The ASX 200 is testing resistance at 4600. Breakout is likely — following bullishness in Europe and Asia — and would signal an advance to 4900*. The 63-day Twiggs Momentum trough above zero suggests a strong primary up-trend. Respect of resistance is not expected but would retrace to test the rising trendline at 4450.
* Target calculation: 4600 + ( 4600 – 4300 ) = 4900
Alan Kohler writes about the Fed’s quantitative easing strategy which is effectively debasing the US dollar:
Because it is trying to reduce the world’s reserve currency, the Fed is effectively giving other countries two choices: either allow your currencies to appreciate against the US dollar and thus make your economies less competitive and crunch your export industries, or print money with us and risk (or perhaps guarantee) inflation.
It is a Hobson’s Choice, and like most other countries’ central banks, the Reserve Bank of Australia doesn’t quite know what to do.
The strategy is also debasing the more than $2 trillion of US Treasuries held by China and Japan, placing these Asian exporters in an awkward position. Repatriating their investments would send the dollar plummeting against the yuan and the yen, reversing their export advantage maintained over the last two decades through capital account inflows into US Treasuries. Capital inflows were used to offset the current account outflows and prevented the yen and yuan from appreciating against the dollar. If the flows reverse, the US will enjoy an unfair trade advantage from an under-valued dollar.
Methinks those who predict a globally dominant China with continued growth rates of 7% to 8% are a mite premature. …….Possibly a century or two.
Read more at What to do about the US currency war | Alan Kohler | Commentary | Business Spectator.
Michael Pettis writes about the latest Australian government White Paper Australia in the Asian Century that projects an average 7% GDP growth rate for China between 2012 and 2025:
This seems to put the Australian government among the most optimistic in the market when it comes to long-term growth expectations for China. I have always assumed that government projections should generally be on the pessimistic side to prepare for unexpected negative shocks (positive shocks can take care of themselves), but apparently not. I am glad to say that my own conversations with Australian government officials lead me to believe that this White Paper may represent the official view of the government, but it does not represent the private views of all Australian government officials…….
Read more at Pettis: Australia should be pessimistic | MacroBusiness.
Amanda Vanstone, former Howard government minister, writes on the 40th anniversary of Gough Whitlam’s government.
For a surprisingly long period there was no effective cabinet, then unsatisfactory cabinet process. It was nothing short of economic chaos, a disaster. It was a reminder to everyone that you can have all the great ideas you want about a better world, but if you do not keep the economy on track your government will fall apart.
The Aussie Dollar is consolidating in a narrow range below resistance at $1.05 — a bullish sign. Breakout would indicate a test of long-term resistance at $1.06. Rising 63-day Twiggs Momentum, above zero, indicates a primary up-trend. In the long-term, breakout above $1.06 would offer a target of $1.10* but the RBA may take measures to prevent further appreciation. Reversal below $1.04 and the rising trendline is unlikely, but would warn of a correction to test primary support at $1.015.
* Target calculation: 1.06 + ( 1.06 – 1.02 ) = 1.10
The ASX 200 found resistance at 4540 after a strong rally. Reversal below 4500 would indicate retracement to test support at 4450. Breach of the falling trendline indicates the correction is over. Respect of 4450 would confirm. A 21-day Twiggs Money Flow trough above zero would signal medium-term buying pressure. Breakout above 4580 would indicate a primary advance to 4800*.
* Target calculation: 4580 + ( 4580 – 4350 ) = 4810
The IMF identifies risks to Australia’s banking system:
- Residential mortgages are banks’ single largest asset, and a combination of high household debt and elevated house prices increases the risk in this portfolio.
- Banks rely on funding from outside the country, and with the crisis in Europe and the global economy suffering, these funding sources are volatile.
- Four major banks dominate the banking system, and they share many similarities that can be a cause of risk spreading from one to another in the event of a crisis.
……The four major banks are systemically important which means difficulties in any one of them would have severe repercussions for the financial system and the economy. A higher minimum capital requirement would provide a bigger cushion against potential losses.
Capital ratios may under-state capital requirements through risk-weighting assets. Past performance is not always a good predictor of the future. I prefer FDIC director Thomas Hoenig’s unweighted comparison of tangible assets to tangible equity.
via IMF Survey: Australia’s Banks Sturdy, Closely Connected.
Australian-born chairman and CEO of the Dow Chemical Company, Andrew Liveris, talks with Alan Kohler on ABC Inside Business about the US fiscal cliff and why Australia needs a cohesive energy policy.
“We have to create an infrastructure such that we can have gas-on-gas on competition domestically. If you build the infrastructure, and private sector can do it, and allow shared pipelines, if you build it you will get a domestic gas system and a pricing system that defies the oil gas parity pricing that countries like Australia should never have. If you have the resource in your country, you shouldn’t be paying the highest alternative price of the country that doesn’t have the resource. Why are we paying Japan energy prices when we have domestic gases?”
The Euro is testing its long-term descending trendline in response to the weakening dollar. Breakout above $1.315/$1.32 would confirm the primary up-trend signaled earlier by 63-day Twiggs Momentum recovery above zero.
* Target calculation: 1.315 + ( 1.315 – 1.265 ) = 1.365
The Aussie Dollar found short-term support at $1.04 and is testing medium-term resistance at $1.05. Breakout would indicate a test of long-term resistance at $1.06. Oscillation of 63-day Twiggs Momentum above zero suggests a primary up-trend. In the long-term, breakout above $1.06 would offer a target of $1.10* but the RBA is likely to take measures to counter further appreciation.
* Target calculation: 1.06 + ( 1.06 – 1.02 ) = 1.10
