European banks stage a small recovery, ASX futures up 20 points

As you can see from today's first chart, the ASX 200 remains in a downtrend, having made a series of lower lows since November last year. It's really only the last two days of performance that have altered the look of the ASX 200 – you can see in the chart that the late January recovery and subsequent consolidation was unfortunately blown apart by the latest focus on the European banks caused a stir. Symptomatic of a bear market, traders are looking for excuses to extend a sell-off rather than ignite a rally – so whether its US interest rates, Chinese equities, Chinese yuan, European banks or oil prices, this market is just in a state where it is very easily spooked. We have seen evidence that traders are willing to drive an impulsive move higher (as was the case in late December with a 400+ point rally over two week); however, since that time the mood of the market has just been sour.
Some good news did emerge overnight, however, when the bank that set off this latest two-day drop rallied over 10%. Deutsche Bank shares jumped from 13.23 to 14.58 euros at the same time as US Federal Reserve Chairwoman Janet Yellen's congressional testimony came and went without a whimper. I guess we have to celebrate the small victories in a market like this, and it was nice to see the market not set about inflicting more pain on European financial names.
As you'll hear my bang on about fairly consistency, I am excited by the prospect of a weaker US dollar and traders are putting the boot into the greenback, as illustrated by today's second chart in blue. This is continuing to buoy the AUDUSD currency pair (pink) and gold trade. The US dollar index has now fallen about 4 points or 4% in the last 10 trading days, and if the market for 30-day Fed Funds futures are correct, we're still not seeing an implied probability of another rate hike in 2016. I don't care much for the intricacies of US interest rate policy analysis, but I am interested in watching the US dollar fall – so let's see if a trend can form that might precipitate a flow of US dollars back out and into emerging economies.

Source: Rivkin, Saxo Bank
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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.