Australian dollar ready to roll as COVID-19 deaths spike

See the latest Australian dollar analysis here:

Macro Afternoon

by Chris Becker

Share markets are lifting across Asia with the ASX200 finally looking to put on gains, but still short of the 6000 point barrier:

Meanwhile the PBOC is on a tear again, this time reducing the Yuan fix from 7.0207 down to almost parity at 7.0085, taking advantage of USD weakness it seems! Offshore trading in Yuan has now slumped below the 7 parity level:

The Aussie dollar has an interesting setup against USD and on the crosses going into the end of the week. First, a possible bearish double top pattern on the four hourly chart as price is unable to get back up to the 70 handle and maybe ready to rollover:

To confuse matters though, the AUDJPY cross is still well on track, having its own battle against resistance at the 75 handle but not yet showing signs of rolling over as the risk proxy picks up again (i.e high correlation with rising stock markets):

Whereas my favourite anti-risk proxy – the Aussie/Kiwi cross – is setting up a bearish descending triangle, ready to break below the 1.06 handle on the daily chart:

But a series of much more troubling charts – the number of deaths from COVID-19 in the USA is starting to build up again, specifically because of the outbreaks in the SW/South. Close to 1000 new deaths per day and over 60,000 new cases per day to a new record high as positivity rates continue to be at startling levels:

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Comments

  1. You are on f!re chris, usually you post macro morning and afternoon. Keep’em c0ming the quality of your posts are high and enjoyable
    (After I posted the same it disappeared, then figured out the
    Words triggered the “post self-destruct ” )

  2. happy valleyMEMBER

    Scotty from Marketing is just announcing the next moon shot for the Strayan resi property market – with the floodgates to be opened into Hong Kongers already here on visas or wanting to come.

    At least, it will make things simple in my area – the local primary school will go from 80% Asian to closer to 100%.

    • but this time it will backfire. Aussies forced to sell and be homeless and unemployed while Chinese buying their houses and kicking them on the street. This is not normal environment where such move will prop up prices. He is bringing more immigrants while Australians are losing their jobs.
      Let’s see how this plays out. In my view, it only shows how incompetent Scumo and everyone around him are. They can’t see further than their noses.
      Also, Chinese from HK are bit more informed about RE speculation and I am sure most will not be bidding against themselves at Auctions.

    • Ajaydee73MEMBER

      I saw a job ad on Seek written in Chinese today. English speakers need not apply.

  3. Back in April / May, there were around 25-30k cases and 1.5-2k deaths per day, giving a “spot” case fatality rate of around 6-7%.

    Now we have 50k per day and 0.5k deaths per day, giving a “spot” CFR of around 1%.

    Previous data (presented here) showed the % of tests that was positive was roughly constant.

    You can put this together two ways
    1. The virus is spreading faster and causing more people to get sick. More sick people drives up tests. So total diagnosed cases are going up. But at the exact same time, the virus has evolved in some way to become less lethal. So cases are less severe now than previously.
    2. Ramped up testing capacity is finding the milder infections that were simply missed before. Finding these milder infections simultaneously drives up case numbers and drives down lethality.

    The correct explanation is the case definition and finding these milder cases.

    This happens all the time with medicine.
    Think of the brain and “strokes.”
    There is a condition called a TIA or a mini-stroke – where the symptoms resolve within a defined period of time.
    And there is a stroke proper – where symptoms persist after this time.

    As you might expect, TIA (where symptoms resolve) is better than stroke (where they persist). And within TIAs, the prognosis depends upon how long these symptoms last. Longer = worse.

    The initial time cut-off was an arbitrary 24 hours (in the absence of anything better, we used the rate of the earth’s rotation to differentiate these conditions).
    With increased understanding, in 2002 this cut-off was shortened to one hour.

    Hey presto, the prognosis of both strokes and TIAs simultaneously improved. Substantially.
    Not because of some new treatment.
    Not because strokes somehow became less dangerous.
    Not because the brain became less important to our well-being.
    But because the more severe TIAs were suddenly moved into the stroke group where they became the milder strokes.
    So the average TIA became less severe AND the average stroke became more severe. Amazing.

    Didn’t change anything for the patient of course – they got whatever they got regardless of the definition of the day.

  4. Of course it could be something much simpler explaining the fall in the case fatality rate. Namely, lags. You don’t die straight away so there are lags between diagnosis and mortality. I’m picking we see a surge in deaths in July-August…

      • Patience.

        In mid-May I was telling my clients that there would be a tsunami of cases led by CA, NC, FL and TX. I missed AZ and SC, but now, a tsunami of cases.

        Of course mortality will surge.

        • I believe that it’s a version of Simpson‘s paradox, and lower mortality rates over time makes sense when you disaggregate by city. In other words, when the 50k is spread across many cities, hospitals can handle the caseload. When in one place ie NYC, in the early dats when hospitals are overloaded, mortality is high.