Rio Tinto, one of the world’s largest natural resources companies, has warned that some of its customers were asking to delay shipments of metals, in a clear sign that the financial turmoil is starting to affect the commodities sector.
Selling pressure on ASX 200
The ASX 200 is headed for another test of 4000. 21-Day Twiggs Money Flow holding below zero warns of strong medium-term selling pressure. Failure of support is likely and would offer a target of 3500*.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
Strong dollar costs nation 90,000 jobs | The Australian
INDUSTRIES trying to win exports or fend off imports have shed 90,000 jobs in the past three months as they try to deal with the high Australian dollar.
The only parts of the economy that have been adding staff in any numbers are the state and commonwealth public sectors, health, professional services and the mining industry.
via Strong dollar costs nation 90,000 jobs | The Australian.
Aussie Dollar tests trend channel
The Australian Dollar is testing the lower border of its long-term (Raff Regression) trend channel against the greenback on a weekly chart. Expect strong support at parity. Recovery above $1.075 would suggest a rally to test the upper channel around $1.20*, while failure would warn of reversal to a primary down-trend.
* Target calculation: 1.10 + ( 1.10 – 1.00 ) = 1.20
More on bank funding vulnerability – macrobusiness.com.au
Note the rather large spread that’s opened up between the market’s expectations for the official cash rate and the BBSW rate.
…………To make the point about how unusual this situation is, let’s take a look at the spread over a longer time frame……. As you can see, the GFC is the only other period where this spread has blown out in this way.
………..The US and Great Britain, which led the interbank seizure in the last crisis, have risen mildly. Of the Western markets, only Australia and Europe have spiked in a way resembling the GFC.
via More on bank funding vulnerability – macrobusiness.com.au
RBNZ throws cold water on RBA – macrobusiness.com.au
What should be clear…… is that the growth in Australian housing values has been funded, to a large extent, by foreign borrowings, much of it short-term.
A key risk going forward is that the banks’ ability to refinance their borrowings rests with the willingness of foreign investors to continue to lend them money. But in times of heightened risk-aversion – such as the impending European debt crisis – foreign investors can become nervous and less inclined to continue extending credit, which could leave Australia’s banks, house prices, and broader economy exposed to a sudden funding freeze.
Rate cuts are coming – macrobusiness.com.au
The recent seasonal adjustments to the CPI and the reduction in the level of underlying inflation blunts the force of the RBA’s recent argument about inflationary pressures. But, absent an offshore catalysing event, that alone won’t make them cut rates.
Rather I think that household retrenchment and saving will lower economic activity in the economy and that the RBA has overplayed the extent that the mining boom induced income will wash through the Australian economy.
Increasingly, we are getting confirmation of this theory. Unfortunately, we are seeing Australians lose jobs at an increasing rate. Data released yesterday by Westpac on consumer unemployment expectations suggests this is going to get worse.
Aussie slides against US and Kiwi Dollar
Flight to safety weakened the Australian Dollar which broke support at $1.04 against the greenback. Expect another test of parity. 63-Day Momentum crossing below zero warns that the primary up-trend may be reversing. Breach of support would confirm.
* Target calculation: 1.05 – ( 1.10 – 1.05 ) = 1.00
The Aussie Dollar is also testing support at $1.25 against its Kiwi partner. The primary trend is down and follow-through below $1.245 would indicate a down-swing to the lower trend channel over the next few months.
* Target calculation: 1.24 – ( 1.28 – 1.24 ) = 1.20
ASX 200 tests key support level
The ASX 200 fell sharply, headed for a test of its key support level at 4000. Low volume indicates weak support and downward breakout would signal a primary down-swing to 3500*.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
Aussie Dollar weakens
The Aussie Dollar is testing support at $1.045 against the greenback; failure would warn of another down-swing to parity*. Breakout above $1.075, however, would re-visit $1.10.
* Target calculation: 1.05 – ( 1.10 – 1.05 ) = 1.00
AUDUSD is strongly influenced by commodity prices and closely tracks the CRB Commodities Index. $CRB is rising and breakout above 350 would indicate a primary advance to 385* — suggesting increased support for the Aussie Dollar.
* Target calculation: 350 + ( 350 – 315 ) = 385