Is the Aussie dollar about to crash on the back of a budget impasse? | Vantage FX

Is the Aussie dollar about to crash on the back of a budget impasse?

May 20, 2014

Just like we saw in the US over the past couple of years traders abhor the vacuum that budget impasses  can cause and while Budgets hardly ever matter to Australian bond and currency markets budget impasses certainly do.

So I’m wondering if the threat from global ratings agency Standard and Poor’s to Australia’s Triple A rating and the genuine chance of a budget impasse, after Clive Palmer and Labour signalled opposition to the governments budget in the Senate, is worrying traders.

This chart looks like it is rolling over to me – suggesting lower levels. Equally the 4 hour chart is right on the 200 period moving average on the 4 hour charts.

Looking more closely at the dailies we see that the 0.9300 region is key. So as we said yesterday give it a few points and call a move under 0.9287 a break and look for the mid 91 region after that.

Turning back overnight stocks in the US were higher last night even though the Fedspeak implied not only a continuation of the taper but an eventual increase in rate with Fed President’s Williams and Fisher both warning of the long term dangers of super easy monetary policy.

At the close the Dow was up a marginal 0.13% to 16,512, th Nasdaq rose 0.87% to 4,126 while the S&P 500 picked up 7 points or 0.38% to 1,885.

In Europe things were more mixed with the FTSE down 0.16% to 6,845 weighed down by the miners. In Europe the Dax and CAC were both 0.31% higher even though Astra Zeneca shares tanked 11%. In Milan and Madrid stocks reversed with the FTSEMIB falling 1.6% and in MAdrid the IBEX fell 0.5%.

– Locally the ASX came under heavy selling pressure yesterday but the futures have rallied 20 points overnight with the SPI 200 June contract at 5434 bid. Worth noting is the June 62 Ferrous Iron Ore Swap Furture was lower again overnight which could hold back the miners again and weigh on trade.

On currency markets the Euro ran up to 1.3735 but sits somewhat becalmed at 1.3708, GBP is at 1.6815 while USDJPY is static around the 101.5 region at 101.48 this morning.

On commodities Nymex crude for May delivery rose 0.58% to $102.58 Bbl, Copper sits at $3.17 lb while gold fell $12.20 oz to $1,296.60 and silver sits $19.35 oz. On the Ags it was back to volatility for corn which fell 1.34% while soybeans rose 1.19%. Wheat was unchanged.

On the data front today we get the RBA’s minutes to the last meeting along with the leading economic index for Australia and Japan. PPI in Germany and CPI and PPI in the UK will also be important before the Redbook index and more Fedspeak in the US.




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