Markets mostly flat with some profit taking in Europe, Aussie dollar pops up, ASX futures down 19 points

Global markets remained focused on insights that might have been gleaned from US Fed Chairwoman Janet Yellen last night. She had to defend her position on continued zero interest rate policy in front of Republicans who want to see Fed policy return to normal. More important is the market reaction to what the US Fed has been saying, and today's first chart shows the very mild change in the level of the US dollar index (March contract - DXH5), which has eased back over the last couple of sessions as these two Fed testimonies have played out.

If we look at today's second chart (the AUDUSD pair at 15 minute intervals), we can see an inversion there that has led the Australian dollar higher. This is not only coming from US dollar weakness, rather the probability of another rate cut next Tuesday has dropped from 71% as at Monday last week to be 42% now - so we are seeing a short-term change in dynamics on two fronts. While US dollar markets are unwinding (or pushing out) bets of a rate hike, Aussie dollar pundits are reining in their bets that the Reserve Bank of Australia will boldly continue cutting interest rates. With risk-averse investors being pushed into toppy equity markets due to falling cash and term deposit rates, it is probably not a bad idea to sit and wait to see whether the February rate cut will help lift economic sentiment - especially with the potential for further cuts to fuel the housing market.

Today's last chart shows the ASX 200's rally (in black) running out of steam; but again, we're not seeing corrective retracements of this recent rally just yet. I've included the US S&P volatility index (VIX in orange) to illustrate the complacency that has been creeping back into the market ever since peaks were notched up in December and January - the big question is, is this complacency warranted? The ASX is going to kick off with a -19 point start from the overnight futures, let's see what today's Australian makes of a firmer Aussie dollar and another busy day of reporting.

ASX 300 companies reporting earnings today:
  • ABC Adelaide Brighton
  • ACR Acrux
  • AGO Atlas Iron
  • ASB Austal
  • AWC Alumina
  • BDR Beadell Resources
  • EHL Emeco
  • FAN Fantastic Holdings
  • GJT Galileo Japan Trust
  • GPG Guinness Peat Group
  • IFL IOOF
  • IQE Intueri Education Group
  • JHC Japara Healthcare
  • KSC K&S Corporation
  • MOC Mortgage Choice
  • NEC Nine Entertainment Co. Holdings
  • NWH NRW Holdings
  • NXT NextDC
  • PAN Panoramic Resources
  • PPC Peet
  • PPT Perpetual
  • PRT Prime Media Group
  • QAN Qantas Airways
  • SAI SAI Global
  • SYD Sydney Airport
  • VHP Vital Healthcare Property Trust


Today‚Äôs charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: Japanese foreign asset purchases 10:50am, German employment report at 7:55pm, UK GDP at 8:30pm, Canadian CPI at 12:30am, US CPI, consumer confidence and durable goods orders at 12:30am, all Sydney time.

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