Calendar Week 23-2023
Chinese whispers flush Aussie dollar shorts out, whilst US stocks stonk on up along with rate rise expectations – go figure.
News on Friday that China looking to add stimulus by the way of supporting the flailing real estate industry pushed commodities and commodity currencies higher. How true or effective remains to be seen, but if Xi is willing to support one area of their economy, he might do more too.
Also on Friday, US job numbers came out and the headline was a big beat. +339,000 jobs added over an expected +193K. The % of unemployed also jumped though, so it was not all rosy. However stocks loved it and took off. With the US economy still showing some strength, the odds of rate rises also increased, so someone is wrong.
Here a wage increase will also force the RBA to keep raising rates, with Fiscal policy (government) working directly against Monetary policy (central bank). Phil Lowe being the fall guy to the media and Albanese does not care as Phil is out in September anyway.
So more of the same as inflation continues to rise yet stocks are being FOMO’d and VIX, the fear indicator, it fell under 15 for the first time in 3 years. This time of year is usually poor for stocks, but try telling that to the machines.
Week ahead we have interest rate settings from Australia and Canada, Australia GDP and Chinese inflation figures. Some volatility around those so trade accordingly.
Currency Guidance
USD – Got to 103.50 as we thought it would then bounced as interest rate yields rallied. However the higher stocks go, the less strength I see in the USD. A lot of USD buying has been from buying bonds in risk off safe haven flow. So this might not have too much more upside to it.
AUD – Found its way across 66 and is now sitting on it for support. This one will depend on the veracity of the Chinese stimulus, if it is here and hefty then 68 is a target, if not then we will drift lower to retest 65.
EUR – Whilst it faded of our level to almost the pip, the future for this pair is murky. The ECB would be happy to keep the Euro around here, and the direction of the dollar will be the dominant decider.
GBP – 1.2438 held for a few times, but it broke and is now support for a resurgent Cable. Despite the USD strength late Friday, this pair looks to be heading to 1.2650 again.
JPY – Faded back to minor support at 138.70 before finding buyers again. Next resistance will be circa 142. With the BOJ “line in the sand” at 145.
