Forex daily analysis from FIBO Group

[FIBOgroup]

12.11.2014 - Australian dollar up on strong data, weak yen

The Australian dollar broke through US87.00 cents before pulling back and settling around US86.80 cents at 4.35pm(AEDT) as strong local data gave the currency a boost. The Westpac Consumer Confidence Index came in at 1.9% up from last month’s number of 0.9%, challenging analysts who have written off the Australian economy claiming it was headed for a downturn.

This strong figure is evidence that consumers are not feeling the heat from the recent decline of the local currency and are still prepared to open their wallets in the lead up to Christmas and the New Year claim Analysts from Fibogroup.

The Aussie dollar also rallied against the Japanese currency, breaking through the 100 yen mark for the first time since May 2013, after speculation swirled that Prime minister Abe of Japan may call snap elections by the end of the year to push through changes and increase the countries sales tax to 10%.

“The idea is that he would go to a snap election to make sure he has still got a mandate to continue with the policies of Abenomics,” said Sam Tuck, senior foreign exchange strategist at ANZ Bank New Zealand. “The markets appear to have taken that one directionally, that he will get the mandate which will increase their ability to enact the difficult policy reform that is necessary for the rebalancing of the Japanese economy. All the political commentators are saying that it is a good time to go and a good time to cement and increase gains.”

 

[FIBOgroup]

17.11.2014 - Australian dollar up on potential free trade deal

The Australian dollar has continued to climb and is trading at around US87.80 cents today up from US87.46 cents on Friday even as positive data out of the US hit the market.

On Friday US retail sales came in at 0.3% against a consensus of 0.2% and The Reuters/Michigan Consumer Sentiment Index which is an accurate measure of consumer confidence showed a reading of 89.4 against analysts’ expectations of 87.5.

This shows that the Aussie dollar has some life left in it as against the backdrop of such news we should have seen the greenback strengthen but this wasn’t the case.

Also boosting the local currency was the Announcement that Australia and China would sign a free trade agreement potentially offsetting the effects of the downturn in the mining boom. The deal could help pump $18 billion into the Australian economy over the next 10 years

Senior government MP Josh Frydenberg told ABC radio "I think this is a game-changer," "It will supercharge our trade with China. Up to 95 percent of our exports over time will enter the Chinese market tariff free."

Australia is Chinas largest trading partner with bilateral trade reaching $150 billion.

 

[FIBOgroup]

18.11.2014 - Australian dollar slightly up ahead of RBA speech

The Australian dollar is trading around US87.17 cents at 5.20pm (AEDT) up from US87.07 cents yesterday as the Japanese government unexpectedly announced a second quarter contraction, technically pushing the country into recession. The economy contracted -1.6% year-on-year in the third quarter, against a consensus of 2.1% which sent the Yen reeling against most major currencies as fears grow the Japanese government may flood the country with economic stimulus.

Later today, the market will await the latest monetary policy speech from RBA governor Glen Stevens, following the latest minutes meeting from the bank. The tone of the speech will be closely monitored after recent comments by after RBA assistant governor Christopher Kent who said that intervention to cut the exchange rate was not off the table.

“We haven’t ruled it out,” Dr Kent noted.

“It’s still there as an option, if needed.” saying the dollar is “too high, relative to our fundamentals”.

In recent speeches, Governor Glen Stevens has mentioned “the Aussie dollar remains high by historical standards” and also made no secret that he would like to see the currency lower to give a much needed boost to the mining and export sectors which are feeling the pinch from the high dollar.

 

[FIBOgroup]

19.11.2014 - Australian dollar tumbles along with Iron ore price

The Australian dollar has dropped sharply below the US87.00 cents level as Iron ore prices fell sharply overnight and Prime minister Abe of Japan called snap elections.

At 6.30pm (AEDT) the local currency was trading at US86.71 cents down from US87.19 cents yesterday.

Iron ore is now sitting at a five-year low dropping around 50% since the start of the year.

“The move lower in the iron ore price has seen the Australian dollar/US dollar sharply lower,” Western Union Business Solutions currency strategist Steven Dooley said.

