AUD news - page 10
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AUD/USD forecast for the week of October 24, 2016
The AUD/USD pair initially tried to rally during the course of the week, but found the 0.7750 level above to be a bit too resistive. By doing so, we ended up turning back around and forming a shooting star. Because of this, it’s likely that we will drop from here but there is a significant amount of support below at the 0.75 level, so if we bounce from there would not be much of a surprise. If we broke down below there, then we could start to fall rather significantly.
AUD/USD Weekly Forecast October 24-28
AUD/USD posted strong gains in the first half of the week, scaling above a critical declining trendline and printing fresh highs for the month. A sharp turn lower on the back of a weak Australian jobs report and a Dollar rally led to a two-day decline bringing the pair back into negative territory for the week and month.
The Reserve Bank of Australia released minutes from their latest central bank meeting on Monday. Concerns were expressed regarding the housing market as some cities continue to show growth in house price inflation. There is a supply of housing scheduled to come into the markets over the next few years, but there is some risk between the time it takes for additional supply to reach the market. The RBA also indicated that there has been a pickup in labor market gains, however, this derived mostly from part-time income over the past year. The central bank will want to see gains in the labor market to aid in boosting inflation levels. There was also a comment in the minutes that the bank will have the latest CPI data available to evalutate at their next meeting.
Australian labor data on Wednesday triggered the sharp turn lower in AUD/USD. While the unemployment rate remained steady at 5.6%, employment change declined by 9,800 people against an expected increase of 15,200. There was a notable drop in full-time employment while part-time employment increased.
Out of the United States, the consumer price index was reported to rise 0.3% in September and 1.5% on an annual basis. The core figures came in slightly softer with a rise of 0.1% for the month and a rise of 2.2% annually.
The latest COT report indicated a fourth consecutive build in the net long Aussie position. For the week to October 18, non-commercials were reported to hold a net long of $2.3 billion, up $330 million from the prior week.
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Australia - Weekly consumer confidence: 113.6 (prior 117.8)
Australia - ANZ / Roy Morgan weekly consumer confidence, big drop to 113.6- previous week was 117.8
AUD Into CPI: Our Strategy Is To Sell Any Rallies Targeting 0.65
Our trade of the week to be short AUDUSD* has caught attention due to its aggressive target of 0.65. Actually we think the level is not out of reach, it was our end 2017 target and we see a risk of hitting that level even earlier than that, but for now we are promoting it as a medium term structural trade. In general, from the China side, loose monetary conditions have caused a housing market boom and thus high commodity imports, but we think the easing will slow in coming months.
As we find again this morning, China's authorities are starting to show signs of clamping down on the housing market. Some regions have used methods to tighten by increasing the down payment required on a house and our China economists no longer expect the PBoC to cut rates this year, a sign that monetary conditions could stop loosening.
From the Australia side, the labour market deteriorated further in September, with an increasing number of full-time jobs being replaced by part-time, weakening the long term earnings and growth outlook for the economy. The RBA's new governor Lowe has suggested that the case for further cuts would be strengthened if the labour market worsened. The market only currently prices 12 bp of cuts by the end of 2017 but our economists expect another 50bp.
The market will be watching the 3Q AU CPI release tonight, where we expect 0.7% QoQ. Consumer confidence fell overnight as expectations of household financial situations in a year from now declined rapidly. The effects of reduced mining sector investment, not replaced by investment in other sectors, should also drag down growth in addition to the weakening expected in Australia's housing market next year. Sure, there is a chance that China keeps on easing at the rate of the past quarters, adding to commodity price and thus AUD support but the effectiveness of piling debt on top of debt is diminishing (as shown by declining returns on investment), suggesting to us that upside is becoming more limited.
Our strategy is to use any rallies to sell the AUDUSD.
MS runs a limit order to sell AUD/USD at 0.7670 with a target of 0.6500 and stop at 0.7750
source
AUD Into CPI: A Surprise Would Have A 'Significant' Impact On AUD
Further strong gains in iron ore, which reached a YTD high, helped give the AUD boost ahead of important CPI data to be released on Wednesday. Gains in iron ore and energy prices have seen Australia’s terms of trade surge in the last month.
The CPI data could have a significant impact on the AUD/USD in the event of a surprise given that the Australian-US 3M rate differential and the relative slopes of their bill strips are strong drivers of the currency at the moment.
The market is pricing in only a 16% chance of a RBA rate cut next week and only 6 out of 26 economists surveyed by Bloomberg currently look for a cut. But the market is also pricing in about a 50% chance of a rate cut by mid-2017. So if underlying inflation were to accelerate, we think that the rates market would price in the end of the easing cycle and give the AUD a boost. The recent RBA Minutes suggest that the Board is more concerned about the property market and new Governor, Philip Lowe, has emphasized that the RBA’s inflation target should be pursued with financial stability in mind.
