Welcome to my Australia Today column where I'll have a look at some economics, the Aussie dollar, and the outlook for the ASX200 and SPI.
As every Feedback is welcome
THE AUSTRALIAN DOLLAR
Risk appetite took a hit across global markets overnight as emerging currencies came under pressure once more and with news breaking that the threat of a trade war with China and perhaps the EU is still something President Trump is interested in.
The corollary of this has been a little strength in the Yen with USDJPY falling 111.03. The Aussie too has reacted - to the overnight moves and yesterday’s big miss in CapEx – and is down 0.61% at 0.7261.
The battler is under pressure as the maelstrom which could engulf global markets looks set to intensify once again.
This Bloomberg interview with President Trump and the associated story about the $200 billion tariffs on China, if it actually translates to policy, would again increase uncertainty about the outlook for the global economy and thus for global markets and growth. That in turn wouldn’t help the AUDUSD especially at a time when EM markets, and sentiment toward them, are fragile. Should that feed a risk off tone then the Aussie will come under selling pressure – especially against the Yen.
You can see in the 30 minute chart of the Aussie versus the Euro how these forces are already weighing on the Aussie as it breaks the kin with the Euro and USD moves.
And of course yesterday’s CapEx didn’t help. It again raised the debate about just where the Australian economy sits. Certainly there has been much coverage of new Treasurer Josh Frydenberg meeting senior policy makers including RBA governor Lowe and getting the “she’ll be right message”. But it will be interesting to see how the NAB business survey, Westpac consumer sentiment, and retail sales track in the months ahead.
On the short term charts the AUDUSD is breaking down at the 4 hour…target is 0.7240 and then massive support in the 0.7185/72 cent region.
After a lacklustre day yesterday on the ASX which was essentially flat at 6,351 SPI traders have managed to find 12 points of gains this morning – no really. We’ll see.
Where SPI traders have found 12 points of rally among everything else that’s happened in the past 12 hours I don't know. Interesting really. I’m not sure where that comes from other than the Aussie dollar. But the irrepressible ASX may follow that lead. We’ll see.
The 4 hour SPI chart suggests if 6,315 braks we could be in for a decent fall. SPI currently sits at 6,336.
A LITTLE ON THE ECONOMY
Yesterday’s Capex was a big miss. Much weaker than expected on the actually data and the forecasts are not as strong as we’d like to see. Overall it suggests upside risk to the Q2 GDP result due soon are no longer skewed to the upside as many thought.
On the day Kiwi traders will be watching consumer confidence in New Zealand. We also get South Korean construction, industrial production, and retail sales data. Japan has production, unemployment, and Tokyo prices, while here in Australia we have the RBA financial aggregates data (debt) out.
Chinese official PMI’s are to be released as well and tonight it’s German retail sales French and Euro Area inflation, Indian GDP, Canadian PPI and the Chicago PMI in the US – along with Michigan consumer confidence.
Have a great day's trading.
Chief Market Strategist
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