US markets push higher, supported by a weaker dollar

Thursday, June 26, 2014

US markets managed to close higher yesterday despite a third revision to the first quarter GDP reading that came in weaker than expected. Both the S&P 500 and DJIA posted steady gains after starting the session on the back foot as investors chose to ignore the downward revision which saw Q1 growth contract by -2.9% q/q, the most since 2009. Market participants instead focused on the Markit composite and services PMI readings which both accelerated in June to 61.1 and 61.2 respectively, from previous readings of 58.4 and 58.1.

The dollar index bore the brunt of less than impressive headline macro data yesterday as selling pressure throughout the day saw it slip below the 200 day MA despite closing prices finding tentative support at this level earlier in the week. Intraday declines tested support at the 100 day moving average towards 80.085 before recovering to close at 80.225. The dollar index has experienced substantial selling pressure since early June, falling from the recent high of 80.898 as it gave up May gains to the likes of the euro and sterling.

The positive sentiment on Wall Street carried over to the Asian session with the majority of benchmark indices in the region posting gains. Market participants piled into risk assets as the weaker than expected downward revision to US Q1 GDP fuelled speculation of an extended period of low US interest rates. The yen firmed slightly towards 101.70 overnight, testing the 200 day MA for a second session. Yen volatility has decreased sharply in recent weeks as trading remains rangebound between both the 100 day and 200 day MA.

DXY faces continued selling pressure against major peers

DXY Curncy DOLLAR INDEX SPOT 2014 06 26 08 20 37

Yen remains rangebound between long term moving averages

JPY Curncy Japanese Yen Spot 2014 06 26 08 30 37


Events for today

0700

UK

Jun

Nationwide House Price

0930

UK

Q1

GDP Final

1330

US

May

PCE & Personal Income

1330

US

w/e

Jobless Claims

1530

US

w/e

EIA Nat Gas

LT: 

Jun  Copper, Gold & Silver (COMEX)

Jul  Natural Gas (NYMEX)

 

Topics: Equities, JPY, DXY
More from: Kash Kamal