Consensus looks for stable underlying inflation (average of weighted median and trimmed mean measures) of 0.4% QoQ and 1.6% YoY, which in our view would not be weak enough to get the RBA to cut rates. Underlying inflation in 0.3% QoQ or below is required. The market focus is typically on the trimmed mean measure as this the RBA’s preferred measure of underlying inflation. This measure has the benefit of base effects to help push it higher in YoY terms.
source
Australia Q3 CPI: 0.7% q/q (expected 0.5%)
Third quarter 2016 inflation data fro Australia out now from the Australian Bureau of Statistics
Headline CPI 0.7% q/q WELL ABOVE EXPECTED (note the comments from the ABS, below)
Trimmed mean (This is the measure the RBA pays most regard to, the 'core' figure where the RBA target band is 2 to 3%)
0.4 % q/q:
'Weighted median:
AUD/JPY Breaks Out to New Rally Highs on CPI Data
AUD/JPY is sharply higher following the release of Australian CPI data. Consumer prices rose 0.7% in the third quarter, following a 0.4% increase in April-June, the Reserve Bank of Australia said in its quarterly inflation report. Year-over-year, the CPI rate rose 1.3%. Consensus estimates of economists forecast inflation to rise 0.5% quarter-over-quarter and 1.1% annually. In the latest monetary policy minutes, Reserve Bank of Australia Governor Lowe stated that the next inflation data would be crucial for the policy decision at November’s RBA meeting. Today’s report suggests a rate cut is not forthcoming at the November 1st meeting.
AUD/JPY rose sharply on the news, breaking above the former rally highs near the 80 handle. Now in play as a result of the move is the cross’s 200-day moving average near 80.175. Clearing this moving average on a sustained basis would be a bullish development that leaves the upside target at the June/July highs at 81.590/81.513. An extension of today’s advance would also confirm an upside breakout from the long term downward sloping trend channel shown on the weekly chart. A breakout from this channel would suggest the longer term trend in the pair is shifting out of bearish territory.
As a result of today’s advance, the Stochastic, a price momentum indicator, is back at heavily overbought territory. Thus, there is the potential for at least some near term consolidation. The former highs at 80.017-80.006 represents first support. Holding above this level on a consolidation would keep the bullish implications of the reaction to the CPI data intact and the bias firmly to the upside. On a drop below this level, the target becomes last week’s low 78.700 low, which is given added reinforcement by the 20-day moving average, a moving average that has support and resistance value in the past for the cross.
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Australia new home sales data (September) +2.7% m/m (prior +6.1%)
Housing Industry Association data for September.
Q3 PPI data is still to come, due at the bottom of the our. It'll give a picture of price pressures upstream. But, like this HIA data, unlikely to move the forex too much.
AUD/USD forecast for the week of October 31, 2016
The AUD/USD pair initially tried to rally during the course of the week but found quite a bit of resistance just below the 0.7750 level to turn things around and form a shooting star again. We had formed a shooting star from the previous week, but the week before that ended up forming a hammer. With this being the case, looks as if there is a lot of noise in this area, so I don’t think that longer-term traders are going to be able to take advantage of this market. Ultimately, this is a market that is going to be difficult to deal with, and I think we are going to continue to chop around but eventually we could break above the 0.7750 level which would be an extraordinarily bullish sign. We broke down below the 0.74 level, then the Australian dollar will more than likely break down significantly. Ultimately though, you have to pay attention to the gold markets as they do tend to have quite a bit of influence on the Aussie dollar, so keep an eye on both of those.
I do expect a lot of volatility, and quite frankly the longer-term trade may not trigger this week. However, I do think that it’s worth paying attention to for the longer-term perspective as the setup looks to be so obvious. We have been consolidating for some time, so I think perhaps we may eventually break to the upside but we are trying to build up the momentum which of course we are going to need quite a bit of in order to go higher.Ultimately, the market is something that you’re going to have to be very patient to deal with, but I think that given enough time we will have a significant move and therefore white a bit of profit to be made if you are willing to wait. At this point, this could be one of the more significant trades once it develops, so although I do not have a position at this moment, I am watching this market with great interest.
AUD/USD Weekly Forecast October 31-November 4
Price action in AUD/USD mimicked the prior week as a bullish attempt was met with a sharp reversal, leading to a marginal weekly loss. Australian inflation data triggered volatility in the pair as initial gains from the report on Wednesday were quickly erased, with downside follow-through carrying momentum for the remainder of the week.
The Australian consumer price index was reported to rise 0.7% in the September quarter, to beat the analyst expected rise of 0.5%. A notable portion of the gains derived from fruit and vegetables, as a result of adverse weather conditions. AUD/USD reached a high of 0.7709 after the release but struggled to hold on to gains with a turn lower in European trading resulting in a daily doji print. A continuation was seen on Thursday, and early in the day on Friday, while a broader Dollar decline triggered a bounce in North American trading at a significant rising trendline support.
In the upcoming week, the Federal Reserve and the Reserve Bank of Australia will deliver their latest rate decision and policy statement.
Following their last rate cut in August, the RBA is seen taking a more neutral stance. As a poor inflation reading in the first quarter signaled the two rate cuts seen this year, this week’s central bank communication will be important in gauging the stance on monetary policy following the latest quarterly CPI data. The central bank should acknowledge that some of the gains in inflation were due to adverse weather conditions, but nevertheless be pleased with inflation ticking higher. While a poor CPI reading would normally cause speculation for a rate cut, the central bank may potentially view the positive data as a signal that their easing efforts have been fruitful, prompting them to attach a dovish slant to the statement. There is little expectation for a rate change this week as the majority of analysts are calling for rates to remain at 1.50% while the futures markets are only pricing in a 6% probability of a reduction in the official cash rate this week.
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