Daily Economic Commentary: Australia

Trading Discussion News and Economy
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Looks like the fun stops at three! The Aussie wasn’t able to gain on the Greenback for the fourth day in a row yesterday when risk aversion in markets sent the high-yielding currencies down the charts. After reaching an intraday high of 1.0154, AUD/USD dropped by 60 pips and closed at 1.0094.

Like most major economies, it was a quiet day for the Land Down Under as Australia didn’t release any economic report. But trouble in the Middle East soon weighed on risk appetite, which reduced the demand for high-yielding currencies such as the Aussie.

We’ll see if the Aussie bulls manage to pick up the slack today as an economic report released a few Twitter posts ago woke up the Aussie on the wrong side of the pip beds. Low profitability and economic confidence in Switzerland dragged on the NAB business confidence data, so the figure for the fourth quarter of 2010 only clocked in an index number of 5, which is almost half of the third quarter’s 9.

At 10:00 pm GMT we’ll also see RBA Governor Glenn Stevens give a speech about the resources boom. Since the RBA recently regarded its current 4.50% interest rate as appropriate in the last RBA meeting minutes, any hawkish comment from Stevens might attract some Aussie-buying.

424

Just like Paramore, Aussie bulls were in the business of misery yesterday as AUD/USD fell like a rock to .9883 after opening at 1.0093. That’s what you get when risk aversion kicks in! Whoooaa-ooh!

With tensions still high in the Middle East, Japan getting a credit rating downgrade, and New Zealand suffering another earthquake, it isn’t much of a shock to see traders ditched higher-yielding currencies.

Making it even worse for the Aussie was that the NAB Quarterly Business Confidence index for the fourth quarter of 2010 dropped to 5.0 after printing at 9.0 in the third quarter of the year. Ouch!

I wonder if today’s reports will be able to help the Aussie pare some of losses against the scrilla.

Earlier, we saw that construction work done for the fourth quarter of 2010 grew by 0.8% but missed the 1.3% forecast. On the other hand, the wage cost index, considered as a leading indicator of inflation, beat expectations by 0.1% when it printed at 1.0% during the last quarter.

Hmmm, I think market sentiment will continue to dictate price action today. So make sure that you get a good feel of the market’s mood before you bet your pips, ayt? Peace!

425

Whew! The Aussie finally caught a break against the Greenback yesterday when AUD/USD went up by 34 pips despite the persistence of risk aversion in markets. The pair reached an intraday high of 1.0060 before capping the day at 1.0018.

Was it Australia’s positive reports that encouraged the bulls? Construction in the country grew by 0.8% in the fourth quarter of 2010, which is a lot better than the 1.5% dip during the third quarter. Wages for the same quarter also rose by 1.0% when analysts had only anticipated a 0.9% uptick. Lastly, the CB leading index outperformed its 0.2% figure in November by rising by 0.7% in December. Not bad for a day’s worth of reports, eh?

Data released a few coffee cups ago also revealed that private capital expenditure in the Land Down Under climbed by 1.3% in the fourth quarter. The figure is not only slower than the third quarter’s 6.9% growth, but is also a bit behind the 2.5% growth expectations.

Watch the Aussie pairs closely for more confirmation on its direction! I hear that Big Pippin has a pretty good AUD/USD setup in his chart art!

426

Surf’s up, mates! Despite printing a worse-than-expected economic report, the Aussie roundhouse-kicked the Greenback down the charts. After reaching an intraday high of 1.0124, AUD/USD leveled off to a 78-pip gain at 1.0096.

A report released yesterday revealed that private capital spending in Australia only gained by 1.3% in the fourth quarter of 2010, which is a lot weaker than the third quarter’s 6.9% figure. See, I told you those floods in Australia will take its toll on economic growth!

While speculators expect flooding effects to weigh on economic figures for the next few months, they’re also seeing the glass half full, especially since projections for the mining industry are higher than Big Pippin’s afro.

No reports will be released from the Land Down Under today, but keep close tabs on risk appetite! I hear that rumors of Muammar Gaddafi being shot are trending in markets lately, but a few naysayers are also contesting the idea. Hmm, maybe it was a flu shot?

427

Talk about a g’day mate! The Aussie continued its winning streak against the Greenback and the yen, as AUD/USD ended at 1.0175 while AUD/JPY landed 9 pips above the 83.00 handle. Will it be continue to outpace the safe havens this week?