“Iron ore is Australia’s largest export, closely tied to our terms of trade, and a fall would naturally push the Australian dollar lower.”

The move by Japan’s Abe to call snap elections pushed the US dollar to a seven year high against the Yen which in turn caused the Aussie dollar and a basket of other currencies to move lower. There is speculation that the Japanese prime minister may try to delay a planned sales tax increase if he is re-elected.

Later today, the market will focus on the latest FOMC minutes meeting from the US federal reserve where speculation of the timing of an Interest rate rise will be the hot topic and could put further pressure on the Australian dollar.

 

[FIBOgroup]

20.11.2014 - Australian dollar down, further falls expected

The Australian dollar has broken down through the US86.00 cent market today after yesterdays Fed minutes meeting and a further slump in the Iron ore price. Today the currency is s trading at US85.86 cents 5.46pm(AEDT) down from US86.17 cents yesterday.

The meeting minutes portrayed a more-hawkish-than-expected FOMC statement after the October meeting and board members voted to end the banks quantitive easing program as most analysts had expected. Now the main focus is on the outlook for Inflation and when the Fed plans to start lifting interest rates.

A majority of Fed members still predict that inflation, despite a recent downturn, will rebound and push back up towards the central bank’s 2% target rate and eventually reach that goal in 2015.

Another Important Indicator for the Fed on the strength of the economy is the unemployment rate which is sitting at a six year low of 5.8% confirming the their position that labor market is steaming ahead and moving toward its goal of an unemployment rate range of 5.2%-5.6%.

Putting more pressure on the Aussie currency was a further fall in the Iron ore price overnight, which hit a fresh five-year low at $US70 a tonne.

One Analyst predicts that the recent fall may be connected to China’s property market, which some say is beginning to unravel and may push the Iron ore price below US$60 a tonne next year.

China’s residential property market accounts for around 24 per cent of steel consumption in the world’s second largest economy.

“The key issue right now with regards to the Chinese property market is that supply continues to rise, which on face value would be positive for steel consumption and the iron ore price,” Deltec chief investment officer Atul Lele said. “But it’s coming in an environment where demand for property is actually remaining quite weak.”

“We believe it represents the biggest risk to the Chinese and global economy,” Mr Lele said.

 

[FIBOgroup]

21.11.2014 - Aussie dollar rebounds on poor US data

21.11.2014 - Aussie dollar rebounds on poor US data

The Australian dollar bounced back through the US86.00 cent mark as lower than expected manufacturing numbers and lackluster Inflation data failed to please Investors. Today the Australian dollar is trading at around US86.37 cents 4.47pm (AEDT) up from US86.19 cents yesterday.

Manufacturing in the US fell in November to its lowest rate of growth since January and new orders also fell for a third straight month. The Index fell to 54.7 from October’s reading of 55.9 coming in under analysts’ expectations of 56.4.

A major factor in the decline of the Index may be the recent strength of the US dollar putting pressure on exports and raising the costs for overseas buyers.

“Export market weakness holds the key to the recent slowdown, with manufacturers reporting the largest drop in export orders for nearly one and a half years,” said Chris Williamson, chief economist at Markit.

Latest Inflation figures from the US came in slightly above estimates although considerably lower than the US central bank’s Inflation target of 2%. Year on year Inflation rose to 1.7% in October against a reading of 1.6% in the previous month.

 

[FIBOgroup]

24.11.2014 - Australian dollar up on surprise rate cut

The Australian dollar is trading higher after the Chinese government decided to cut Interest rates on Friday to boost its flagging economy. Today the Australian dollar is sitting at around US86.82 cents 5.44pm (AEDT) up from US86.72 cents at the close of trade on Friday,

In a move that caught everybody off guard, the People’s Bank of China on Friday cut the one-year benchmark lending rate by 40 basis points, marking the first decline in two years. The bank also cut the benchmark one-year deposit rate by 25 basis points.

The central bank’s cut in Interest rates is seen as a move to lower costs and boost confidence to encourage businesses to Invest. Analysts agree that the rate cut confirms growing fears about a slowdown in the Chinese economy which could pressure the Aussie dollar as Australia is China’s largest export partner with bilateral trade reaching $150 billion a year.

