Originally published by AxiTrader
Copper is down again this morning amid what's been another day of falling prices across global metals markets. The Aussie US 2 and 10-year spreads likewise are down again this morning with the 2-year spread at -4 points and the 10-year spread sitting at just ten and a half points.
Taken together those two factors alone are enough of a handbrake on the Aussie dollar and place downward pressure on prices.
So it's no surprise that the AUDUSD is lower this morning at 0.7574 having lost 0.23% but having found support at the 0.7550 region I highlighted yesterday.
The Aussie is also lower against the pound with GBPAUD up 0.77% to 1.7707, while EURAUD is also higher at 1.5647 - up 0.38%. The Aussie has lost less against the yen and is relatively flat against the Kiwi which as part of the commodity bloc (yes I know its export mix is very different to either Australia or Canada) is also under pressure.
For me thought perhaps the best example of why the Aussie is under pressure is the preference that global investors are showing in their sector allocations in stocks. To do this I use what I think is a neat non-forex indicator of what investors are doing. That indicator is simply a measure of the relative performance of the MSCI Metals and Mining Index (NYSE:PICK) versus the MSCI World Index (NYSE:URTH).
It's not a perfect measure by any stretch - but it is indicative of investor intent and attention. As mining and metals share underperform, so often does the Aussie.
Which is where we are today with the Aussie under a little bit of pressure as traders await the release of the latest update of Private Capital Expenditure.
This is an important release for two reasons. The first is that what business invested in during Q3 feeds into that quarter's GDP growth rate. The second is that the projections of what business will invest in over the next year is also important in judging the outlook for the economy.
The market is expecting Q3 CapEx to have increased 1% on the June quarter. The outlook for the rest of the 2017/18 financial year is also expected to lift although there are no forecasts for that via Reuters or other polls. This will be an important number as well.
So too will the release of China's NBS PMI's for manufacturing and non-manufacturing. Chinese data has been weak lately and the Citibank economic surprise index for the nation is currently sitting at -28.2. Any further deterioration will continue to weigh on metals, sentiment toward the Chinese economy, and thus the Australian dollar.
Reuters say the market is looking for a small fall in manufacturing PMI from 51.6 to 51.4 in November.
Turning to the charts now and not a lot has changed for the Aussie in the past 24 hours. Other than it has slipped to and found support at the 0.7550 region I highlighted yesterday would offer support if 0.7585 broke.
The daily chart tells you all you need to know. The AUD/USD is in a downtrend. It has recently failed three days in a row to break and hold above that trendline and so remains in a downtrend.
As it stands now the 0.7530 region - recent low - looks important. If it breaks the 0.7450 region comes into the frame.
Topside the Aussie would need to break 0.7610/20 and then 0.7645 to open up any substantial topside.
Have a great day's trading.