Even though Australia didn’t release any economic data last Friday, the Australian dollar was able to keep up its stride and gain against its counterparts. This was most probably because traders lost their appetite for U.S. dollars after Uncle Sam revealed a few lousy economic figures, such as a downward revision to its fourth quarter GDP.

Fresh off the press was the private sector credit data, which showed a 0.3% increase in new credit issued to businesses and consumers. However, the company operating profits figure fell short of expectations and posted a 2.8% decline instead of a 0.8% increase for the last quarter of 2010.

Up ahead, Australia has a busy week with a bunch of economic events lined up. Tomorrow, the Land Down Under will release its retail sales and current account balance reports, which are both expected to show improvements over their previous readings. If the actual figures don’t disappoint, the Aussie could keep up its winning streak. Also that day, the much awaited RBA statement is due and hawkish comments from the central bank officials could provide support for the Aussie.

On Wednesday, the new home sales and GDP figures are due. Australia is expected to have grown by 0.6% in the last quarter of 2010, which would be much better than the last quarter’s 0.2% expansion.

Thursday has the building approvals and trade balance on tap. Both these reports are expected to show some slowdowns in construction and trade, but if the actual reports manage to beat expectations the Aussie could hold its ground.

No reports are due from Australia on Friday, but the infamous NFP report could still shake AUD/USD then. Happy trading!

428

Will the Aussie be a big winner like the King’s Speech during the Academy Awards? The Australian dollar still managed to squeeze a few gains from the Greenback and the yen yesterday, and today’s big events will determine whether the Aussie can keep up its rally or not.

Today is a big day for the Aussie as the RBA is warming up to make its monetary policy decision at 3:30 am GMT. The central bank is expected to keep rates on hold at 4.75% despite the recent surge in inflation. Besides, it would be prudent for RBA Governor Glenn Stevens and his men to refrain from tightening their monetary policy while Australia gets back on its feet after the recent cyclones. Still, it would be interesting to find out whether RBA policymakers intend to hike rates later on this year or not, depending on their outlook for the economy. The accompanying statement could shed more light on that so make sure you keep your eyes and ears peeled during the release!

Also, keep in mind that Fed head Ben Bernanke is set to deliver a speech later today. This could set off some wild movements across the charts, as traders are eager to find out whether the central bank is ready to end its quantitative easing. If you aren’t prepared to handle extra volatility, stay on the sidelines during his testimony at 3:00 pm GMT.

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Australia had great news for Aussie traders yesterday, but the Aussie hardly has anything to show for it! A couple of upbeat reports were only able to push AUD/USD 29 pips higher to close at 1.0152.

The first report to roll out was a positive reading from the HIA new home sales report. The last time this came out, it showed a 0.6% decline in the number of newly constructed homes sold. But the month of January showed a strong pickup, as it recorded a solid 2.5% increase.

You would think that the Aussie would head for the skies after seeing Australia’s Q4 GDP. Output rose 0.7% in the last quarter of 2010, beating forecasts for a 0.6% expansion. A surge in household spending to the tune of 0.4% had a lot to do with this upside surprise.

But even though Australia’s economy remains strong, there is still a significant amount of risk involved. The economy is yet to feel the full impact of the Queensland floods. Maybe this is the reason why the Aussie just inched higher, instead of leaping up.

The good news continued today as the AIG services index ticked up from 45.5 to 48.7. Even though this reading still falls below 50 and is indicative of contraction, it does give us something to celebrate. The retail sector carried the services industry as consumers seem to be less stingy with their money. This is exactly the kind of confidence the economy will need if it wants to recover strongly from the floods.

Australia’s trade balance also seems to be indicating healthier-than-expected trade. Even though its trade surplus narrowed from 2.02 billion AUD to 1.88 billion AUD in January, it exceeded expectations which had the surplus shrinking to 1.53 billion AUD.

But in spite of the better-than-forecast data, there is reason for concern. Coal exports, one of Australia’s biggest cash cows, slumped in January, no doubt because of the Queensland floods. You have to wonder how long it’ll take for this part of the economy to recover.

Aside from that, the building approvals report presented another thorn on Australia’s side. Following the solid 10.0% increase in December, January posted a dismal 15.9% drop in building approvals, more than 5 times worse than anticipated. OOOOOUCH!

Phew, what a wrap up! Now that you’ve got your Aussie data fix for the day, go out there and make some pips!

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We got a bit of good news and a bit of bad in Australia yesterday. I guess it should be no surprise that the Aussie’s price action was just as confused. AUD/USD closed 6 pips lower at 1.0158 after swinging high and low, while AUD/JPY managed to march 45 pips higher to 83.68.

