Kiwi trend channel

The Australian Dollar is edging towards the upper trend channel against its Kiwi counterpart, but the primary trend remains downward. Respect of the upper channel (and resistance at $1.28) would signal a test of the lower border at the 2010 low of $1.21.

Australian Dollar - New Zealand Dollar

* Target calculation: 1.23 – ( 1.28 – 1.23 ) = 1.18

Aussie dollar recovery is tentative

The Aussie Dollar recovered above the former primary support level at $1.04, testing resistance at $1.06. Breakout would indicate an advance to $1.10. But there are several question-marks over the latest advance. First, the rally has accompanied a similar recovery on the ASX 200 (to test resistance at 4500). If resistance holds, as expected, the AUD is likely to retreat.

Australian Dollar

* Target calculation: 1.04 – ( 1.10 – 1.04 ) = 0.98

Second, the CRB Commodities Index confirmed a primary down-trend with a sharp fall below 335. The primary trend is unlikely to reverse at this stage and another down-swing would drag the Aussie Dollar lower.

CRB Commodities Index

* Target calculation: 330 – ( 350 – 330 ) = 310

Silver edges higher

Spot silver is headed for another test of $42/ounce after recovering above $40. Breakout above $42 would offer a medium-term target of $46* (long-term $50).

Spot Silver

* Target calculation: 42 + ( 42 – 38 ) = 46

Gold back at $1800/ounce

After a brief but volatile dip, gold is again testing resistance at $1800/ounce. Rising Momentum threatens an exponential up-trend, with rapid gains and short retracements. Breakout would signal an advance to $2000.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1600 ) = 2000

Always bear in mind that exponential trends make rapid gains but inevitably lead to a blow-off; and stop losses employed in a normal trend are likely to react too late.

Dollar Index tests support

The Dollar Index has consolidated between 73 and 76.50 for the last 3 months. The recent failed swing, a rally that did not reach 76, indicates weakness and we are now likely to see a test of support at 73. In the long term, with 63-day Twiggs Momentum oscillating below zero, the primary down-trend is likely to continue. Failure of support would offer a target of 70*.

US Dollar Index

* Target calculation: 73 – ( 76 – 73 ) = 70

US debt shrinkage slows

Having fallen by almost $1 trillion since its peak in 2009, the decline in US bank lending is slowing, with the annual rate of change approaching zero. A stable level of debt would reduce deflationary pressure and signal that residential and commercial real estate prices are bottoming.

US Bank Loans Leases and Securitised Loans

Most of the money pumped into the economy over the last year leaked straight back out, with excess bank reserves deposited with the Fed rising by more than $500 billion.

US Bank Assets

UK austerity bites

UK bank lending to households jumped slightly in June 2011, but the annual rate of change remains negative at -3%.

UK Household Debt

Commercial loans continue to shrink at an annual rate of 7.5%, signaling a dearth of new investment and job creation by the private sector.

UK Commercial Debt

Australian bank lending slows

Annual rate of change in Australian household debt is falling but remains in positive territory for the time being.

Australian Household Debt

Commercial debt, however, has fallen by more than A$100 billion since its peak in 2009, signaling a fall in new capital investment and job creation by the private sector.

Australian Commercial Debt