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Aussie gains as RBA keeps quiet on currency strength


Australia's dollar was the biggest gainer among major currencies as U.S. and European traders returned from summer holidays on Tuesday, jumping almost 1 percent after the country's central bank said little on its 10 percent rise since January.

Australian data: Construction PMI for August: 46.6 (prior 51.6)


The Performance of Construction Index from the Australian Industry Group

For August, comes in at 46.6, completing a very poor trifecta for Australia's 3 PMIs in August
  • the previous month's was 51.6

Australia - July trade balance: -2.41 bln (expected -2.7bn)


July's trade deficit in Australia comes in at 2410mln

  • expected -2700mln
  • prior was -3195mln

  • Goods and services exports up 3% m/m,
  • imports flat (0 change) m/m
Trade deficit not as wide as expected nor as wide as the previous month

AUD/USD forecast for the week of September 12, 2016


The AUD/USD pair initially tried to rally during the course of the week but found enough resistance at the 0.7675 level. By doing so, we turned back around to form a bit of a shooting star. The shooting star of course here is a negative sign, but there is a massive amount of support just below and as a result I think that you can’t sell this market. We certainly can’t do it from the long-term perspective, so having said that I think you have to look to the short-term charts in order to get involved, and quite frankly I would get out as soon as a signs of support.


National Australia Bank Business Survey for August

Business Confidence 6
  • prior 4
Business Conditions 7
  • prior was 9, revised from 8
Apologies for the delay ... while the site appeared to be working the back end (where I post) was down.

The key points from NAB on the survey results, in summary and bolding mine:
  • Despite some moderation in business conditions, results from the NAB Monthly Business Survey remain reasonably upbeat.
  • Business sentiment has proven to be resilient to negative influences over recent months, which has flowed through to more stable (and above average) levels of labour demand.
  • business confidence is consistent with the long-term average of +6
  • Business conditions eased back further in August, to +7 index points (from a revised +9). While this is the lowest level of business conditions since the start of the year, the index is still above its long-run average level (+5)- having consistently remained above this level since early 2015
  • The strength in business conditions remains largely confined to the major services and construction industries, while relatively subdued conditions in wholesale and retail warrant close monitoring - particularly in light of disappointing consumption growth in the Q2 National Accounts.
  • Trading conditions and profitability have been the main drivers of elevated business conditions, but while both of these eased in August, employment conditions held steady - pointing to ongoing employment growth.
  • Inflation measures in the Survey generally stayed soft, with retail prices pulling back sharply.
  • NAB's measure of capacity utilisation dropped back in the month, which could suggest a turn in the long running improving trend. Utilisation rates fell to 81% (from 81.5%), which is in line with the long-run average of 81%. The increase is consistent with elevated levels of trading conditions, although both capex and employment remained positive in the month (adding to capacity).
  • The results from this month's survey remain broadly consistent with our prior view of the economy and the near-term outlook. It points to a patchy, but sustained, improvement in the non-mining economy, with the major services sectors and construction leading the way.
  • That said, recent negative movements in retail and wholesale conditions will be a cause for concern should they continue, and we are watching to see if they represent the start of a new trend.
  • Beyond the near-term, as the effects of previous AUD depreciation, higher commodity exports and the housing construction cycle begin to wane, the outlook becomes more uncertain. All of these factors are expected to come to a head around 2018, and the economy will likely require additional policy support from the RBA ahead of this to firm up growth and stabilise the unemployment rate. NAB economics currently expect two more 25bp cuts by the RBA in mid-2017.

Australian Employment Declines for First Time in Seven Months


Australian employment declined for the first time in seven months, although the underlying trend remained favourable as full-time jobs rebounded.

Overall employment fell 3,900 in August, the Australian Bureau of Statistics reported Thursday. Economists in a median estimate called for an increase of 15,000.

Full-time employment, which has proven more volatile this year, rose 11,500 last month. Full-time jobs declined at a revised 43,400 pace in July. Part-time jobs fell 15,400 in August after gaining a revised 69,900 the month before.

The unemployment rate declined by 0.1 percentage point to 5.6%, confounding expectations calling for no change.

