Focus shifts back to the Australian market to begin the week, and while we don’t see any tier one data releases today, what a lead up into tomorrow we have!
The weekend saw China release official Manufacturing PMI data, which coming in at 50.1 technically missed expectations of 50.3. In saying that however, if the index comes in above 50.0, then it is still signalling growth in the sector. Flicking open our News Terminal and taking a look at the history of the release, this ‘miss’ obviously could have been a lot worse and things seem to be on holding steady rather than regressing:
But like we mentioned above, the start of the week is all about Australia itself, with tomorrow’s RBA rates decision just happening to fall on the same day the government releases the Federal Budget in the middle of an election campaign! Throw in the big 4 banks all releasing earnings this week, the uncertainty of the dip in inflation below the RBA’s target band and depending on the type of trader you are, the Aussie Dollar is either heaven or hell for you.
Daily Levels:
AUD/USD Daily:
Click on chart to see a larger view.
AUD/JPY Daily:
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GBP/AUD Daily:
Click on chart to see a larger view.
The bearish channel in that AUD/JPY chart is textbook. Definitely the pick of the charts for me.
However, the fact that we are in the middle of channels and at short term range support/resistance just highlights the uncertainty that markets have around tomorrow’s fundamental releases. Surveyed economists are officially leaning toward a no cut tomorrow, while the trader talk has been all about a cut on the back of the horrible inflation numbers that we saw last week. Throw in the Treasurer refusing to talk about what in the budget has been released to the RBA and there’s yet more unpredictability. Not a word that traders want to hear, right?
I’ve been ebbing back and forwards, trying to dissect market expectations and assess in which direction the greatest risk lies, but lack conviction which ever argument I make. The technicals are in no-man’s-land, the economist expectations are evenly split and the chances of a re-pricing in the AUD on the back of interpretation of economic data are there in both directions! This release looks as close to a 50/50 punt as you’re going to get…
So the question stands. Are you a trader or are you a punter? Answer that and it will determine how you position yourself to start the week.
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Chart of the Day:
As we mentioned above, not only does the Australian SPI 200 200 index see event risk from the RBA and Australian Government tomorrow, but also the weeks bank earnings releases all having a major impact on price.
SPI 200 Daily:
Click on chart to see a larger view.
Of course the US market leads the world of indices, highlighted by the fact that price across the board bounced from major trend line support to end 2015.
With both the US and Australian markets at major resistance right now, there is definitely a ceiling to manage your risk around.
On the Forex Calendar Monday:
CNY Bank Holiday
AUD NAB Business Confidence
GBP Bank Holiday
EUR ECB President Draghi Speaks
USD ISM Manufacturing PMI
CHF SNB Chairman Jordan Speaks
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