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Price & Time: Just How Important Was Last Week Low in AUD/USD?
We have been rather dismissive of the recent low in AUD/USD as a few cyclical techniques continue to point lower in the rate. However, a variety of longer-term Fibonacci time relationships between this month’s low and several key lows over the past 4 years is making us seriously question this negative cyclical assessment. Such a clear relationship amongst so many important lows is rare and raises the possibility that this month’s low could lead to a deeper upside correction (and possibly even a full fledge reversal in trend) in the weeks ahead. The .9300 level looks absolutely critical in this regard with a close over it the likely lynchpin to a much more important move higher. Shorter-term cyclical studies suggest weakness will be seen in the Aussie into the latter part of the week before another low of some kind is recorded. However, a close below .8900 would undermine the potential positive prospects of the Fibonacci time relationship.
If actual > forecast = good for currency (for USD in our case)
==========
U.S. Retail Sales Show Continued Growth Despite Pullback In Auto Sales
Retail sales in the U.S. rose for the fourth consecutive month in July, according to a report released by the Commerce Department on Tuesday, although the sales growth was slightly weaker than expected due to a notable drop in auto sales.
The report said retail sales edged up by 0.2 percent in July following an upwardly revised 0.6 percent increase in June.
Economists had expected sales to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.
New Zealand Producer Price Output +1.0% In Q2
Producer prices received in New Zealand for the output of products jumped 1.0 percent in the second quarter of 2013 compared to the previous three months, Statistics New Zealand said on Monday.
That follows the 0.8 percent quarterly gain in the previous three months.
Input prices added 0.6 percent on quarter, slowing from the 0.8 percent increase in the three months prior.
"Higher dairy prices contributed to increases in both the output and input PPI," prices manager Chris Pike said in a release accompanying the data.
2013-08-19 01:30 GMT | [AUD - New Motor Vehicle Sales]
If actual > forecast = good for currency (for AUD in our case)
==========
Australia July New Motor Vehicle Sales -3.5%
The total number of new motor vehicle sales in Australia was down a seasonally adjusted 3.5 percent in July compared to the previous month, the Australian Bureau of Statistics said on Monday, standing at 93,797.
That follows the 4.0 percent monthly gain in June.
By category, sales of passenger vehicles shed 3.0 percent on month, while sports utility vehicles lost 2.3 percent and other vehicles dropped 6.2 percent.
AUD at Risk on RBA Minutes- Verbal Intervention on Tap?
Why Is This Event Important:
Although there’s speculation that the RBA delivered its last rate cut at the August 6 meeting, Governor Glenn Stevens may continue to strike a cautious outlook for the region amid the slowing recovery, and the central bank head make further attempt to talk down the Australian dollar in an effort to balance the risks surrounding the region.
The RBA may talk down bets for lower borrowing costs amid the rise in private lending, and we will need to see the central bank endorse a neutral policy stance to see a more meaningful rebound in the Australian dollar.
Nevertheless, Governor Stevens may continue to push for a weaker exchange rate in order to stem the downside risks for growth and inflation, and the bearish sentiment surrounding the higher-yielding currency may gather pace over the near to medium-term should the interest rate outlook deteriorate further.
How To Trade This Event Risk
Should the RBA soften its dovish tone for monetary policy and talk down bets for another rate cut, we will then need to see a green, five-minute candle following the statement to consider a long entry on two-lots of AUDUSD. If the market reaction favor a long aussie-dollar trade, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will establish our first target. The second objective will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in an effort to protect our profits.
On the other hand, the RBA may try to talk down the Australian dollar amid the weakening outlook for growth and inflation, and we will carry out the same setup for a short aussie-dollar trade as the long position mentioned above, just in the opposite direction.
Chinese Developers Move Up as FarmVille hit 50M This Week :
FarmVille, a virtual farming game from Zynga, inspired by an earlier China-based version, has reached 50 million monthly active users this past week, having gained 4.21 million new players. Meanwhile, our AppData service shows Chinese developers gaining some of the most new users among the top 20 fastest-growing games on Facebook.
Silicon Valley and Chinese gaming platforms, companies and gamers are, in their own ways, coming together like never before. Indeed, number 12 on the list is 開心農場, or “Happy Farm,” made by ELEX — apparently also a Chinese-language virtual farming game patterned after earlier, China-based Happy Farm games.
My Fishbowl, a multi-language but apparently mostly Chinese-language virtual aquarium game made by AppSphere Inc, gained 891,000 new users over the past week, to reach 4.19 million monthly actives. It came in at number five. It was followed by Animal Paradise, from Beijing-based Rekoo, with 726,000 new users and 2.77 million monthly actives.
Australia Westpac-MI Leading Index Points To Strong Above-Trend Growth :
A leading indicator for Australian economic activity continued to signal solid above-trend growth for the economy in the coming months, though the annualized growth rate of the index has eased to a seven-month low, a key survey revealed Wednesday.