First, the good news!

The AIG services index showed a solid rise last month, jumping up from 45.5 to 48.7. Studies say that the services sector owes a lot of thanks to the retail industry for boosting business activity. This is great news considering Australia is just coming out of a few natural calamities! There’s nothing like strong consumer spending to get the economy going.

Also, we learned that Australia’s trade surplus didn’t shrink as much as expected. Forecasts had the trade balance surplus falling from 2.02 billion AUD to 1.53 billion AUD, but instead, it narrowed to just 1.88 billion AUD. A slide in exports was widely expected as the Queensland floods have been limiting Australia’s coal production, one of its most popular exports.

Now, the bad news!

Building approvals dropped, nay DOVE, to 15.9% in January. Following the 10.0% rise in December, many were anticipating a 3.1% slide. Certainly, no one was prepared to see building approvals record its largest drop in 8 years! Again, fingers are pointing to the floods as the culprit as they disrupted many of the country’s construction plans.

You can divert your attention away from Australia today because they ain’t rolling out any more reports! In the meantime, set your eyes west, to the U.S. as its set to publish its NFP report later today. Make the most of this Friday, kids!

431

Whew! The Aussie did a lil’ Matrix action and dodged a big bullet against the Greenback last Friday when risk aversion in markets pushed the high-yielding currencies lower in the charts. After dropping to an intraday low of 1.0076, AUD/USD contained its losses and closed only 20 pips lower than its 1.0158 open price.

No reports were released from the Land Down Under last Friday, but traders got a bit jumpy on the high-yielding currencies when oil prices reached $104 per barrel. You see, high commodity prices usually benefit the comdolls, but this time around the Aussie’s strength could actually hurt its exports.

Will Australia’s mixed economic reports over the weekend provide the Aussie support? Data printed last Sunday revealed that the AIG construction index rose to an index number of 44.6 in February, a bit better than its 40.2 figure in January. Meanwhile, the ANZ job advertisements report slipped to only a 1.2% growth in February after popping up by 2.4% in the first month of the year.

No other data is scheduled for release today, but keep your eyes on risk appetite kids! We’ll never know if the markets extend the risk aversion round due to oil prices, or if it adopts a new theme for the week.

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Aussie bulls learned the hard way that pippin ain’t easy! In spite of positive economic feedback, the AUD/USD failed to rise higher and retest the 1.0200 resistance level. Instead, it peaked at a high of 1.0186 and closed at 1.0112, 17 pips lower for the day.

Coming off a less pessimistic reading from the AIG construction index, you would think the Aussie would start climbing, but that wasn’t the case yesterday. The index jumped from 40.2 to 44.2 in February, recording its ninth straight month of contraction. The good news that we can take from this is that the natural calamities that hit Australia weren’t as disruptive in February. But still, we can’t put on our pip-hats and celebrate as the construction sector is certainly still in a rut.

On a more positive note, the floods surprisingly seem to be doing Australia’s employment good. According to the ANZ job advertisements report, employment ads increased another 1.2% in February, a nice follow up to January’s 3.0% surge. Apparently, there has been an increase in labor demand as Australia has been stepping up its rebuilding efforts.

The only data from Australia today is the NAB business confidence report. Released just a couple hours ago, the report showed a nice rise in confidence in the business sector as the index ticked up from 4 to 14 in February.

So far, AUD/USD has been crawling higher, but it’s too early to tell if this will be the trend for the day. Y’all better keep an eye on this pair ‘cause you never know when resistance at 1.0200 will break down!

433

It looks as though the Aussie was suckered out of a win yesterday! It printed awesome business confidence results, but still couldn’t rally. AUD/USD slid 15 pips lower to record its first close below 1.0100 in over a week!

The NAB business confidence report gave Aussie bulls reason to rally, but they just didn’t bite! The report upgraded its reading from 4 to 14 last month, its highest level in almost a year. Apparently, even though Australia was just battered by a couple of natural calamities, companies still feel very optimistic about business conditions over the next few months. Talk about looking on the bright side! This is exactly the kind of confidence the economy will need to power through these tough times.

Today, the reports released so far haven’t been as upbeat.
Westpac consumer sentiment data for March showed a 2.4% decline as higher oil prices have been giving Australian consumers furrowed eyebrows.

Unfortunately, the bad news doesn’t end there. Home loans fell 4.5% in January, far worse than the 0.7% slide that most were expecting to see. If you guessed that the Queensland floods are again to blame, then you deserve a prize!

