Range bound end to the week

While the ASX 200 index finished higher yesterday, it remained inside Wednesday’s range. The market looks like ending the week in this essentially sideways mode. A soft lead from US markets, weaker than expected US GDP growth and a stronger Aussie Dollar are likely to keep investors cautious at the open this morning.

Despite disappointing profits by some headline companies, the US profit reporting season has beaten expectations overall. However, against a background of relatively high valuations, this has not been enough to fuel a new move higher in US stock indexes. On average, US profit results have been ahead of expectations but they have been patchy. Economic growth is not good enough to conceal the problems of stocks with strategic issues like Apple and Twitter.

The Bank of Japan’s decision to leave monetary policy unchanged and last night’s weaker than expected US GDP data, has triggered another high momentum bout of US Dollar selling. This looks as though it has further to go at this stage.

Currency moves over the past 24 hours create a real question mark over whether the Aussie Dollar is in fact trending down after Australia’s weaker than expected inflation data. The Aussie Dollar is yet to break through major supports and might just be in a volatile trading range with potential for another rally towards $US .79.  Next week’s RBA meeting looms as a key event for the near term direction of the Aussie Dollar. The Governor’s statement and the extent of any future easing bias may be just as important as whether or not rates are actually cut next week.

Changed thinking on the $US was reflected in the strength of gold price overnight. This could see gold stocks well supported on the local market today.