Australia & NZ Archives - Page 57 of 99

October 10, 2013

Forex: Euro, Aussie up-trend

The Euro continues to test its new support level at $1.34/$1.3450. Respect is likely and would signal a test of the February high at $1.37. Breakout above $1.37 would offer a long-term target of $1.47*. A trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend. Failure of support — and penetration of the rising trendline — is unlikely, but would warn of another correction.

Euro/USD

* Target calculation: 1.37 + ( 1.37 – 1.27 ) = 1.47

Sterling faltered after breaking resistance at €1.19. Reversal below €1.18 would warn of another test of primary support at €1.14. Follow-through above €1.20 is less likely, but would signal an advance to €1.24*.

Sterling/Euro

* Target calculation: 1.19 + ( 1.19 – 1.14 ) = 1.24

The greenback is testing primary support at ¥96 against the Yen. Reversal of 13-week Twiggs Momentum below zero would warn of a primary down-trend. Follow-through below ¥94 would confirm. Recovery above ¥101 is less likely, but would indicate another advance.

USD/JPY

* Target calculation: 96 – ( 100 – 96 ) = 92

Canada’s Loonie respected its descending trendline and is testing support at $0.96. Failure (of support) would signal another test of the primary level at $0.9450. Bullish divergence on 13-week Twiggs Momentum continues to favor a primary up-trend. Breakout above $0.9750 is presently unlikely, but would complete a double-bottom reversal with a target of parity*.

Canadian Loonie

* Target calculation: 97.5 + ( 97.5 – 94.5 ) = 100.5

The Aussie Dollar is retracing to test its new support level at $0.94 against the greenback. Respect would indicate a test of resistance at $0.95, but failure is as likely and would warn of another test of medium-term support at $0.93. Breach of $0.93 would be more serious, warning of a correction to primary support at $0.89.

Aussie Dollar

* Target calculations: 0.95 + ( 0.95 – 0.93 ) = 0.97

The Aussie continues to test primary support at $1.12 against its Kiwi neighbour. Recovery above $1.14 — and the descending trendline — would indicate a test of primary resistance at $1.16. Breakout above $1.16 would complete a double-bottom reversal with a target of $1.20*. Breach of primary support remains as likely, however, and would offer a target of $1.08*.

Kiwi Dollar

* Target calculations: 1.12 – ( 1.16 – 1.12 ) = 1.08

October 9, 2013

Household Debt to Income ratio

Barry Ritholz highlights the alarming debt to income ratio for Canada compared to the USA:
Household Debt to Income ratio

How does Australia compare?

Australian household debt to income is similar to Canada’s. There has been discussion recently about whether Australia is in a housing bubble. As Anna Schwartz (joint author of A Monetary History of the United States, 1867-1960 with Milton Friedman) pointed out: there is only one kind of bubble and that is a debt bubble. It may manifest through rising real estate, stock or other asset prices, but the underlying driver is the same: a rapid expansion of the money supply through easy credit.

October 8, 2013

ASX signals correction despite Shanghai rally

Dow Jones Shanghai Index penetrated its (secondary) descending trendline today, suggesting an up-swing to test resistance between 298 and 304 at the upper trend channel. Reversal below 282 and the lower trend channel is unlikely, but would warn of another test of primary support at 248.

DJ Shanghai Index

The ASX 200, however, broke its rising trendline and short-term support at 5200, warning of a correction to primary support at 4650. Breach of medium-term support at 5000 would further strengthen the signal.

ASX 200

October 3, 2013

Forex: Euro and Aussie rise as Dollar weakens

The Euro respected support, on a brief retracement to $1.34/$1.3450, before following through above the last two week’s high — signaling a test of the February high at $1.37. Breakout would offer a long-term target of $1.46*. The trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend. Respect of resistance is unlikely, but would warn of another correction.

Euro/USD

* Target calculation: 1.37 + ( 1.37 – 1.28 ) = 1.46

The greenback is heading for a test of primary support at ¥96 after breaking short-term support at ¥98 on the daily chart. Failure of support would offer a target of ¥92*. Reversal of 13-week Twiggs Momentum below zero would also warn of a primary down-trend. Recovery above the descending trendline is unlikely at present, but would indicate a rally to ¥100.50.

USD/JPY

* Target calculation: 96 – ( 100 – 96 ) = 92

The Aussie Dollar has so far respected support at $0.93 against the greenback. Follow-through above $0.94 would suggest an advance to $0.97; confirmed if resistance at $0.95 is broken. Reversal below $0.93, however, would warn of a correction to primary support at $0.89.

Aussie Dollar

* Target calculations: 0.95 + ( 0.95 – 0.93 ) = 0.97

The Aussie continues to test support at $1.12 against its Kiwi neighbour. Tall shadows (wicks) for the last two weeks indicate selling pressure. Failure of support would offer a target of $1.08*. Recovery above the descending trendline is less likely, but would suggest an advance to $1.20; breakout above $1.16 would confirm, completing a double-bottom reversal.

