Aussie and Loonie hurt by dollar surge

The Aussie broke short-term support at $1.02, signaling a test of parity. The descending 63-day Twiggs Momentum “iceberg” warns of a primary down-trend. Breach of parity would indicate another visit to primary support at $0.94. In the long-term, failure of primary support would offer a target of $0.80*.

AUDUSD

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

Canada’s Loonie “peeked” briefly above parity before retreating to test support at $0.975/0.980. Descending 63-day Twiggs Momentum, below zero, indicates a primary down-trend. Breach of support would test $0.94; and failure of primary support at $0.94 would offer a target of $0.88*.

CADUSD

* Target calculation: 0.94 – ( 1.00 – 0.94 ) = 0.88

ASX 200 hesitant

The ASX 200 index is testing its descending trendline. Recovery above 4350 would indicate a primary advance, while reversal below 4100 would test primary support at 3850. Bearish divergence on 21-day Twiggs Money Flow warns of medium-term selling pressure.

ASX 200 Index

The longer term chart displays a bullish divergence on 13-week Twiggs Money Flow, indicating long-term buying pressure. Breakout above 4350 would offer a weak advance but a correction that respects primary support would strengthen the signal.

ASX 200 Index Weekly

* Target calculation: 3900 – ( 4400 – 3900 ) = 3400

ASX value trap – macrobusiness.com.au

Merrill Lynch reckons growth forecasts for next financial year have now dropped to below 10%, down from 19% last May. That is a pretty sharp fall, suggesting that, amongst other things, the deleveraging of indebted Australian households is having a deep impact. Merrill also notes that resources stocks are yet to be re-rated for the impact of lower commodity prices.

via ASX value trap – macrobusiness.com.au | macrobusiness.com.au.

Kiwi Dollar

The Kiwi respected the band of resistance at $0.80/$0.82 against the greenback, warning of a primary decline. Earlier breach of the rising trendline strengthens the signal. Failure of support at $0.75 would offer a target of $0.70.

NZDUSD

* Target calculation: 0.75 – ( 0.80 – 0.75 ) = 0.70

Aussie Dollar

The Aussie Dollar is headed for a test of support at $1.01/$1.00. Recovery above $1.08 would complete an inverted head and shoulders, but there is still some way to go.  Breach of support would warn of another primary decline. In the long-term, failure of support at $0.94 would offer a target of $0.80, while breakout above $1.08 would indicate a target of $1.22.

AUDUSD

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

China’s leading indicators head south – macrobusiness.com.au

Take a look at the [Chinese] Leading Index’s sharp deterioration recently – there has been a clear and material deterioration in the leading index over the past couple of months. This suggests to us a substantial further fall in Chinese GDP. The last release of a week or so ago showed Chinese GDP growing at 9.1% against expectations of 9.1%. This leading index to us suggests that this growth rate will fall to 8% which is getting dangerously close to the “hard landing” territory.

via China’s leading indicators head south – macrobusiness.com.au | macrobusiness.com.au.

There goes the neighbourhood | Steve Keen’s Debtwatch

Housing credit increased by 0.5 per cent over September (see the RBA Release for details), but this involved a further deceleration of mortgage debt…..

….The most recent figures—that prices fell 1.2% over the June to September 2011 quarter, and 2.2% from September 2010 to September 2011 (see the ABS Release for details)—confirm that mortgage debt acceleration, and not “population pressure” etc., is the key determinant of house prices.

via There goes the neighbourhood | Steve Keen’s Debtwatch.

Westpac: RBA cuts the overnight cash rate by 25bps

RBA cuts the overnight cash rate by 25bps – first rate cut since April 2009

As we predicted the Reserve Bank Board decided to lower the cash rate by 25bps to 4.5%…..

Undoubtedly the most important development in the Governor’s statement is his observation that “inflation is likely to be consistent with the 2-3 per cent target in 2012 and 2013.” …… The fact that there is now confidence that inflation will remain within the target band for an extended period allows the Bank to deal with the prospects of an economy which is only showing moderate growth.

via Bill Evans, Westpac Chief Economist

Nothing’s changed – Steve Keen’s Debtwatch (2009)

In fact “normal” for the last half century has been an unsustainable growth in debt, which has finally reached an apogee from which it will fall. As it falls–by an unwillingness to lend by bankers and to borrow by businesses and households, by deliberate debt reductions, by default and bankruptcy–aggregate demand will be reduced well below aggregate supply. The economy will therefore falter–and only regular government stimuli will revive it.

This however will be a Zombie Capitalism: the private sector’s reductions in debt will counter the public sector’s attempts to stimulate the economy via debt-financed spending. Growth, if it occurs, will not be sufficiently high to prevent growing unemployment, and growth is likely to evaporate as soon as stimulus packages are removed.

The only sensible course is to reduce the debt levels. As Michael Hudson argues, a simple dynamic is now being played out: debts that cannot be repaid, won’t be repaid. The only thing we have to do is work out how that should occur.

via Debtwatch No 41, December 2009: 4 Years of Calling the GFC | Steve Keen’s Debtwatch.

Nothing seems to have changed since Steve Keen wrote this in December 2009. Almost two years later and any private sector deleveraging has been compensated by increases in public debt to finance stimulus spending. Greece’s “default” may be the first step in a long journey — and the jury is still out as to whether recapitalization of European banks (after their “haircut”) will be funded out of debt or new equity.