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 AUDUSD is at 0.7388 despite the fall in copper of 1.36% in US trade. The RBA this afternoon will be interesting. No change is expected but any signs of dovishness will hurt the Aussie.
Move along please, nothing to see here.
Seriously, the AUDUSD’s 30 point range was about half the ATR of the past 20 days and reflects both a resilience in the AUDUSD as it sits near the middle of the recent range and also that what ails Europe and the UK doesn’t exactly ail the Aussie dollar right now.
Certainly the Euro/USD tractor beam is still strong (as is USDCNY moves).
But with the CESI for Australia up around 45 and leading the global pack there are economic positives for the bulls to grab onto. There are also plenty of folks who want to sell the Aussie too. Just with a big short already on and a lack of fresh catalysts the reason was absent for the first part of the week’s trade.
For the moment the Aussie is in a consolidation range above 73 cents and below the downtrend from the last failure above 81 cents. I’m just trading the range unless or until it breaks. Or the Euro falls completely out of bed dragging the Aussie with it as the USD surges – if that happens.
Support in the very near term today is 0.7370/75 with resistance 0.7510/15 on the day.
The ASX200 which rallied nicely to close at 6,273 – still below the recent high and still respecting the solid uptrend from March. SPI traders are more circumspect this morning only adding 4 points to yesterday’s 38 point rally on the ASX200 physical.
SO I’m sticking with the uptrend and range unless or until it breaks.
Obviously, the ability of the Nasdaq to bounce off trendline support last week, of the S&P 500 to close within 20 points or so of the record high are good signs for support of the ASX200 and the SPI. And the reality is the uptrend from back in March remains persistent. SO I’m going to respect that. Not much else to say other than watch US markets and earnings here in Australia.
Here’s the Cash CFD chart of the ASX200 we have.
A LITTLE ON THE ECONOMY
Job ads yesterday again suggest a strong labour market will remain in place in Australia for some time and that unemployment will fall.
That’s good news because the growth in employment in aggregate, along with the increased participation rate, is helping to assuage the worries that households have over debt, low wages, and now falling house prices. And that’s something the men and women of the RBA will be discussing at this morning’s Board meeting before the governors announcement this afternoon that for the 24 th month in a row rates in Australia will remain at 1.5%.
No doubt they would love to have an excuse to raise rates. To have an economy strong enough to support such a move, with inflation high enough for them to have confidence it will sustainably head back in the range. But it’s too soon for that. So while I expect the governor to note the consumer resilience I’ll be interested to see what, if, he has to say about housing and any impacts. If the RBA wants to change the message this is the week to do it. But then again my bet is they are likely very happy with how things are tracking right now and just have a weather eye on housing
On the day the RBA is the big event here in Australia. No change is expected but we hear from the RBA – including today – three times this week so if they want to tweak or change their message this is the week to do it. So be on the lookout at 2.30pm AEST.
Offshore the highlight is going to be the German trade data and industrial production. Coming a day after the IMF popped the Germans for their surplus and the pressure it puts on other nations this will garner some coverage. House prices are out in the UK tonight and in the US its JOLTS and the IBD/TIPP optimism survey while in Canada we get the release of the Ivey PMI.
But the big data release given the Yuan’s slide and the trade war is probably the Chinese foreign reserves data at 6 pm my time this evening.
Have a great day's trading.
Chief Market Strategist
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support