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After January’s declines, February opened on a positive note, with the major indices closing with an average gain of 1.2%. The intraday rally, which occurred mainly due to improving fundamental data, sparked enthusiasm across the globe and sent bullish traders back into positions. The MSCI Asia Pacific Index gained 0.7%, while the Nikkei traded with a 1.68% gain.
On the Fundamental side, the ISM manufacturing Purchasing Index, jumped higher by 3.5 points to its highest level, since 2004. The result showed a 58.4 figure compared to an expected 55.2 points. In addition, nominal personal income increased by 0.4% and showed that income is picking up. Even though the number was less than the previous 0.5% it still had a positive effect on the session. One can see on the chart below that since mid 2009 personal income has increased and is now trading in positive territory.
Materials presented the most relative strength yesterday, closing higher by 3.98%. The lagging sector of the day was health care, as it finished with a mere gain of 0.58%. Energy also presented a stunning session, and finished with a gain of 3.3%. From a technical point of view the major index (S&P500) is now testing resistance which acted as support. Even though the major indices could experience a bounce around current levels, technical levels could put pressure on the index.
The RBA shocks the marketOn the Forex market the Dollar index traded steady around prior levels of 79.5 points, despite shocking news from the RBA. The positive equity session had more of an effect on the session as investors exited the rising Dollar and entered back into equity positions.
Aussie bulls received a blow yesterday as the RBA left rates unchanged at a 3.75%. Many were expecting a rate hike of 0.25% to 4% as increasing demand from China has helped the Australian economy recuperate from its recession. One must note that Australia is a major provider of raw materials to China. Due to recent news comments, stating that China is now trying to restrain its economy from rapid economic growth, the RBA preferred to hold this time round. The board commented on the matter and stated that “if economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term."
From a technical point of view the AUD/USD dropped by over 100 pips, following the session, wiping out yesterday’s turnaround formation. The AUD/USD is now trading above prior support of 0.8758.
AUD/USD – intraday session
Market Data to Watch Out ForInvestors will start to prepare for the end of this week as two banks are expected to release their rate decisions, while the U.S will release its NFP result. Even though today’s events have a lower priority, the U.K could surprise with its Halifax House Price Index. The result is expected to show a 0.9% increase – a lower result than the previous 1%.
In addition the U.S will release its pending home sales figure. This event could spark some volatility as economists are expecting a positive 1% result, compared to the previous -16%.
To view the full economic calendar click here.
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