Kiwi Dollar

* Target calculations: 1.12 – ( 1.16 – 1.12 ) = 1.08

October 3, 2013

China recovery

China’s Shanghai Composite Index is testing support at 2150 and the lower trend channel. Recovery above the descending trendline would suggest another rally, while failure of support would warn of a correction to primary support at 1950. The index hints at long-term recovery but further confirmation is necessary.
Shanghai Composite Index

The Harper Petersen Index, from ship brokers Harper Petersen & Co., indicates that shipping rates for container vessels remain depressed, suggesting a sluggish global trade in manufactured goods. Exporters like China would be severely affected.

Harper Petersen Index

The Baltic Dry Index — reflecting dry bulk shipping rates for commodities like iron ore and coal — jumped sharply, however, reflecting an upturn in demand for bulk commodities.

Bulk commodity prices remain depressed according to the RBA.
RBA Bulk Commodity Prices
But export volumes are rising, in step with the Baltic Dry Index, reflecting strong demand from infrastructure development.
RBA Bulk Commodity Exports

WSJ reports that monthly electricity consumption has reached a new high:

China on Tuesday posted an all-time record-high electricity output level of 498.7 billion kilowatt-hours in August, rising 13% from a year earlier.

Monthly fluctuations should largely be ignored because of weather variation — excessively hot months like August can boost electricity demand — but the rising long-term trend in electricity consumption (chart from IndexMundi) suggests a robust recovery. A recovery led primarily by infrastructure investment rather than manufactured exports may well prove unsustainable in the long-term, but should provide welcome relief to the resources sector in the next few years.

October 1, 2013

Japan & China steady, ASX threatens correction

Dow Jones Japan index chose to ignore the poker game on Capitol Hill in Washington today, following Friday’s sharp fall. Breach of the rising trendline, however, warns of a correction.

Dow Jones Japan index

A weekly chart of the Nikkei 225 shows short-term support at 14300, with resistance at 15000. Failure of support would test the primary level at 13200, while upward breakout remains as likely and would signal an advance to 17000*. Earlier bearish divergence on 13-week Twiggs Money Flow warns of a reversal; decline below 15% would strengthen the signal. Failure of support at 13200 would confirm.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 13000 ) = 17000

China’s Shanghai Composite is testing short-term support at 2150. Failure of support would penetrate the rising trendline, warning of another correction. A sharp fall on 13-week Twiggs Money Flow indicates short-term selling pressure. Respect of 2150, or even 2100, would signal another test of resistance at 2250. Follow-through above the descending trendline would suggest the primary down-trend is reversing. But breach of 2100 would indicate another test of primary support at 1950.

Shanghai Composite Index

India’s Sensex continues on a downward path toward primary support. Penetration of the former rising trendline would increase the likelihood of a test. Breakout below 18500 would signal a primary down-trend, while follow-through below 18000 would confirm. A 13-week Twiggs Money Flow trough above zero is unlikely, but would suggest continuation of the primary up-trend.

Sensex

* Target calculation: 18500 – ( 20500 – 18500 ) = 16500

The ASX 200 retreated below its May high of 5250 for a second time; a bearish sign. Penetration of the rising trendline also warns of a correction. Breach of short-term support at 5200 would confirm.

ASX 200

There appears little danger of a primary reversal at this stage, with primary support at 4650, but 13-week Twiggs Momentum below zero would strengthen the warning. 13-Week Twiggs Money Flow (not shown) also displays a bearish divergence, indicating selling pressure. Long-term target for an advance would be 5850*, but we are likely to see a correction first.

ASX 200

* Target calculation: 5250 + ( 5250 – 4650 ) = 5850

October 1, 2013

Crawling, not walking, to non-mining led growth | MacroBusiness

Leith van Onselen quotes the latest JP Morgan report on the Australian economy:

…risk of a recession is “inevitably higher now than usual; the economy has built up vulnerabilities over time that have been masked by the continued growth in output and national income… the downside of avoiding recession is that Australia has carried these excesses through a succession of growth cycles”.

Households are particularly at risk from expensive house prices and high levels of household debt. Which brings me back to the unnecessary risks bank regulators are taking by condoning low bank capital ratios of between 4.0% and 4.5% of total credit exposure. Risk-weighting of bank assets provided a smokescreen, inflating perceived ratios to around 10%, while encouraging over-exposure to (low risk-weighted) residential mortgages.

September 25, 2013

Forex: Aussie and Euro breakout

The Euro broke through resistance at $1.34/$1.3450, offering a medium-term target of $1.37* and long-term target of $1.40*. A trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend.

