Trading Day: Aussie dollar rampage

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Not the Prince

Trading Day covers the relevant moves in the Asian stock, commodity, debt and currency markets including a review of the top 8 Australian stocks – the top 4 miners and banks, highlighting trading ideas and investment opportunities. Remember to read “Trading Week“, published each Saturday morning, to put these events and ideas in context.

End of month and quarter window dressing for the managed funds trading your savings in super? Maybe – the S&P/ASX200  was bid up until lunch, and then everyone went out and played golf, leaving the work experience guy at the desk it seems:

The bourse finished flat, at 4335 points, but still above its slim breakout:

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Other Asian markets continued to fall with Japan’s Nikkei 225 losing 0.5% to 10064 points: (Disclosure: I’m still long but have tightened my position), the NZX50 finished up 0.4% at 3509 points, whilst the volatile Hang Seng lost 0.6% at 20488 points and is teetering on support here – one to watch. Meanwhile the Shanghai Composite is basically flat, up a few points at 2254 points, looking very weak here.

The AUD had a little rally – maybe that was behind the ASX200 weakness – rising 0.25% against the USD to be just above 1.04, but this maybe just intraday noise in a new trend, which I’ll talk about in a moment.

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Finally on gold which finished flat for the Asian session, now at $1662.50USD an ounce before the start of the London trade. In AUD terms it was up steady to $1597 per ounce. I’m keeping an eye on the AUD gold price – there could be a long opportunity here brewing even better than following the USD spot price (using the ETF GOLD, which I covered here)

The ASX8 – not today Reynard, tomorrow in Trading Week

I follow the ASX8, the top four banks (ANZ/CBA/NAB/WBC) and miners (BHP/RIO/NCM/WPL), very closely as they are effectively the entire market – the Houses and Holes. Add Telstra (TLS) and you’ve pretty much covered the major stars (or dogs, depending on your point of view) of the market, as the ASX8 is the ASX50 – which follows the ASX200 extremely closely on any chart.

Today I’m going to expand on yesterday’s trading idea where I covered the AUD/JPY cross instead of the ASX8. I said something is brewing in the AUD cross-trades – here is that brew in picture form:

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First, the well covered and commented rout in the AUD against the USD:

And the JPY (yen) cross, teetering on support here:

The same picture with pound sterling (GBP):

And the Euro (EUR) – might want to put off the European holiday for a bit:

And finally, the New Zealand Dollar (NZD) cross, a recent trade idea I got completely wrong – the “L” was my long signal, which obviously hasn’t worked out:

I point this out because some view trading and investing as about having to be right ALL THE TIME. No, that only matters with property investing. You get that wrong, and the costs are tremendous, even if prices are nominally stable, the holding costs, transaction costs and of course, leverage are huge. This trade cost me less than a quarter of a percentage point of equity…..

Anyway – something is going on here – I’m betting the market is betting we are all betting that interest rates are going down as the Australian economy slows down under the weight of a private debt load and the minor effects of FutureBoom! That means a lower dollar – across everything. Great news for exporters, bad news for retailers and those who use those pesky motor vehicles to get around.

The Futures

The futures are looking mixed going into the European session. US and Euro markets are both pointing to slightly higher opens, whilst the local market is down a few points at 4330 points. The market-moving data to watch tonight is Euro-centric first, with German retail sales followed by Italian CPI figures alongside news that Greece may need ANOTHER bailout, plus problems with Spanish and Portguese banks. Then the flow moves to the US, with the Chicago PMI and consumer sentiment numbers.

Let’s see what happens in Market Morning, my daily wrap up of the major macro markets to start the Asian session, tomorrow morning.

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