate. The apparent disconnect between having the ECB ready to purchase bonds and Spain not requesting a bailout is acting as an impediment to further rises in higher yielding assets.

The Aussie Dollar has continued to consolidate gains in the wake of Thursday’s employment data. Today was mostly about positioning ahead of the Chinese Trade Balance data tomorrow, which has kept the AUDUSD rate operating in a tight range just shy of the 1.03 level. Commodity price reaction early next week to the Chinese data will have a direct impact on the AUD’s attempts to push towards 1.04 in the short term.

It was a restrained performance by the ASX200 to close out the week, with Materials stocks the main ones to flourish courtesy of a push higher in commodity prices. A move lower by the US Dollar overnight in reaction to the Jobless Claims data allowed commodity prices to rise. This move higher in commodities suited the blue chip mining stocks which propped up the overall index and served to counteract weakness in other sectors of the local markets. Ahead, we have US consumer sentiment data this evening. And of course, upcoming Chinese Trade Balance data on the weekend could dictate the path taken by the big mining stocks early next week.

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