Aussie weaker

The Aussie Dollar continues to consolidate between $1.03 and $1.06 against the greenback. Failure of support at $1.03 would test parity, while breakout above $1.06 would target resistance at $1.10. In the long term, declining commodity prices are likely to drag the Aussie lower — unless the Fed starts printing money again.

Australian Dollar AUDUSD

* Target calculation: 1.03 – ( 1.06 – 1.03 ) = 1.00

The Aussie Dollar is testing the upper border of the declining trend channel against its Kiwi counterpart. Reversal below short-term support at $1.255 would indicate respect of the upper channel and a down-swing to around $1.20*. Breakout above $1.28 is unlikely but would warn that the down-trend is weakening.

New Zealand Dollar NZDUSD

* Target calculation: 1.24 – ( 1.28 – 1.24 ) = 1.20

NZ bucks trend

New Zealand is one of the few markets that is bucking the trend — its agriculture-based economy fairly insulated from the global down-turn. ENZL, the MSCI New Zealand ETF, recovered above its former primary support level at 31.50 after strong bullish divergence on 13-week Twiggs Money Flow. While technically still a bear market, retracement that respects the new support level of 31.50 would confirm a test of 34.

iShares MSCI New Zealand Investable Market Index Fund (ENZL)

NZ50 bullish divergence

Bullish divergence on 21-day Twiggs Money Flow on the NZ50 Index signals buying support. Breakout above 3300 is possible, but the primary down-trend is unlikely to change, given the state of global markets.

NZ50 Index

* Target calculation: 3100 – ( 3300 – 3100 ) = 2900

ASX 200 support weakens

The ASX 200 Index is headed for another test of support at 4000. Volumes are far lower than the previous week, indicating a scarcity of buyers. Unless there is a significant upsurge on Tuesday, we are likely to see a downward breakout, offering a target of 3500*.

ASX 200 Index

* Target calculation: 4000 – ( 4500 – 4000 ) = 3500

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

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

Kiwi 50 face strong selling pressure

The NZ50 Index is retracing to test 3300, but 13-week Twiggs Money Flow deep below zero warns of strong selling pressure. Respect of resistance is likely, followed by another test of support at 3100.

New Zealand NZ50 Index

* Target calculation: 3300 – ( 3600 – 3300 ) = 3000

ASX 200 rallies on declining volume

The ASX 200 is headed for a test of 4500. Declining volume is typical of such a rally; a surge would indicate increased selling pressure — especially when accompanied by a narrow range or red candle. Expect resistance at 4500 to hold, followed by another test of support at 4000.

ASX 200 Index

* Target calculation: 4000 – ( 4500 – 4000 ) = 3500

Kiwi Dollar continues to strengthen

The Australian Dollar continues in a downward trend against its Kiwi counterpart. Recovery above $1.26 would test the upper channel at $1.28, but breakout below $1.23 is just as likely and would continue to test the lower channel border.
New Zealand Dollar NZD

* Target calculation: 1.28 – ( 1.32 – 1.28 ) = 1.24