The price of iron ore has fallen below $US70 a tonne for the first time since the middle of 2009 as Investors worry about an oversupply. At close of trade on Friday the Iron ore price was trading at $US69.80 a tonne, down 0.3 per cent from its previous close of $US70 a tonne.

We may see some relief in the Iron ore price due to the rate cut by the central bank of China but we expect that to be short lived as there are too many “external forces at play” predict analysts from Fibogroup.“This will further pressure the Australian dollar”

 

[FIBOgroup]

25.11.2014 - Australian dollar closing in on four year low

The Australian dollar is trading sharply lower, heading back down to levels not seen since July 2010, and unable to hold onto the gains from yesterday as the market digests the news, that the People’s Bank of China will reduce its benchmark interest rates for the first time in more than two years.

After trading as high as US86.99 cents yesterday the local currency is currently trading at US85.96 cents 3.54pm (AEDT)

Analysts from Fibogroup noted” the rate cut was not enough to save the Aussie dollar”

They also mentioned that “ with Iron ore prices hovering around 5 year lows and a cooling Chinese property market which accounts for more than 20% of the metal, Australia’s biggest commodity looks set to remain weak which will keep a cloud hanging over the Australian currency”

With no key statistics coming out of Australia the Aussie dollar may find a direction as Investors await key numbers from the US. Later today the market will see the release of quarterly GDP numbers from the US followed up by the latest consumer confidence Index which may show a rise in consumer spending and put the Aussie dollar under further pressure.

 

[FIBOgroup]

26.11.2014 - Australian dollar below US85.00 cents

The Australian dollar has fallen through the US85.00 cent mark as strong US data and downbeat comments from the RBA weighed on the currency. At 9.33pm (AEDT) the currency was trading at US84.92 cents down from US85.29 cents yesterday.

Quarterly US GDP figures yesterday came in at 3.9% against Analysts expectations of 3.3% confirming that the American economy really is in recovery mode.

Comments from RBA deputy governor Philip Lowe confirmed the banks long standing position that the Aussie dollar still has further to fall and noted that “If the exchange rate is to play its important stabilizing role, it needs to go down when the terms of trade and investment are declining, just as it went up when the terms of trade and investment were rising. To date, as we expected, we have seen some adjustment, but if our assessment of the fundamentals is correct we would expect to see more in time”

He also mentioned that “our exchange rate is unusually high and, at the same time, savers are being offered unusually low returns. Of course, Australia is not unique in being in this position. And this particular configuration is causing complications for macroeconomic management here as well as in a number of other countries”

There is a raft of economic news due out of the US later today including the latest durable goods report and Initial jobless claims which may see the Aussie dollar come under further pressure.

 

[FIBOgroup]

27.11.2014 - Australian dollar up on mixed signals from US

The Australian dollar has bounced strongly back towards the US86.00 cents level after mixed signals out of the US and strong local housing data boosted the local currency. At 5.54pm (AEDT) the Aussie dollar was trading at US85.86 cents up from US85.47 cents at yesterdays close.

Orders for durable goods which are products designed to last at least three years rose by 0.4% in October from a month earlier reversing a -0.6% drop in September which is positive although a big part was connected to military spending.

Initial jobless claims came in at 313,000, the highest since early September and up from 292,000 in the previous period according to the labor department.

“It’s particularly difficult to adjust the data during the holiday season” noted Thomas Simons, an economist at Jefferies LLC in New York.

He also mentioned “Variant winter weather, the floating timing of the Thanksgiving holiday, and preparations for the holiday-shopping season that differ from prior years tend to make historical comparisons difficult,” “Volatility will probably continue to be elevated until the end of the year, but we expect that claims will drift lower again.”

Most analysts predict this latest disappointing number is only a glitch in an otherwise robust US jobs market and expect a rebound as we head into the run up to Christmas.

Sales of new homes in Australia rose in October to their highest level in four months despite talk of a developing bubble in the housing market .The Housing Industry Association reported that sales of new homes climbed 3% October, up from 0% the previous month.

