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
The Australian dollar is the worst performer of the big currencies with a 0.5% fall to 0.7267. Copper was flat to down a little and there was some weakness across the base metals complex more broadly. That and the fact the Thomson Reuters CRB index is down 1% and sitting at five-month lows, along with the AUDUSD underperformance, and the VIX increase to 14.73 (up 12%) tells you traders are still concerned.
The Aussie’s performance has been consistent with concerns about the outlook for the global economy.
Whether that is another in the long line of market overreactions we’ve seen over the years is difficult to tell right here and now. But while stocks remain under pressure, while commodities are dipping (not counting iron ore obviously), while the USD remains bid the outlook for the AUDUSD remains lower.
Locally though the data flow has been among, if not the, best in the advanced economies lately. As I’ve discussed recently the AUD CESI score is at +42.7 right now. That’s solid and it’s why the AUDUSD rose to 0.7450/60 resistance last week. But the local data is just one part of the overall maelstrom of inputs traders and investors use when calibrating their expectations for the Aussie dollar. The macro stuff prevails at the moment.
Offshore events predominate and Glushkin Sheff’s David Rosenberg highlights what many investors are thinking right now. That’s going to impact the AUDUSD and Aussie crosses.
So, if the USD remains bid, a solid print from the NAB survey today is likely to be sold if the AUD bounces. Levels I’m watching are 0.7336 as resistance – it’s a chance given where the AUDUSD is on the daily Bolly Bands. But before that, the 4 hour charts suggest resistance at 0.7298 and then 0.7336. Support is 0.7250.
Despite the weakness in the US and Europe overnight SPI traders have added 5 points to prices after the 26-point fall on the ASX 200 yesterday.
That's despite the fact the ASX broke lower yesterday taking out the uptrend from the April lows.
As a result I see a changed outlook for the local market and the bearish engulfing day on the S&P 500 for me belies the Panglossian hopefulness of SPI traders when the ASX finished tat 6,252.
But, of course, being bearish this market has been dangerous though in recent months.
That’s both a result and cause of the uptrend. So, I doubt there’ll be too many aggressive sellers unless we see more weakness in Asia and night futures. On the day last night’s low of 6,178 is the key for the SPI. If it breaks the run toward the current range bottom around 6145 is likely to have begun.
A LITTLE ON THE ECONOMY
The NAB business survey is out today.
It’s the most important economic release I watch each month because it gives us a solid window into what businesses are doing, thinking, and feeling across so many aspects of the economy. It’s also important because consumers work in those businesses and the kind of messages they get from owners and managers are then taken back to the dinner table and impact on their feelings, confidence, and spending.
What’s been clear recently, is that the peak seems to have been passed for confidence and conditions but that the latter is still better than the long run average. Likewise employment has dipped but has recently remained consistent with the economy generating around 20,000 jobs a month. Trading and profitability have been doing okay as well.
Will we see more of that today? Or will we see a deterioration given the diminishing light in the global backdrop. I can’t wait to find out. I’ll have lots to discuss tomorrow.
Yesterday’s Chinese loans and money supply data suggested the re-liquification efforts of the PBOC might be gaining some traction. But we’ll get proof or otherwise today with the release of the monthly triple-treat of retail sales, industrial production, and fixed asset investment for July. We’ll also get the NAB business survey out here in Australia and Japanese industrial production in our time zone.
Tonight, it’s German Q2 GDP and July inflation data as well as UK employment and the second read on EU Q2 GDP. The ZEW economic conditions and sentiment is also out for Germany while export and import prices are out in the US before the API crude data tomorrow morning.
Have a great day's trading.
Chief Market Strategist
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