Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Global Investors May Have Moved On From Australia

By Axi (Greg McKenna)Market OverviewJun 22, 2017 11:48
au.investing.com/analysis/global-investors-may-have-moved-on-from-australia-200195874
Global Investors May Have Moved On From Australia
By Axi (Greg McKenna)   |  Jun 22, 2017 11:48
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Originally published by AxiTrader

The Aussie is under pressure again.

Mild as it may seem at 0.7550 this morning it's pressure nonetheless as the multiple failures above 76 cents in the past week give the bears the whip hand. The question now is where the support level will come back in.

Last night the low was 0.7542 - 10 points above the 38.2% retracement of the most recent rally. This zone will important again today. But it's equally likely traders want to test the recent lows at 0.7515/20 to see if they still hold as well.

For me though I'm wondering about the overall environment for the Aussie and Australian markets.

Now I don't want to over-egg it, but the current environment reminds me very much of the 1999-2001 period when global investors just moved on from Australia to better opportunities elsewhere.

That was the period when the AUD/USD fell from around 68 cents down and though 50 cents to a record low of 0.4775 in April 2001.

The reason I'm seeing this analogy with that earlier period in this current environment is not just because of the rampant bid in tech stocks - or at least the big ones - nor is it simply that Australia's commodity basket is in a downdraft and BHP Billiton Ltd (AX:BHP) its own downtrend.

We also have concerns about the local housing market, financial sector stocks as an extension of that, and we've had a really poor performance on the S&P/ASX 200 relative to the S&P 500, and other major global stock markets.

Chart
Chart

I've been banging on about the ASX underperformance to the S&P in my Morning Markets Wrap for some time now. And just like the late 1990's, the sense I get is that investors have simply moved on - away from Australia - to other markets and other opportunities.

Europe's existential threat has gone with the Macron victory. The rise of centrist Europe is helping Angela Merkel in Germany and even Beppe Grillo's 5-Star movement in Italy is reported to have stepped back from its Euro-sceptic approach.

Money has flowed back to the continent as a result.

Likewise the opportunities in tech, and a continued expectation that president Trump will eventually give the US economy a lift have investors focused elsewhere. And the inclusion by MSCI of 222 Chinese stocks in its global stock indexes means you don't need a China proxy if you can buy China direct - or at least more easily with the cover of index inclusion.

And perhaps China's continued transition toward a services-based economy is part of the changed sentiment toward Australia as well. Just yesterday the National Development and Reform Commission said it wants the economy to move to 60% services by 2025 from around 51/52% at present.

That will reduce China's reliance on Australian commodity exports and resource use intensity for any given percentage point of growth.

It's all a narrative that speaks to the Aussie dollar and Aussie markets losing the attention of global investors. We'll see how it plays out in the months ahead. But at the very least it's going to keep the Aussie with an offered tone on any rallies. Any signs of economic weakness will be severely punished.

In the immediate term as highlighted above 0.7532/42 is short term support before 0.7515/20. 0.7585 is resistance in the first instance ahead of 0.7625/35.

Here's the daily chart.

Chart
Chart

Have a great day's trading.

Global Investors May Have Moved On From Australia
 

Related Articles

Global Investors May Have Moved On From Australia

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
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email