 

[FIBOgroup]

28.11.2014 - Australian dollar tumbles along with oil price

The Australian dollar tumbled in today’s trade as OPEC decided to leave output unchanged which had a drastic effect on commodity currencies. At 608pm (AEDT) The Australian currency is trading at $84.91 US cents down from US85.42 cents at yesterdays close.

The oil cartel decided to keep output at 30 million barrels per day, at least 1 million above OPEC's own estimates of demand for its oil next year, sending the oil price plummeting towards the $70 a barrel mark.

The battle is now on between OPEC and non-OPEC countries, as a boom in U.S. shale oil production and a slowdown in China and Europe have already seen crude prices fall by nearly third since June.

"It is a new world for OPEC because they simply cannot manage the market anymore. It is now the market’s turn to dictate prices and they will certainly go lower," said Dr. Gary Ross, chief executive of PIRA Energy Group.

Although the Australian economy is not closely connected with oil, the sharp fall in price boosted the US dollar against a basket of other currencies including the Aussie and we could see more downward pressure on the currency as the oil price falls further.

 

[FIBOgroup]

01.12.2014 - Australian dollar falls along with commodity prices

The Australian dollar is trading sharply lower today after weak Chinese manufacturing data and commodity prices forced the currency lower. At 5.46pm (AEDT) the local currency was trading at US84.40 cents down from US85.02 cents at Friday’s close.

Swiss voters rejected a referendum making it necessary for the Swiss National Bank to hold at least 20 per cent of its assets in gold sending the gold price plummeting and dragging down commodity currencies Including the Aussie with it.

The Chinese manufacturing index which is a leading indicator of business confidence came in 50.3 down from last month’s reading of 50.8 and lower than analyst’s forecasts of 50.5.

The price of Brent crude oil is trading at around $US68.35 per barrel with some including Canadian billionaire Murray Edwards, chairman of Canadian Natural Resource, claiming that the commodity may fall much further.

Speaking with Canadian business publication financial post Edwards said, "Prices could spike down to $30, $40. It got down to $35 in 2008, for a very short period of time."

Edwards also noted that "On a given day you can have market fluctuations where prices fluctuate far more than the underlying economic value of the unit," adding that if oil falls to $30 or $40 a barrel he doesn't expect it would stay that low.

 

[FIBOgroup]

02.12.2014 - Australian dollar up on RBA speech

The Australian dollar is trading slightly higher today after the latest Interest rate decision where rates were kept on hold at 2.5% and the following monetary speech from RBA governor Glen Stevens which sounded slightly upbeat.

At 3.25pm(AEDT) the Australian dollar is trading at US85.20 cents up from US84.89 cents yesterday.

Speaking about concerns of a slowdown in China, and especially the property market Stevens sounded cautiously optimistic and noted,

“Growth in the global economy is continuing at a moderate pace. China's growth has generally been in line with policymakers' objectives. While weakening property markets present a challenge in the near term, economic policies have been responding in a way that should support growth”.

Brushing off speculation last week from another board member that the bank may cut interest rates in the nearest future and giving the impression that they will remain on hold he also mentioned that,

“In the Board's judgment, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates”.

In what is becoming like a famous punch line in each of his speeches for talking the Australian currency down Stevens also noted,

“The Australian dollar remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices in recent months. A lower exchange rate is likely to be needed to achieve balanced growth in the economy”.

Also giving the Aussie dollar a boost today was the latest release of building permits which came in at 11.4% against a consensus of 5% which clearly shows there is confidence remaining in the property market.

 

[FIBOgroup]

03.12.2014 - Australian dollar down on potential rate cut

The Australian dollar broke through the US84.00 Cents mark in early trade today as quarterly GDP figures hit the market well below consensus which sent the currency tumbling.

At 4.35pm (AEDT) the Australian dollar was trading at US83.99 cents down from US84.44 cents yesterday.

The Australian Bureau of Statistics report showed the economy grew by just 0.3 per cent in the September quarter and only 2.7 per cent over the year to September 30.

Most Analysts had been forecasting growth of 0.7 per cent in the September quarter and 3.1 per cent for the year.

AMP Capital Investors chief economist Shane Oliver noted that “Australia is now in an income recession”.