Euro/USD

* Target calculation: 1.34 + ( 1.34 – 1.31 ) = 1.37; 1.34 + ( 1.34 – 1.28 ) = 1.40

The greenback is ranging aimlessly between ¥96 and ¥101 against the yen, indicating uncertainty. Breakout from the range will indicate future direction. Reversal of 13-week Twiggs Momentum below zero would suggest a primary down-trend.

USD/JPY

* Target calculation: 101 + ( 101 – 96 ) = 106

The Aussie Dollar retraced to test support at $0.93/$0.935 against the greenback after its recent breakout. Respect is likely and would suggest an advance to $0.97*. Follow-through above $0.95 would confirm.

Aussie Dollar

* Target calculations: 0.95 + ( 0.95 – 0.93 ) = 0.97

The Aussie found support at $1.12 against its Kiwi neighbour. Recovery above $1.16 and the descending trendline would complete a double-bottom reversal, offering a target of $1.20*.

Kiwi Dollar

* Target calculations: 1.16 + ( 1.16 – 1.12 ) = 1.20

September 25, 2013

Asia recovery helps ASX 200

China’s Shanghai Composite Index ran into resistance at 2250 and is likely to retrace to support at 2100. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Respect of 2100 would be bullish, while recovery above 2250 would penetrate the descending trendline, suggesting that the primary down-trend is reversing. A primary up-trend would signal increased demand for resources and give a significant boost to the ASX. Failure of 2100 is unlikely, but would indicate a test of primary support at 1950.

Shanghai Composite Index

Japan’s Nikkei 225 is testing resistance at 15000. Breakout would signal an advance to 17500*. Earlier bearish divergence on 13-week Twiggs Money Flow, however, warns of a reversal. Penetration of the rising trendline would also suggest the primary up-trend is losing momentum. Failure of support at 13200 remains unlikely, but would signal a reversal.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 12500 ) = 17500

India’s Sensex retreated below resistance at 20500. Tall shadows and long tails on the weekly chart indicate excessive volatility. Reversal below last week’s low at 19500 would warn of another down-swing. Breach of the rising trendline would strengthen the reversal warning. A 13-week Twiggs Money Flow trough above zero, however, would suggest continuation of the primary up-trend.

Sensex

* Target calculation: 18500 – ( 20500 – 18500 ) = 16500

ASX 200 recovery above the May high of 5250 indicates a primary advance. Follow-through above 5300 would confirm. Rising 21-day Twiggs Money Flow suggests medium-term buying pressure. Long-term target for an advance would be 5850*.

ASX 200

* Target calculation: 5250 + ( 5250 – 4650 ) = 5850

September 23, 2013

Saving Medicare: The Case for Market-Based Health Reform

In a paper to Catholic Health Conference Australia, Jeremy Sammut highlights the need for revision of Australia’s national health care system.

….health spending already consumes a third of the NSW budget….. and if health spending continues to grow at current rates, health will consume the entire NSW budget in 20 years time.

Providing free services encourages over-use and, with limited budgets, restricts access to essential services for the most needy. Sammut suggests a shift to self-funding for minor expenditure, with state assistance for chronic or catastrophic needs.

As the increasingly unaffordable United States private health system demonstrates, it is impossible to insure people for all health services without over-use causing a cost and premium spiral. In a private system, moral hazard creates un-affordability; in a free public insurance system like Medicare it causes arbitrary and unethical rationing.

Public and private health systems are both plagued by the problem of ‘first dollar insurance’ – the expectation among consumers that private or public insurance should entitle them to receive treatment entirely paid for by a third-party payer no matter how small the cost or condition.

By contrast, a soundly constructed insurance system should not insure people for all services. Instead, individuals should be required to self insure for minor health needs and expenses. Third party insurance should be reserved to enable people to share exceptional risk involving major health problems, and thus should only cover a minimum package of high-cost treatments for complex chronic and catastrophic conditions. And personal responsibility, consumer sovereignty, and price signals should also feature by using front-end deductibles and copayments to control costs and deter unnecessary use of marginal and discretionary services and trivial claims.

What we also need is for public and private hospitals to compete on an equal footing for the taxpayer’s health care dollar. This system has been successfully implemented in the Lombardy region of Italy, with excellent results. Margherita Stancati at WSJ online reports:

Lombardy, by contrast, has increased its quality standards, set its own reimbursement rates and, most important, put public and private hospitals on an equal footing by making each equally eligible for public funds. If a hospital meets the quality standards and charges the accepted reimbursement rate, it qualifies. Patients are free to choose between state-run and publicly funded private hospitals at no extra cost. Their co-pay is the same in either case. As a result, public and many private hospitals in Lombardy compete directly for patients and funds.

…..Around 30% of hospital care in Lombardy is private now — more than anywhere else in Italy. And service in both the private and public sector has improved.

Read Jeremy Sammut’s presentation at Saving Medicare: The Case for Market-Based Health Reform | Jeremy Sammut.