The last event of the day will take place at 1:45 pm GMT, when RBA Governor Glenn Stevens takes the mic. I don’t think I need to remind you how words straight from this horse’s mouth have rocked the Aussie in the past!

434

AUD/USD was off to a good start yesterday as it bounced back from Tuesday’s losses and traded above the 1.0100 handle. However, when Australia’s neighbor New Zealand cut interest rates by 50 basis points, the Aussie sympathized and edged lower. Still, AUD/USD was able to end the day 5 pips above 1.0100.

Even though Australia’s home loans report came in weaker than expected and logged in a 4.5% dip for January, the Aussie was still able to recover from its recent losses against the Greenback. AUD/USD consolidated for the rest of the day, as it awaited the monetary policy decision of it’s buddy New Zealand’s central bank.

Upon finding out that the RBNZ cut rates by 0.5% in order to help New Zealand cope with the aftermath of the recent quakes, AUD/USD dipped below the 1.0100 area. But count on the Aussie to stay resilient and keep its head above water!

Australia has its employment data on tap today and it remains to be seen whether AUD/USD can hold on to its recent gains. Their employment change data is expected to print a 20,800 increase in net hiring, slightly slower than the 24,000 rise in jobs in the previous month. Their unemployment rate is expected to hold steady at 5.0%, but any upside surprise could allow the Aussie to push for more gains. Watch out for the actual figures at 12:30 am GMT!

435

Parity, baby! The Australian dollar reached parity with its U.S. counterpart yesterday, but that isn’t a good thing because it meant a hundred pip drop from the 1.0100 area. Ouch! Will AUD/USD be able to recover today or will 1.0000 give way? Hey, that rhymes!

Yesterday’s economic data, combined with the surge in risk aversion, forced the Aussie to sink down under. The employment change report revealed a 10,100 drop in hiring for February, instead of the 20,800 projected increase in jobs. It didn’t help that the January figure suffered a downward revision from 24,000 to a mere 7,700 rise in hiring. Although Australia’s unemployment rate held steady at 5.0%, the drop in employment due to the floods and cyclones was too much for the Aussie to bear. Whatever happened to “cyclones can’t break us, hurricanes can’t take away our love”? It looks like Australia’s labor market wasn’t like a pyramid built on a solid rock after all!

As though those labor pains weren’t enough for the poor Aussie, China came out and reported a 7.3 billion CNY trade deficit for February. That must mean that the PBoC’s prudent monetary policy moves are starting to work. China is set to print another set of economic data today so you better stay tuned at 2:00 pm GMT to see whether its CPI, retail sales, and industrial production figures also disappoint. Bear in mind that China is one of Australia’s largest trade partners, and weak data from the Asian superpower could make the Aussie’s knees wobble.

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With a very light economic calendar, the Aussie was able to stay afloat and surf the strong waves on the charts. It completely erased its big loss from Thursday to force AUD/USD to rise 156 pips and close at 1.0150 at the end of the week.

The only bit of news to come from Australia last Friday was RBA Assistant Governor Guy Debelle’s speech, which was surprisingly upbeat. According to Debelle, bank lending to small businesses has improved, but it still has a way to go before it reaches pre-financial crisis levels. Nevertheless, it’s a good sign for the economy because it implies growing confidence for small businesses, as well as loose credit conditions which help promote economic activity.

Today, Debelle will be in the spotlight again as he speaks at the Australian DCM Summit at 10:05 pm GMT. We probably won’t be hearing anything groundbreaking from the RBA assistant governor, but since this is the only event on the calendar today, you might as well listen in! He may have more details to share about the country’s business conditions.

The rest of the week will be light as well, with only the monetary policy meeting minutes due tomorrow at 12:30 am GMT. Be sure to catch this release to get a better understanding of why the RBA decided to keep interest rates unchanged two weeks ago. Since the RBA clearly wasn’t too worried about inflationary pressures and the effects of the Queensland floods in its rate statement, we’ll probably see how they downplayed these factors in their last meeting.

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The Aussie joined its comdoll homies in the losers bench during yesterday’s trading. AUD/USD opened at what would be its intraday high at 1.0146 and plunged to a low of 1.0047 before ending the day at 1.0098.

Aside from good ol’ risk aversion, the Aussie weakened against its counterparts as the recent global unrest dashed hopes for an interest rate hike from the RBA . And you know what, based on the most recent mentary policy meeting minutes, it seems naysayers were right to side with the Aussie bears!

