Australian dollar smashed as stock market unwinds

See the latest Australian dollar analysis here:

Macro Afternoon

DXY is stong again and has formed a head and shoulders bottom. EUR reflects:

The Australian dollar was crushed:

But EMs more:

Gold’s bullish pennant broke down:

Oil is in trouble as Libya returns:

Base metals were crunched:

Big miners drove into a pothole:

EM stocks gapped lower:

Junk is now screaming a warning for risk:

US bonds were bid:

Stocks were hit. Nasdaq clung to the neckline:

Westpac has the wrap:

Event Wrap

The Chicago Fed national activity survey for August continued to gyrate, pulling back to +0.79 from +2.54 (revised from 1.18) in July.

The BBC reported that the UK may move from Covid alert level 3 to 4, amid a rise in cases. PM Johnson will give a speech tomorrow after a special Cabinet meeting. London’s Mayor, Khan, said restrictions will be revealed after discussions with Johnson on Tuesday.

Event Outlook

Australia: Weekly payrolls to 5 Sep are likely to exhibit some improvement in momentum after August figures reflected Victoria’s lockdown (prior: -0.4%). RBA Deputy Governor Debelle will speak at 10:30am on “The Australian Economy and Monetary Policy”.

Europe: The resurgence of Covid cases in the region is expected to act as a headwind to consumer confidence’s recovery (prior: -14.7, market f/c: 15.0).

US: Lower mortgage rates have boosted the housing market as the economy reopened. A moderation is anticipated after July’s gains in existing home sales (prior: 24.7%, market f/c: 2.4%). Improving conditions are supporting manufacturing sentiment, according to the Richmond Fed index (prior: 18, market f/c: 12).

This correction is getting moving. S&P broke its 50DMA and is on its way lower, still far above stronger supports like the 200DMA. It’s now clear as well that DXY will rerun its traditional safe haven role once more despite all of the Fed’s efforts which, frankly, are just not enough. In the absence of all fundmanetal drivers, the Fed is either giving or it is taking away and right now it is the latter:

There is no US recovery:

The virus is returning again:

And the hope of the next fiscal package has been dealt another blow by the death of Ruth Bader Ginsberg as Capitol Hill now has another reason to brawl rather than agree to anything pre-election. Not to mention the election itself. And hard Brexit to weigh on EUR.

If DXY is bid once more then Fakeflation is in trouble and the Australian dollar with it.

David Llewellyn-Smith

Comments

    • Single greatest indicator of how corrupt the Dems truly are. The use of the claim that Ruth on her death bed said her dying wish was that Trump not install a new Judge before the election.

      Ruth would absolutely NEVER make a claim like that – utterly absurd to even imply that her last words were to completely undermine the constitution – ridiculous and obvious.

      Democrats are like Australian ALP – everyone desperately wants then in – but they are just filled with feckless virtue signalling SJW’s who are obsessed with identity politics.

      FFS.

      • China PlateMEMBER

        “Ruth would absolutely NEVER make a claim like that”
        yes and you know this as you have intel from what 5 eyes, Showden and the CCP, who were all in the room wishing her a happy transition to the great gig in the sky

    • Why is nobody calling her a selfish old egomaniac? The woman had cancer like 4 times. Where was her sense of judgement, of foresight to say around 2014…you know what…I’ve had a good run. Maybe its time for me to go and have someone of a similar political persuasion replace me. Nah! I’m gonna hang on as long as I can and ultimately screw the next couple of generations with right wing nut jobs. Good call lady. Like so many oldies these days you’ve really stuffed up the future for today’s young.

    • Yep, once you start on the stimulus programs they never stop.

      The best you can do is let the rot unravel, the malinvestment be purged so the system can re-boot. With every stimulus program you just double down and ensure that the eventual denouement is even worse.

  1. Gold has been in a descending triangle pattern for a while, not a symmetrical one. That means there is serious resistance set up and a pretty good march down. I think thats it for gold for the next 6 month the least.

    Natural gas had a horrible day which wraps up a horrible few weeks. 30% down since the start of the month. Was this part of our gas led recovery?

    • Ironically, cheaper gas is actually better for our domestic recovery! Less good for gas cartel rentiers, but that’s a good thing.

      Maybe the cartel will have less money to pay lobbyists.