Market Shakes Traders Awake For 2014

Big moves in oil, gold and yen crosses greeted traders on the first trading day of 2014. The yen was the top performer while the Swiss franc lagged. The Chinese non-manufacturing PMI is on the calendar later.

Traders were shaken into action with trading getting underway for the year. Gold jumped $25, WTI crude oil fell the most in more than a year and the high-flying yen crosses were blown out.

A mix of position unwinds, flows and risk aversion kicked off the year. The S&P 500 fell 0.85% in a stumble to start the year. The theme, if there was one, was a reversal of the moves in the illiquid markets in late December. In particular, GBP/JPY and EUR/JPY rallied hard late in the year on light liquidity, they fell 180 and 225 pips, respectively, to start the year.

Gold was a different story. Technicals played an important role as the market rebounded from support at the June low. Tax loss selling late in the year and hedge fund window dressing may have also understated demand for gold. With the gains, gold technicals point toward a retest of the zone of congestion at $1250/60.

US oil declined the most since November 2012 on fundamental and technical selling. Production restarts in Libya weighed but breaks below the 200 and 55-day moving averages along with the mid-December lows sparked a wave of selling down to $95.58, nearly $3 on the day.

Fundamentals were generally pushed aside despite some upper tier data. The ISM non-manufacturing index slipped but beat expectations at 57.0 compared to 56.8 expected. The bigger stories were the sub indexes; the new orders component was at the highest since April 2010 and employment was at the highest since June 2011. Other data was also a touch strong, the final market manufacturing PMI was revised to 55.0 from 54.7 and initial jobless claims were at 339K compared to 342K expected.