Here's Your 20-Second Guide To What Aussie Traders Will Be Talking About This Morning

Amy week which starts with an Aussie legend is bound to be a good week.

– Yes, the much awaited Black Caviar foal was born over the weekend and while there will be some speculation around trading floors on the young filly’s future, most interest this morning is going to be centered on the Aussie dollar, which is perilously close to breaking below 90 cent level for the first time since March this year after the weak Chinese data on Saturday morning.

– Westpac’s Singapore based strategist Jonathan Cavenagh said that industrial production, fixed asset investment and retail sales data for August all “came in weaker than expected but the very sharp deceleration in year-on-year (yoy) IP growth will draw the most attention.” More on that here

– Indeed, this is why after finishing at 0.9036 on Friday night, the Aussie dollar low so far this morning has been 0.9000 – early morning Asian traders are reacting negatively to the data. The Aussie is currently sitting at 0.9006 but it is only a matter of time before the level gives way.

– In the US on Friday, the data was solid with August retail sales growing the 0.6% expected, up from 0.3% last month. This data added to expectations the Fed will continue to taper at FOMC this week but also fueled fears about the path of interest rates in 2015.

– So at the close, the Dow fell 0.36% and back below 17,000 to 16,988. The Nasdaq dipped 0.52% to 4,568 and the S&P 500 lost 11 points or 0.57% to 1,986.

– Europe was mixed again, which is really interesting given usual correlation and more recent breakdown. The FTSE rose 0.11% to 6,807, the DAX dipped 0.42% to 9,651 while the CAC was largely unmoved at 4,442. In Milan, stocks dipped 0.1% and in Madrid, stocks rose 0.02%.

– The impact locally was weakness in futures trade on Friday night, with the SPI September futures down 19 points to 5,517 and December futures off 26 points to 5,515. Chinese data probably won’t help today, even though iron ore rallied on Friday.

– In Asia Friday, Shanghai rallied 0.88% to 2,332, which was a little strange given the Chinese new loan data Today’s price action will speak volumes about the expectation, or not, of more policy stimulus. In Japan, the Nikkei was up 0.24% to 15,948. The Hang Seng fell 0.27% to 24,595 as the fractious election debate continues.

– On rates markets, the sell-off and the carnage continues. With rates so low, the capital losses of this move higher over the past week or so are staggering. US 10s rose 6 points to 2.61% on Friday for a loss of 2.25%, German Bunds rose to 1.04% for a capital loss of 4.12% while Spanish bonds rose another 9 points to 2.41%, a loss for longs of 4.08%. In the UK, Gilts rose to 2.53%.

– On Commodity markets, Iron Ore for September is at $94.06 up 64 cents a tonne while Newcastle Coal for the same month dipped 20 cents to $65.90. Gold is down again at $1,229, suggesting traders expect higher rates but no inflation in the months and years ahead. Nymex Crude is down again, suggesting my hypothesis about Gold is true – it closed at $92.15 a barrel on Friday. Copper sits at $3.10 a pound.

On the data front, there is nothing material out in Australia today unless you are interested in seeing just how far Australia’s love affair with FJ Cruisers and other SUVs really is. EU trade balance tonight will hold some small interest and in the US, the Empire State manufacturing index is also out along with industrial production and utilisation data.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

Qantas

The three lines on the Qantas chart below are Bollinger Bands. The upper and lower blue ones are measures of standard deviation or “variance” from a mean value. The purple one in the middle is a 20-day moving average i.e. a mean value. Bollinger Bands are a tool designed to tell you something about both trend (price above or below the moving average) and the strength of trend (price above or below the standard deviation lines)

At the moment, the Bollinger Bands are telling us that the momentum of the Qantas uptrend is stalling. It was initially very strong with every day’s candle above the 2% standard deviation line. Theoretically this only happens 5% of the time. Now though, Qantas has made a trend peak well under the upper band. Even though Thursday’s price was the highest in the recent trend, its variance from the mean was lower indicating declining trend strength.

This situation often indicates that a trend change or pull back is on the cards. If we do get a pullback here, the zone around the 20-day moving average in the low $1.40s might provide support.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

The 3 lines on the Qantas chart below are Bollinger Bands. The upper and lower blue ones are measures of standard deviation or “variance” from a mean value. The purple one in the middle is a 20 day moving average i.e. a mean value. Bollinger Bands are a tool designed to tell you something about both trend (price above or below the moving average) and the strength of trend (price above or below the standard deviation lines)
At the moment, the Bollinger Bands are telling us that the momentum of the Qantas uptrend is stalling. It was initially very strong with every day’s candle above the 2% standard deviation line. Theoretically this only happens 5% of the time. Now though, Qantas has made a trend peak well under the upper band. Even though Thursday’s price was the highest in the recent trend, its variance from the mean was lower indicating declining trend strength.
This situation often indicates that a trend change or pull back is on the cards. If we do get a pullback here the zone around the 20 day moving average in the low $1.40’s might provide support.

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