“The fact that GDP was lower than expected, that national income has fallen again in an income recession, suggest to me the risk on interest rates is all to the downside,” he said.

On the bright side he mentioned that a rate cut might give some relief to previously underperforming sectors.

Treasurer Joe Hockey also weighed in on the argument by saying that a falling Australian dollar will help offset the damage of declining national income from abroad.

“It helps to cushion the economic impact from fall terms of trade,” Mr Hockey told reporters in Canberra.

“A lower exchange rate is an important driver for rebalancing growth across the economy.”

 

[FIBOgroup]

04.12.2014 - Australian dollar's rally short lived

The Australian dollar is back below the US84.00 cent mark today even as the latest retail sales figures come in well above expectations.

A 4.13pm (AEDT) the local currency is trading at US83.94 cents after trading as high as US84.28 cents following the release of the data.

The monthly retail sales number came in at 0.4% against Analysts expectations of 0.0% which gave the Aussie dollar a quick boost but in the end it turned out to be short lived.

“There is so much negative bias surrounding the Aussie dollar at the moment” claim analysts from Fibogroup forex brokers

“With Iron ore prices hovering around five year lows, a potential slowdown in China and a resurgent US economy it difficult for the Australian dollar to keep its head above water”

“Speculation of an Interest rate cut from the Reserve bank of Australia at some time in the nearest future is also adding fuel to the fire and when you combine all of these negative factors it is hard to be bullish on the Aussie dollar at the moment” they noted.

Key data due out later today includes the latest Jobless claims figure from the US as well the HIA/AiG Performance of Construction Index from Australia which could see the local currency come under further pressure.

 

[FIBOgroup]

05.12.2014 - Australian dollar lower as property market unwinds

The Australian dollar is trading lower today after more downbeat economic news following the disappointing quarterly GDP numbers on Wednesday.

At 6.00pm (AEDT) the Australian dollar is trading at US83.71 cents down from US83.82 cents yesterday.

Australia’s economic savior, the property market is finally beginning to buckle according to the latest Australian Industry Group/Housing Industry Association construction index.

The number came in at 45.4 down sharply from last month’s 53.4 putting another dent in the Australian economy and placing further pressure on the RBA to cut Interest rates early next year.

"The housing market was one of the sectors keeping the Australian economy above water as well as providing some support for the Aussie dollar, so this news didn’t go down well" noted analysts from Fibogroup forex brokers.

"The property sector provided a boost to the economy as the mining boom in Australia was coming to an end, and now with a cloud hanging over the real estate market it looks as if the Australian dollar has nowhere to turn".

The local currency is expected to come under further pressure today in the lead up to the release of the non farm payrolls data and the latest unemployment rate from the US, where analysts expect a strong showing and further evidence that the US economy is in recovery mode.

 

[FIBOgroup]

08.12.2014 - Australian dollar lower on stellar US jobs data

The Australian dollar is trading sharply lower today as key employment data out of the US late Friday sent the US dollar soaring against all major currencies Including the Aussie.

At 6.50pm (AEDT) the local currency is trading at US 82.61 cents down from US 83.11 cents on Friday

The Latest non-farm payrolls data from the US came in at a staggering 321.000 against analysts’ expectations of 230,000 clearly showing that the US economy is in recovery mode and providing further evidence that the US Federal reserve may need to make a move on Interest rates sooner rather than later.

“There is now a consensus amongst analysts that the Australian central bank will move to reduce rates while at the same time the US Fed will seek to Increase rates which will close the gap on the Interest rate difference” noted analysts from Fibogroup forex brokers.

“We have rates in the US sitting at 0.25% while in Australia the rate is at 2.5% and as the difference begins to narrow, the Aussie dollar will lose some of its appeal and especially in regards to the carry trade which has helped underpin the Australian dollar for a number of years” they said.

Just how far the Australian dollar will now fall is anybody’s guess but some are very bearish on the currency including State Street Global Advisor's head of investment solutions Mark Willis who noted,

"At the moment it’s probably fair to say many chief investment officers think of US80 cents as being a neutral level,"

"On our valuation metrics we have a long-term fair value at around US70 cents. It's moving back towards that level and a lot of funds have been anticipating the slowdown in the commodities cycle and that was communicated in a way that they wanted their hedges lightened," he said.

