Aussie dollar under pressure after weak Chinese data over weekend

September 15, 2014

The Aussie dollar is perilously close to breaking below 90 cent level for the first time since March this year after the weak Chinese data on Saturday morning.

Westpac’s Singapore based strategist Jonathan Cavenagh said that industrial production, fixed asset investment and retail sales data for August all “came in weaker than expected but the very sharp deceleration in year-on-year (yoy) IP growth will draw the most attention.” More here in a column I wrote earlier for Business Insider.

Indeed this is why after finishing at 0.9036 on Friday night the Aussie dollar low so far this morning has been 0.9000 as early morning Asian traders react negatively to the data. The Aussie is currently sitting at 0.9006 but it is only a matter of time before the level gives way.

On the five minute chart (and 15 minute) the Aussie looks overcooked this morning but longer term though even though last week was a huge down week – perhaps because it was – my target remains a move toward 0.85-87.

Elsewhere in foreign exchange land Euro is at 1.2966, Sterling is up at 1.6267 and USDJPY is doing a great job of holding nose belled territory above 107. It sits at 107.25 this morning.

In the US on Friday the data was solid with August retail sales growing the 0.6% expected up from 0.3% last month. This data added to expectations the Fed will continue to taper at this week but also fulled fears about the path of interest rates in 2015.

So at the close the Dow fell 0.36% and back below 17,000 to 16,988. The Nasdaq dipped 0.52% to 4,568 and the S&P 500 lost 11 points or 0.57% to 1,986.

Europe was mixed again which is really interesting given usual correlation and more recent breakdown. The FTSE rose 0.11% to 6,807, the DAX dipped 0.42% to 9,651 while the CAC was largely unmoved at 4,442. In Milan stocks dipped 0.1% and in Madrid stocks rose 0.02%.

The impact locally was weakness in futures trade on Friday night with the SPI September futures down 19 points to 5,517 with December futures off 26 points to 5,515. Chinese data probably won’t help today even though iron ore rallied on Friday.

I’m still short tiny SPI and I am still expecting it to head lower.

In Asia Friday Shanghai rallied 0.88% to 2,332 which was a little strange given the Chinese new loan data and today’s price action will speak volumes about the expectation, or not, of more policy stimulus. In Japan the Nikkei was up 0.24% to 15,948. The Hang Seng fell 0.27% to 24,595 as the fractious election debate continues.

On commodity markets iron ore for September is at $94.06 up 64 cents a tonne while Newcastle coal for the same month dipped 20 cents to $65.90. Gold is down again at $1,229 suggesting traders expect higher rates but no inflation in the months and years ahead. Nymex crude is down again suggesting my hypothesis about gold is true – it closed at $92.15 a barrel on Friday. Copper sits at $3.10 a pound and on the Ags corn and soybeans surges 2.19% and 2.78% respectively while corn dipped 0.94%.

On the data front there is nothing material out in Australia today unless you are interested in seeing just how far Australia’s love affair with FJ Cruisers and other SUV’s really is. EU trade balance tonight will hold a small interest and in the US the Empire State manufacturing index is also out along with industrial production and utilisation data.

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