Released earlier today, the RBA minutes hinted that the central bank isn’t in any hurry to hike rates anytime soon. Economic growth is seen to remain steady but inflation is anticipated to fall within the bank’s target range so there’s no urgent need to tighten up yet. Boo!

But don’t worry Aussie bulls! Who knows, the new motor vehicle sales report for February might be able to convince more traders to root for the Aussie too. Also released earlier today, we saw that the number of cars and trucks sold in Australia in February increased by 0.2% after falling by 2.5% in January.

Take note though that this is only a second-tier report so don’t hold your breath for your back up bull troops to come charging anytime soon.

438

No thanks to risk aversion, the Aussie plunged a whopping 282 pips to its intraday low at .9816 right after opening at 1.0098. Ouch! Good thing it was able to find support and recovered some of its losses to end the day at .9910.

As I’ve said yesterday, the minutes of the most recent RBA meeting did very little to boost the Aussie on the charts. I had more time to do further research and I found out that our central banking mates from the Land Down Under remarked that the ill effects of the Queensland floods are actually bigger than what was estimated earlier. Yikes!

But nonetheless, they expect the Australia’s economic growth to continue chugging along but not at a pace that would have inflation overshooting the RBA’s target range.

Hmmm, and it seems like Melbourne Institute’s leading index report for January supports the bank’s statement too. Because although its reading for December was revised up to 0.9% after being initially reported at 0.8%, it printed a 0.1% downtick for the January.

Uh oh… This might ruffle more feathers since investors had their hopes up that the central bank will holler an interest rate hike soon.

We don’t have anything on tap on our economic calendar for the Aussie today, so make sure you get a feel of market sentiment. I have a feeling that until worries over Japan ease, investors will be hesitant to park their assets on higher-yielding currencies. Be careful, ayt?

439

Aussie bears didn’t need much help from the disappointing reports yesterday… Given the general market sentiment, they would’ve been fine on their own! AUD/USD posted a 61-pip fall to land at .9839 just as AUD/JPY dipped 168 pips to 78.31.

It seems the economic impact of the Japanese quake has spilled on over to Australia. You see, Japan has enormous Australian asset holdings, and over the past couple of days, we’ve Japan has been selling off some of its Australian assets to bring yen back home to deal with the crisis.

To make matters worse, yesterday’s data wasn’t exactly upbeat. The MI leading index showed a 0.1% decrease in January, following December’s 0.9% rise. Also, housing starts were down 5.3% in Q4 2010, worse than the expected 1.1% fall.

Today, do yourself a favor and keep an eye out on risk sentiment. With the tragedy in Japan as the major market theme, the markets will probably pay little attention to economic releases, so be sure to get a good feel for risk sentiment by monitoring developments in Japan.

440

Without anything on tap from Australia, the Aussie once again got snacked on by bears that just got out of hibernation! AUD/USD tapped an intraday low of .9707 before ending the day 35 pips lower from its opening price at .9804.

I guess investors are still jittery about talks of a nuclear breakdown in Japan and increasing political tension in the Middle East, huh? So with our economic calendar still blank for reports from Australia today, it would be best to get a feel of market sentiment to guide you with your Aussie trades.

Also take note that the G7 agreed to a joint intervention to weaken the yen. So you may want to keep tabs on AUD/JPY in today’s trading as the interest rate differential between the two currencies could make it an appealing pair to bet your pips on. Good luck!

441

Guess who’s back in the game? The Aussie, of course! After it had lost four consecutive days against the dollar, the Aussie managed to fight back and rally strongly last Friday. AUD/USD started the day on a sour note at .9803, but the news of the joint currency intervention from the Group of Seven (G-7) helped it soar more than 150 pips to end the day sweetly at .9961.

Thanks to the news that the G-7 would mount a coordinated currency intervention to stabilize the yen, risk aversion was tempered, much to the benefit of the high-yielders like the Aussie and Kiwi. Give the Aussie a day or two more of risk appetite, and I think we’ll see it rise above parity again!

No important news events to keep an eye for out for today, but tomorrow, at 12:30 am GMT, expect to see the RBA’s monetary policy minutes. The minutes, which provide the market with a look at factors that influenced the RBA’s monetary policy, is watched closely by traders. With the RBA choosing to keep rates unchanged in their last meeting due to the floods, the contents of the meeting minutes will probably have a bigger effect on price action than usual.

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So you turning bullish on Aussie. Are you backing this up through technical analysis.

Can Libyan war and Japan disastor push Australia lower?