 

[FIBOgroup]

09.12.2014 - Australian dollar hit by double whammy

The Australian dollar is trading sharply lower today as local business conditions deteriorate and weak numbers out of China hit the currency hard.

At 614pm (AEDT) the local currency is trading at US down from US82.92 cents at yesterdays close.

The NAB´s Business Conditions survey for Australia came in at a disappointing figure of 5 down from last month’s 13 and forcing analysts at the National Australia bank to also jump on board and predict a rate cut from the RBA next year.

NAB chief economist, Alan Oster is predicting that RBA may move to cut Interest rates 3 times from the current rate of 2.5% if conditions in the Australian economy don’t improve

"There's a 30 per cent chance they'll need to do a third cut," he said.

"It depends a lot on what happens with the [Australian] currency, but we're not ruling out the prospect of a third cut."

Causing the Aussie dollar further headaches was the release of trade figures from China which seems to confirm fears that the Chinese economy is beginning to crack.

Exports fell sharply in November coming in at 4.7% from the previous year and much lower than the 11.6% rise in October.

Imports fell 6.7 percent on a yearly basis against analysts’ expectations of a 3.9% rise while the number is also sharply down from 4.6% in October.

The overall trade surplus hit $54.47 billion, well above consensus of $43.15 billion.

 

[FIBOgroup]

10.12.2014 - Australian dollar up on mixed data

The Australian dollar is trading higher today after a jump in the number of new home loans, brushing off poor CPI numbers out of China.

At 5.45pm (AEDT) the Australian dollar is trading at US83.20 cents after falling as low as US82.23 cents in yesterday’s trade.

The total number of home loans in Australia was up a seasonally adjusted 0.3% in October to 51,720 the Australian Bureau of Statistics said on Wednesday well above Analysts forecasts of a 0% rise and significantly above last month’s number of - 0.4%.

National Australia Bank senior economist David de Garis said the Australian property market is being underpinned by Sydney.

"The other states have been much flatter and if anything the Melbourne market has come off the boil a little bit," he said.

He also noted "We know there is a lot of new apartments coming on to the market in the next one to two years, that should at least be some type of headwind to house price growth in that market,"

Figures from China showed producer prices fell 2.7% in November from the previous year while consumer inflation slowed to 1.4%, its slowest pace since 2009.

This poor reading may keep a lid on the Aussie dollar’s gains as the market awaits the latest new loans report out of China tomorrow to see if it will follow in the footsteps of the disappointing CPI figures adding more evidence of a slowdown in China.

The latest unemployment rate from Australia, which is one of the biggest drags on the local economy at the moment is also due out tomorrow. Analysts expect a number of 6.3%, up slightly from last month’s 6.2%, and may put further pressure on the Australian dollar.

 

[FIBOgroup]

11.12.2014 - Australian dollar gives up early gains

The Australian dollar jumped as high as US83.73 cents in early morning trade buoyed by the news that the economy created 42,700 new jobs last month well above analysts’ expectations of 15,000 although 95% of the growth was part time jobs.

The Australian Bureau of Statistics data for November show 40,800 part-time jobs and 1,800 full-time jobs were added to the economy last month, seasonally adjusted.

The party was short lived however as Investors concentrated on the big picture which showed that unemployment in Australia rose to 6.3% from last month’s 6.2%, its highest level in 12 years pushing the currency lower to leave it trading at around US83.22 cents at 4.22pm(AEDT).

What appeared to be positive numbers at first sight turned out to be smoke and mirrors with Commonwealth Bank currency strategist Joseph Capurso noting,

"When you look at the detail, virtually all of the growth was in part-time jobs, so the headline was probably a bit better than it looked,"

Commonwealth Bank senior economist Michael Workman told Reuters that a rising unemployment rate may help the cause for an Interest rate cut.

"The net outcome is a labour market that is just not providing all the jobs that are required for the new entrants, so we get this gradual drift upward in the unemployment rate," he said.