Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Australian dollar’s commodity crash

au.investing.com/analysis/australian-dollars-commodity-crash-200584560
Australian dollar’s commodity crash
By David Llewellyn-Smith   |  Dec 07, 2023 11:00
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
DX
-0.04%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ADP
+0.38%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

DXY is still firming in counter-trend:

AUD is the mirror image:

CNY will hold back AUD upside:

Oil is in free fall. If it breaks support then $60 comes into view as the global economy lands:

Dirt is failing:

Miners did better:

EM is truly, madly dead:

Junk is poised for recovery but what sort of landing it it?

Treasuries are booming:

Stocks are worried that maybe bonds and oil are suggesting worse than a soft landing:

BofA gives us the DXY wrap.

•Aggressive pricing of Fed cuts weighed heavily on the USD in Nov; but recent reprieve suggests over-exuberant expectations

•We look closer at Fed pricing along with other CB expectations & easing of financial conditions ahead of Friday’s NFP report

•Technically, we see near-term resistance DXY levels at 104.55, 105.40 and 106 and support levels at 102.55, 101.75 and 100.55

Dollar takes a breather with Fed pricing in the spotlight

The DXY’s ~3% depreciation in November was its largest monthly decline since last November. The notable and likely aggressive pricing in of Fed cuts for H1 2024 has emboldened USD bears, though recent consolidation suggests the FX market sees Fed pricing as overdone ahead of key employment data this week. Nevertheless, Fed expectations remain front and centre as similar policy expectations for easing elsewhere (ie. ECB) has been a secondary factor for currencies until recently. November also saw the largest easing in financial conditions since April 2020 (in the wake of COVID-related policy easing), introducing a potential complicating factor for the Fed going into next week’s FOMC meeting. Before then, however, Friday’s employment report loomsas a possible source of further confirmation or spoiler to these easing expectations.

The key technical levels to know for the DXY bounceback

As the DXY bounces back after its November selloff, we see near-term resistance levelsat 104.55, 105.40 and 106 and support levels at 102.55, 101.75, 100.55.

The next big test is Friday’s NFP. It’s probably too early to expect clear jobs weakness but a declining trend will be enough to see DXY weakness return.

Goldman has more.

According to the ADP (NASDAQ:ADP) report, private sector employment rose by 103k in November (mom sa), following a downwardly revised October increase of 106k (vs.113k previously).

Employment in the services sector rose 117k, led by a 55k increase in trade, transportation and utilities, and a 44k increase in education and health services. Employment in goods-producing industries declined by 14k, led by a 15k decrease in manufacturing.2. We do not place much weight on the ADP miss because of ADP’s negative correlation with BLS private payrolls since the introduction of the new methodology.

We left our nonfarm payroll forecast unchanged at +238k ahead of Friday’s release.3. Nonfarm productivity was revised up by more than expected in Q3 (+0.5pp to +5.2%,qoq ar) and the year-over-year rate now stands at +2.4%. Since 2019 Q4, labour productivity has grown at an annualized rate of 1.5%.

Unit labour costs—compensation divided by output—were revised down by more than expected (-1.2%, qoq ar), and the year-on-year rate now stands at +1.6%. Compensation per hour increased at a 3.9%annualized rate and a 4.0% year-over-year rate in Q3.

Our wage tracker remains at 4.4 %annualized in Q3 (vs. 5.2% in Q2) and 4.4% year-over-year (vs. 5.0% in Q2).

That kind of “soft landing” result would probably be enough to stabilise DXY for a while longer and push AUD lower.

Anything closer to the ADP result will see AUD roar back.

Australian dollar’s commodity crash
 

Related Articles

Chris Becker
22.02.24 Macro Afternoon By Chris Becker - Feb 22, 2024

Asian share markets are starting to lift together – except local stocks – with Japanese markets playing catchup to the post NY rally in Chinese stocks while futures are looking...

Australian dollar’s commodity crash

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email