The U.S stock market decided to come up for a breather yesterday, after experiencing selling pressure last week. Even though the financials continued to weigh on the market with CIT Group falling by over 65%, the indices managed to stay afloat throughout the session, due to better than expected results from Ford and positive fundamental data.

According to Bloomberg news, CIT, a 101-year-old commercial lender, filed for bankruptcy Nov. 1 to cut $10 billion in debt after the credit crunch dried up its funding and a U.S. bailout and debt exchange offer failed. CIT said it plans to exit bankruptcy next month after bondholders voted in favor of a so-called prepackaged plan.

On the data front, a wave of economic results showed that the U.S economy is slowly improving. ISM manufacturing Index and Prices both came out better than expected at 55.70 and 65.00, respectively. Pending home sales shocked analysts beating expectations by 5.70%. The figure showed a 6.1% increase.

Despite the good news, one must note that the current situation isn’t being backed by a drop in unemployment. Over the weekend President Barack Obama gave his comments regarding the economic outlook. Even thought the president was optimistic about the overall outlook, he stressed on the employment situation, mentioning that further job losses could be experienced. As mentioned in numerous reports, some analysts are now concerned that once the stimulus programs run their course the economy could fall due to rising unemployment and low consumer spending.

From a technical point of view the major indices traded in green yesterday and closed with an average gain of 0.6%. For a full technical analysis, see yesterday’s video briefing.

Australia Hikes Again

On the Forex market, currency pairs trade in range during most of yesterday’s session as traders were cautious to take the pairs higher. Even though Wall Street finished higher for the day, currency traders were more cautious to buy back into this market. The Euro managed to gain some height for the day, while the Pound gave up strength to the U.S Dollar.

The surprise of the day came in the form of an interest rate hike from the RBA. During Asian hours the RBA increased their central rate from 3.25% to 3.5% making its currency one of the highest yielding currencies, throughout developed countries. The bank commented on the hike, stating that it is satisfied with the current economic rebound and sees economic growth heading back to a normal situation. 

Even though the Australian Dollar dropped following the statement, the bank’s comments raised assumptions that in the following months further rate hikes could send the Australian Dollar to higher levels, especially against weaker counterparts.

When observing the chart below, one can see that against the U.S the AUD is now trading around prior trend line support. A break of its minor trend line to the upside could spark further buying and a continuation of the current trend. One must note that even though futures on Australian interest rates are pricing in further rate hikes, this chart will trade accordingly, especially due to its high correlation with the broader market.

Market Data to Watch Out For

Even though the economic calendar is packed with data today, most of the scheduled events are classed as low priority ones. The markets will continue to take their cue from U.S stocks, ahead of an action packed week, including two more rate decisions and an awaited employment figure from the U.S on Friday.

To view the full economic calendar click here.

Video Briefing