Stephen Innes
SPI Asset Management
Equity markets
Asia equity markets are feasting on the positive after-effects from better than expected US earnings and the constructive vibe around the resumption of trade talks while the dovish central bank scrim is providing the icing on the cake.
I would be amiss if I didn't have a good reason for the muted reaction to this morning eye-watering API inventory drop. While conspiracy theorists are wading into the " someone had the number early" call, I think there is a glaringly obvious reason.
Frankly, it was one of those unbelievably large draws that raise more than a few reporting concern eyebrows. So, traders remain very cautious that the EIA draw will come anywhere near these numbers.
Also, traders are only half-heartedly pricing in middle east risk war premiums on a combination of “smoke but no fire" and the enormous shale production effect, which is dampening middle eastern supply risk premiums.
Gold continues to consolidate between 1400 and 1430 as the pair should track USD sentiment and the overall risk tone today.
JPY
With the Euro and Pound move likely just about run their course pre-ECB rate decision and PM Johnsons speech later today, FX Traders are back focusing on the risk-positive tone in the market which continues to support USDJPY. It has made moves toward decent resistance but it would need a daily close above 109 to confirm bullish break so, for now, we think markets will continue to honour near term ranges ahead of the FOMC.
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