Traders give the ‘sell’ button a rest

Monday 19 November 2012

Traders give the ‘sell’ button a rest following more positive Washington tone

By Tim Waterer (Senior Trader, CMC Markets)

With the rhetoric from Washington having struck a more conciliatory tone, financial markets have stabilised with traders giving the ‘sell’ button a rest at least momentarily. However, while talk that the two parties are coming closer together will settle some market nerves, until a deal is inked the downside risks of the market still exceed those to the upside by a very wide margin.

There is enough remaining doubt over the fiscal cliff discussions to keep the safe-haven USD well supported until a concrete outcome is reached. Traders of the Euro will be awaiting news this week on the next aid package for Greece, with this decision potentially causing a break to below 1.26 or above 1.28 depending on the outcome.

Today the AUD has grinded higher with sentiment across Asia showing some improvement from last week. The AUDUSD rate has moved around a quarter of a cent higher with buying of the US Dollar receding a little following more optimistic comments from Washington. The strength of US equity market performance tonight will impact the AUD’s attempt to reclaim 1.04, with the currency likely to follow the direction of the S&P500 regarding tendency of traders to adopt risk or safe haven assets. Attention locally will turn to the RBA minutes tomorrow as traders try and assess the likelihood of further RBA rate cuts.

Asian markets exhibited a calmer tone to start the week with the major bourses in the region ticking higher thanks to what is seen as more positive developments regarding the fiscal cliff talks. Australian shares advanced in rather measured fashion, with the market still showing signs of fatigue following the near 3% slump experienced last week. The Materials and Energy sectors responded best to a bounce back in commodity prices, however financial stocks in the main were less enthusiastic to kick off the week.

It seems traders are going to require further convincing from Washington in order for a more sizable market rebound to occur.
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