Today’s Key Market Drivers: 18th June 2018

Today’s Key Market Drivers: 18th June 2018

18 June 2018, 07:02
Matthew Todorovski
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Andrew Barnett:

LTG GoldRock

https://www.ltggoldrock.com/todays-key-market-drivers-18th-june-2018/


"US China trade tensions continue to keep markets on edge."

 

The Aussie Dollar is toast! Nobody wants to buy it, there is no reason whatsoever for investment banks and hedge funds to buy it and the AUD v USD could be back below 0.70c in coming weeks. The reason of course is the growing interest rate differential between the US Fed and RBA.  The US Fed’s interest rates is now 2% and by December it will be 2.5% meaning it will be a full 1% higher than the RBA. Let me ask you as simply question. If you could get 2.5% on your money does that sound better than 1.5%? It’s not rocket science and more and more money is exiting Australia and heading to the USA as US Dollar assets which include stock, houses, businesses and generally everything with Made In The USA continues to grow and prosper. Compare that to a lacklustre economy in Australia with low wages growth, below trend inflation and an over priced housing market and we have a scenario where the AUD v USD could be 0.50c in 18 months if the RBA doesn’t adjust interest rates higher. But they can’t! The RBA is in no position to adjust the official cash rate higher because it knows it will tip Australia into a recession. People will simply stop spending and Australia is going to have a hard enough time as it is when a huge portion of the mortgage market switches over from interest only to principle and interest. The big four banks are already lifting interest rates without the RBA and currently 40% of all Australian mortgages are interest only and when these mortgages holders have to pay principle as well it will add around $400 to the average mortgage per month. Where does that money come from if wages are not keeping up with the economy? It can only be found by stopping spending. Australia is closer to a recession than a lot of people think and I have been warning members of LTG GoldRock to be very careful over leveraging into the property market in the coming 3 years.

 

The biggest Oil producing nations could be about to ramp up supply which will push down the value of the Oil and the Canadian Dollar. From a technical perspective the CAD v JPY looks weak and it is about to break below an important Head and Shoulder neck line on the daily chart. Please review my Sunday Pre Market Prep Video for more details. 

 

The Euro in my view will continue to remain under pressure although some of the selling pressure was released on Friday after Donald Trump said that the USA was about to introduce new tariffs on China. That caused the US Dollar to pull back a little but the pull back will likely be short term and my view is the low on Thursday for the EUR v USD will be breached again soon. It won’t surprise me to see the EUR v USD back at the 2017 low before the end of 2018. 

 

This week the Bank of England will release its June statement and although they won’t adjust the official cash rate from 0.5% this month traders will be eager to hear from the Governor about when the BOE will raise the official rate in 2018. The market is pricing in August or September however recent economic data out of the UK suggests the economy will need to pick up before the BOE lists rates. 

 

Bullish n Bearish Indicator

 

Bullish

GBP v AUD

USD v JPY

USD v CAD

 

Bearish 

AUD v USD

CHF v JPY

AUD v NZD

EUR v JPY

EUR v USD

CAD v JPY 

GBP v USD

NZD v USD

GBP v JPY

AUD v JPY

EUR v NZD

EUR v GBP

NZD v JPY

 

Neutral 

GBP v NZD

AUD v CAD

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