Category: Australia & NZ

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Forex: CAD, AUD, ZAR

Canada’s Loonie continues a narrow consolidation below $1.01, suggesting an upward breakout in response to higher oil prices. Recovery of 63-day Twiggs Momentum above zero indicates a primary advance. Target for the advance would be the 2011 high of $1.06. Breach of the rising trendline is unlikely, but would warn of reversal.

CAD/USD

* Target calculation: 1.01 + ( 1.01 – 0.96 ) = 1.06

The Aussie Dollar reflects broader weakness in commodities. Breach of the rising trendline would warn of a decline to test primary support at $0.96, while respect would indicate another test of $1.08 — and suggest an upward breakout.

AUD/USD

Against the South African Rand, the Aussie Dollar continues to test support at R8.00. Narrow consolidation suggests a downward breakout and test of the long-term trendline at R7.50. Reversal of 63-day Twiggs Momentum below zero would warn of a primary down-trend.

AUD/ZAR

* Target calculation: 8.00 – ( 8.50 – 8.00 ) = 7.50

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ASX 200 response

Australia’s ASX 200 opened with a strong blue candle on the hourly chart but is now retracing to find support. Respect of short-term support at 4290 would suggest follow-through to 4320, while failure would test medium-term support at 4240/4250.

ASX 200 Index

Breakout above 4320 would indicate another test of 4400. Though we are unlikely to see a primary up-trend until China signals that it has formed a bottom.

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ASX 200 hesitant

Australia’s ASX 200 index displays stubborn resistance at 4300, but rising 13-week Twiggs Money Flow indicates buying pressure. Upward breakout would signal a primary up-trend, with an initial target of 4650 and a long-term target of 4950*. The right-angled broadening pattern reflects weak support and downward breakout would test primary support at 4000.

ASX 200 Index

* Target calculation: 4400 + ( 4400 – 3850 ) = 4950

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Pimco Eyes Aussie Bond Boom – WSJ

“We really are in a secular shift for greater demand for fixed income securities in Australia,” John Wilson, the head of the global bond giant’s [Pimco’s] Australia operations told Deal Journal Australia. “That’s why you will see increasing issuance in the domestic market by domestic issuers.”

“We are seeing this notably in our flows in the wealth management business. Private investors are seeking recurring income and capital stability,” he said.

In recent weeks some of Australia’s national champions–such as retailing giant Woolworths and conglomerate Wesfarmers–have issued local currency debt even as some of the country’s other big corporates have skipped local investors and borrowed elsewhere.

via Pimco Eyes Aussie Bond Boom – Deal Journal Australia – WSJ.

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Forex: Aussie, Loonie, Rand

Canada’s Loonie, buoyed by rising oil prices, is testing resistance at $1.01/$1.015. Narrow consolidation suggests an upward breakout and advance to the 2011 high of $1.06*. 63-Day Twiggs Momentum above zero also indicates a primary advance.

Canadian Dollar/USD

* Target calculation: 1.01 + ( 1.00 – 0.95 ) = 1.06

The Australian Dollar, dragged lower by weaker commodity prices, is testing medium-term support at $1.04 on the Weekly chart. Respect of the rising trendline is more likely and would indicate a breakout above the ascending triangle at $1.08.  Long-term target for an advance would be $1.20 but that seems unachievable in the near-term. Breach of the rising trendline is less likely, but would warn of a correction back to $0.96; and reversal of 63-day Twiggs Momentum below zero would indicate a primary down-trend.

Australian Dollar

* Target calculation: 1.08 + ( 1.08 – 0.96 ) = 1.20

The Aussie Dollar breached support against the South African Rand at R8.00 on the Daily chart. Follow-through below R7.90 would confirm a correction to $7.60*. Breach of the long-term rising trendline, however, would warn of a primary down-trend.

AUD/South African Rand

* Target calculation: 8.05 – ( 8.45 – 8.05 ) = 7.60

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RBA gambles on China – MacroBusiness

Glenn Stevens: Those at home [Australia] see this as well. As consumers, they have responded to the higher exchange rate with record levels of international travel. As producers, however, they also see, with increasing clarity, that the rise in the relative price of natural resources amounts to a global and epochal shift, which carries important implications for economic structure in Australia, as it does everywhere else. Some sectors of the economy will grow in importance as they invest and employ to take advantage of higher prices. Other sectors will get relatively smaller, particularly in the traded sector, as they face relatively lower prices for their products and competition for inputs from the stronger sectors. The exchange rate response to this shift in fundamentals is sending very clearly the signal to shift the industry mix, though this would occur at any exchange rate. The shift in relative prices is a shift in global prices that is more or less invariant to the level of the Australian dollar…..

Delusional Economics: And there is the China gamble laid bare for all to see. It is true that in relative pricing terms Australia’s income has increased but, as the Governor alludes to, the prices we are paying for cheaper imports is a hollowing out of some industries and a corresponding restructuring of the labour force. By not intervening via monetary and/or fiscal policy in the capital flows associated with the commodities boom the government and the RBA have made it clear that a restructure of the economy will be the outcome.

However, as I have pointed out in my analysis of Europe , and Mr Stevens goes on to say later in the speech, structural change is difficult and expensive. By allowing the economy to restructure in this way we are making a one-way bet on China. That is, if we’ve got it wrong on Beijing, we are in seriously deep trouble because there is no Plan B.

via RBA gambles on China – MacroBusiness.

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Selling pressure warns of correction

Medium-term selling pressure, signaled by bearish divergence on 21-day Twiggs Money Flow, continues to warn of a correction in US and Asia-Pacific markets. The Dow Jones TSM (formerly “Wilshire”) Asia-Pacific Index displays a bearish divergence since mid-February. Reversal below 1280 would confirm a correction.

Dow Jones TSM Asia-Pacific Index

Dow Jones Industrial Average shows a similar bearish divergence, though the latest down-turn was exaggerated by triple-witching hour [TW] on Friday. Reversal below 12750 would confirm a correction.

Dow Jones Industrial Average

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Australia: ASX 200

The ASX 200 continues in a narrow consolidation between 4300 and 4150, indicating uncertainty. Rising 13-week Twiggs Money Flow is a positive sign and recovery above 10% would suggest a primary up-trend. Breakout above 4300 would likewise suggest an up-trend, while follow-through above 4400 would confirm.

ASX 200 Index

* Target calculation: 4400 + ( 4400 – 3800 ) = 5000

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