“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


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Thursday, September 22, 2011

Australian Dollar closing in on key technical support levels

The Aussie is under severe pressure this morning as traders sell the unit on fears of the global slowdown catching up to the Land Down Under. Australia's economy has been very resilient standing out as a bright spot with relatively low levels of unemployment and a vibrant housing market. That plus the fact that it sells a tremendous amount of its goods to China, has made the Australian Dollar a standout performer for the first half of this year. It has however recently fallen on harder times as traders have shunned "risk trades" in favor of the US Dollar and the US Treasury market and a broad sell off hits the overall commodity sector.

It would appear from the price action in the Aussie that traders are concerned that eventually Australia is going to be impacted by a slowdown in global growth and that any subsequent move on the interest rate front by the RBA will be in a downward direction.

Looking at it on the price chart, it has crashed through a chart support level just below the 99 level this week and has continued its plunge this morning which is bringing it into some key technical support levels. The Aussie tends to be a pretty good harbinger of overall investor sentiment towards growth in general so if it does violate the lowest of this support levels, it will not bode well for future global growth prospects.

If you notice, back in the latter part of 2008, the Aussie bottomed and began its ascent at the same time the US equity markets and the Continuous Commodity Index both bottomed out. So too did gold. We'll keep an eye on this for further clues as to the welfare of all the above.


Another key indicator of overall global health is copper. This has been a very rough month for copper bulls as the red metal has also broken down technically. It looks poised for further declines with some chart support first surfacing about another 13 cents or so below the current level. We will need to see this metal stop declining if we are going to get a shift in investor sentiment back towards risk trades.

3 comments:

  1. can you imagine the phone calls ben is getting.....for saying 'significant'......in the same sentence as 'economic problems'

    really, ben?.....like its a big mystery everybody.....breaking news all right.

    ReplyDelete
  2. Societal Generale is now looking to Qatar and Middle East Banks for funding. Meltdown of European banks will force the hands of the Czars in Euro Central Banks soon. Or, kick Greece out, and print, print, print. Also, noticing the Italian and Spain 10Yrs are now ticking back up after the last intervention. Nothing on the bright side from Europe. PIIGS getting sicker. US can only twist and shout. Soon enough the plague migrates. Morgan Stanley, according to Mr. Durden, is tied to these French Banks up to 60%? Is there a plot next to Bear Stearns, and Lehman being readied?

    ReplyDelete
  3. Today Sept 2011. On the sidelines of the IMF’s annual meeting, Mohamed El-Erian, CEO of global investment-management firm Pimco, said he was “somewhere between worried and scared” about the global economic outlook.

    He described the global economy as akin to a car being driven on a bumpy road to an uncertain destination with very few spare tires in the trunk.
    Remember May 2010
    "After they drove the car into the ditch, made it as difficult as possible for us to pull it back, now they want to keys back," Obama said of the GOP."No! You can't drive. We don't want to have to go back into the ditch. We just got the car out."

    ReplyDelete

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