Aussie Drifting Lower

Quick Recap

Weaker than expected US and Chinese data made the Aussie dollar the worst performing of the major currencies Friday, and sapped the strength of stocks to end the week on a new all time high. Bonds and oil rallied but gold and copper weakened.

What You Need To Know

International

• US retail sales missed with a print of 0.0% against +0.4% expected when they were released on Friday. When you take out food and energy sales fell -0.1%. In some ways though Producer Prices were more disturbing and disruptive for expectations about the Fed’s policy actions this year.

• While the market guesstimate was for a rise in the PPI of 0.1% it actually fell by 0.4% and ex-food and energy the fall was 0.3% versus the 0.2% rise that the pundits guessed at. Consumer confidence was okay edging up to 90.4 from 90.0

• The washup was that the Dow Jones Industrial Average and S&P 500 retreated ever so slightly from the previous days records with closes at 18576, and 2184. The Nasdaq 100 did inch a smidge higher to close at 5232.

• This data also helped drive US bonds a little lower with the 10 year Treasury finishing at 1.515% down around 6 points. Craig James from Commsec reported this morning that the bets on the fed are reduced a little with “Traders now see a 43% chance of a rate hike in December, down from 52% on Thursday.”

• Chinese data was a miss the Friday and I’d characterise it as somewhat disappointing. It wasn’t exactly the “horrible” our headline at BI suggested (nice article from Scutty though) but it was certainly disappointing that the big three numbers missed to the downside. Industrial production printed 6% versus the 6.1% expected and 6.2% in June. Retail sales came in at 10.2% rather than the 10.5% the pundits guessed at, while fixed asset investment was actually a big miss with a print of 8.1% from 9% last and 8.8% expectations.

• We can all wring our hands about Chinese growth but these data points simply confirm the economy is slowing but is still doing better than many feared six-months ago. One thing though I wonder if the economy is actually slowing quite markedly. Why do I wonder that – China’s new belligerence in the South and East China seas along with arguments over South Korea’s new missile defence system.

• Japanese GDP data today is the key highlight 0 market expecting the print in a 0.2%-0.7% range.

Australia

• The banks were a bit of a drag Friday but the National Australia Bank Ltd's (AX:NAB) advance was interesting given we get an update on how its tracking today. In the end the market finished up 23 at 5530, off its highs at 5549 but still a solid 0.42% higher.

• That wasn’t terrible given the Chinese data but the SPI 200 futures are suggesting an 11 point fall when the market opens at 10am this morning. The miners had a bit of a rough run overseas suggesting a little more pressure today and we’ll see how the banks go.

• It’s a big week for reporting on the ASX with 100 names reporting. Today’s highlights are BHP Billiton Ltd (AX:BHP), IronAtlas Iron Ltd (AX:AGO), Newcrest Mining Ltd (AX:NCM), and JB Hi-Fi Ltd (AX:JBH) with the latter giving an interesting indication on how the economy is tracking.

• All that said, as I noted Friday I like the SPI 200 lower.

Forex

• The US dollar was weaker (but not terribly) on Friday as a result of retail sales and PPI data. Euro is at 1.1166 this morning, the pound is still struggling though down at 1.2925, while USD/JPY is at 101.05. The DXY recovered and in the end was down just 0.18% to 95.68.

• But that didn’t help the AUD/USD which appears to have suffered from China’s data and so is this morning sitting at 0.7650. It’s likely to drift a bit in the initial part of the week but support around 0.7600/20 looks strong for the moment. RBA minutes a small risk tomorrow and then unemployment Friday will be pretty big for AUDUSD traders.

Commodities

• Crude Oil continued to surge higher on Friday with gains of more than 2% in WTI and Brent terms. Two nice big fat candles like we’ve seen in the past couple of days suggest momentum for the topside continues.

• Gold was lower and has now slipped the uptrend it has been in for the best part of three months. This is interesting given the US dollar was a little weaker and traders will be watching the $1329 level from last week’s lows to see if the slippage is going to continue back to the $1310/15 level.

• Copper was down at $2.14 a pound and looking wobbly– no doubt the Chinese data didn’t help - $2.11 is the level to watch.

• Iron ore looks like it was down again with Dalian iron ore off 3.6%.

Today's key data and events (all times AEDT)

• Australia - Nil
• New Zealand - Nil
• China - Nil
• Japan - Gross Domestic Product Deflator (YoY) (Q2), Gross Domestic Product Annualized (Q2), Gross Domestic Product (QoQ) (Q2) (9.50am); Industrial Production (YoY) (Jun), Industrial Production (MoM) (Jun), Capacity Utilization (Jun) (2.30pm)
• Germany - Wholesale Price Index (YoY) (Jul), Wholesale Price Index (MoM) (Jul) (4pm)
• EU - Nil
• UK - Rightmove House Price Index (MoM) (Aug), Rightmove House Price Index (YoY) (Aug) (9.01am)
• Canada - Nil
• US - NY Empire State Manufacturing Index (Aug) (10.30pm); NAHB Housing Market Index (Aug) (12am); 3-Month Bill Auction, 6-Month Bill Auction (1.30am); Net Long-Term TIC Flows (Jun), Total Net TIC Flows (Jun) (6am)

Have a great day's trading

Greg McKenna

Chief Market Strategist AxiTrader

www.gregmckenna.com.au

Please note: I usually look at 2 or 3 charts each day. These will not always be the same charts and the above is meant to help guide traders thought processes not offer advice.

The information provided here has been produced by third parties and does not reflect the opinion of AxiTrader. AxiTrader has reproduced the information without alteration or verification and does not represent that this material is accurate, current, or complete and it should not be relied upon as such. The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.