Consistent jobs creation for most of the year has painted a favourable picture of Australia’s economy, which recently recorded its 21st consecutive quarter of economic expansion. With interest rates at rock bottom and the economy chugging along, employment should continue its gradual upward pace for the foreseeable future.

A private gauge of consumer inflation expectations weakened for a second consecutive month in September, suggesting that weak price growth would continue to pose a challenge. On Thursday the Melbourne Institute’s gauge of 12-month inflation expectations fell to 3.3% in September from 3.5% the previous month.

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AUD/USD Breaks above 0.7500 Handle


AUD/USD made a bullish break from a two-day range and broke above resistance at 0.7500. The pair initially attempted a break higher during the US Data release in early North American trading today, but failed to sustain gains as the US Dollar reversed shortly after the release. Into the European close, the pair has gained some momentum, closing above the resistance level on an hourly basis.

Data out of the United States came in mostly below expectations and triggered volatility among the majors. An initial leg of US Dollar weakness was promptly faded, but following the reversal the US Dollar index (DXY) failed to push to fresh highs for the day. DXY spiked lower on the data release to touch the 50% Fibonacci retracement measured from last Thursday’s low at 95.08, briefly dropping below daily support seen at 95.11. The subsequent reversal took the index to a high of 95.54, falling shy of the high on the day at 95.56. DXY was last seen trading at 95.25 for a small loss of 0.08%.

AUD/USD pushed towards weekly lows during the Asian session, as the Australian jobs report showed a decline in the number of people employed. The employment change was reported to decline by 3,900 people against analyst expectations of a 15,200 increase. The data sent the pair to a low of 0.7446 where a turn was seen, slightly ahead of the low for the week. The currency pair was seen climbing higher from the low ahead of the US Data release.

Out of the US, retail sales fell short of expectations printing a decline of 0.3% against the expected 0.1% drop. The weekly unemployment claims showed 260,000 people seeking benefits, up by 1,000 people as compared to the prior week, and slightly below the analyst expected 262,000 people. The data caused a brief spike above the 0.7500 handle in AUD/USD, likely triggering some stops, prior to pulling back as the US dollar recovered. Ahead of the European close, a second attempt was made at the highs, and a fresh high on the day was posted at 0.7517. The Aussie Dollar is now seen as the top performer on the day among the majors.

Among the cross rates, EUR/AUD is seen retreating following a bullish break earlier this week. The 200-period daily moving average capped the decline on Tuesday, while the drop today has engulfed the small gain posted on Wednesday. AUD/CHF fell to fresh lows on the week following the Australian jobs report but saw buyers at it’s 200 DMA, and is on track to post a day of gains after trading heavy over the last week. AUD/NZD was met with support at 1.0246 on Wednesday, the level represents the 161.8% Fibonacci extension measured from the recovery in early August. The pair is on track to erase gains from the prior day to print a bullish engulfing candle.

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AUD/USD forecast for the week of September 19, 2016


The AUD/USD pair fell during the course of the week, slicing through the 0.75 handle. The fact that we have broken down there suggests that we could see quite a bit of negativity but at this point in time I think there are more than enough support of areas below that should keep this market difficult to deal with from the longer-term perspective. Ultimately, I think that you will probably have to trade this market off of the short-term charts, or perhaps even sit on the sidelines as the market has to figure itself out.


Australia: Port of Melbourne sold for AUD$9.7 billion

This will be a big cash boost for the State of Victoria in Australia

Its though a lot of it will be spent on infrastructure. Says the local press:
  • The proceeds from the sale have already been factored into the budget to fund Victoria's promise to remove 50 level crossings over two terms.
  • But the extra cash will give the government even more leeway to deliver infrastructure, including the potential to announce big road projects ...  
  • Ten per cent of lease proceeds, about $970 million, will be invested in regional and rural infrastructure projects
  • Victoria will also get about $1.45 billion under the Federal Government Assets recycling scheme - far more than was set aside in the federal budget
  • Treasurer Tim Pallas said he had expected "a number closer to $7 billion"

Australia - Q2 House Price Index: +2.0% q/q (expected +2.8% q/q, prior -0.2%)


Australia Bureau of Statistics data

+2.0% q/q
  • expected +2.8% q/q, prior -0.2%
+4.1% y/y
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