The Westpac and the Melbourne Institute said that the annualized growth rate of its leading index, which indicates the likely pace of economic activity three to nine months into the future, was 3.6 percent in June.
This was the slowest annualized growth rate in the index since November 2012. However, it remained notably above its long term growth of 2.9 percent and therefore points to a strong above-trend growth outlook, the report said.
However, the index score remained unchanged from May's reading of 293.4.
The Reserve Bank of Australia recently revised down its growth forecast for the economy in 2013 to 2.25 percent from 2.5 percent, although it has maintained its growth forecast out to June 2014 at 2.5 percent.
The Week Ahead: A Contrary Bet For 2014 :
It was a rough week for the exchanges as the three-hour halt in Nasdaq trading on Thursday was unprecedented. There was no comment from the Nasdaq until well after the close. On Friday, their response also seemed to be lacking, looks like they must be using the same damage control experts as Carnival Cruise.Even more disturbing from my perspective was the glitch in Goldman Sachs (GS) options software on Tuesday that mis-priced over 800,000 options at $1 each. If the regulatory authorities decide to bust these trades and protect Goldman, I feel it will be very discouraging to the individual investor.I agree with Myron Scholes, co-creator of the Black-Scholes option pricing formula, who told the Financial Times that Goldman should pay for their mistake.The actions of the big institutional traders and research departments can often provide some useful insight. Sometimes, but not always, it is a good idea to do the opposite of what they are doing or recommending.Should you be doing the opposite of what they are recommending?
Gold price strength in Friday’s session could spill over into next week as the market’s technical charts point to further gains :
Gold prices ended the week up. December gold futures rose Friday, settling at $1,395.8 an ounce on the Comex division of the New York Mercantile Exchange, up 1.8% on the week. September silver rose Friday, settling at $23.738 an ounce, also up 1.8% on the week.
In the Kitco News Gold Survey, out of 36 participants, 23 responded this week. Of those 23 participants, 15 see prices up, while seven see prices down and one sees prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.
Gold price shot higher on Friday, breaking out of resistance at the $1,377-80 area after a lower-than-expected July new home sales report. There are concerns that rising long-term interest rates may slow home sales growth.
Traders said buy stops, which are preplaced buy orders, were uncovered when gold rose broke through technical-chart resistance, propelling prices up.
“Technically this market is looking good. Silver also helped with the rise up,” said Charles Nedoss, senior market strategist with Kingsview Financial. “A close over $1,385 could mean a higher start next week.”
The firmer close could spill over into next week, although volume could be light. Next week is the last full week of August and for many, the last unofficial week of summer.
“September will bring a lot more things to focus on, like another jobs report and the Fed meeting,” said Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA.
There will be plenty of debate over the status of the Federal Reserve’s bond-buying program, known as quantitative easing. Views are split on what the Fed might do in September, either taper the amount of bonds it purchases or continue at the $85 billion monthly pace shift.
“The speculation about Fed policy and when tapering will begin continues to be the main influence for the markets. The data on new home sales was the catalyst for (Friday’s) gold move as it was trading even with last week’s close when released. This market looks higher next week and I expect to reach resistance levels of $1,426, $1,444, and $1,468, but I know that economic data cuts both ways and the right --or wrong -- news could end this rally,” said Frank Lesh, broker and futures analyst with FuturePath Trading.
Those who see the Fed trimming its bond purchases as soon as September cite improving Chinese and European economic data, along with generally stable U.S. economic data. If the Fed acts in September, then gold could come under pressure, said some analysts.
Bob Haberkorn, senior commodities broker, RJO Futures, said he’s not in the September tapering camp. Just the thought of the Fed moving in September has already taken stock indexes off their highs and the U.S. 10-year Treasury note yield to its highest level in two years, he noted.
Actual movement by the Fed would add further weight to equities and send interest rates higher, he said, adding that this would be bearish for gold initially. However, he said he believes that the sell-off would be short-lived as buying would come in via a flight-to-safety move. “I just don’t think the Fed can do this (remove stimulus) in an orderly fashion,” he explained.
Also for next week, traders will watch home sales to see if there is any new evidence that rising long-term interest rates in the U.S. are affecting housing prices when the Case-Shiller 20-city home price index is released. This will be watched especially closely after Friday’s surprisingly weak new home sales.
Traders are looking at two consumer sentiment gauges, the Conference Board’s consumer confidence index and the University of Michigan’s consumer sentiment data. Analysts said while retail gasoline prices were lower on average in August, the recent slide in the stock market could offset any comfort consumers felt from slightly cheaper gasoline.
BoJ Chief Says Bond Buying Lifted Stock Prices, Restrained Bond Yields :
Bank of Japan's Governor Haruhiko Kuroda said bond buying has started to exert effects and monetary easing does not necessarily lead to cross-border capital outflows.