Long AUD/USD (From 29 Nov to 5-Dec)
Real-Time AmpGFX – sold AUD vs USD and NZD to square positions (Wed 12/5/2018 8:53 AM MT)
We sold AUD/USD on our stop-loss order, and decided to also close our long AUD/NZD position at 1.0520.
Comment
The Australian GDP was obviously a major negative for the AUD well below expected and a significant downward revision to the annual growth rate last quarter.
The GDP report had some positive elements, including strong public spending, and the outlook for the Australian economy remains reasonably balanced. But there is room for pessimism to seep in over what may be a slowing trend in household consumption. This will place more attention on the retail sales report later today.
We were holding a long AUD position in light of other factors that we still think may be positive for the AUD including the US-China trade truce, less hawkish Fed, news which we see as potentially net positive for GBP and EUR.
However, AUD has been dragged down by the more dovish than expected Bank of Canada policy statement.
This has triggered our stop loss, and we want to clean all positions to reassess, including AUD/NZD.
We had been looking for a trend line support for AUD/NZD to hold (around our entry level 1.0590), and this has clearly broken. It may find support at its April low (1.0488), but we want a clean slate to consider the best opportunities from here.
The market is at risk of excessive volatility with US markets closed on Wednesday.
Stop loss raised to 0.7273 from 0.7243 on 4-Dec (noted in the AUD/NZD trade briefing).
Real-Time AmpGFX – Bought AUD/USD (Thu 11/29/2018 9:57 AM MT)
Bought one unit AUD/USD at 0.7312
Comment
A report from the WSJ quotes officials on both the US and China sides that have been in discussions in preparation for the Trump-Xi meeting. They appear to be providing a path for the US to suspend further tariffs in exchange for talks that run through to May next year. And some other sweeteners like allowing farm and energy imports to China.
This seems like the type of face-saving deal that Xi and Trump could agree to, and we think this would add to the confidence in global markets.
Trump (on his now typical pre-boarding the helicopter interview) tended to downplay the prospect of a deal, but he also likes to make grand statements after meeting global leaders, so we think risk positive news is more likely from the weekend.
So we have bought AUD, anticipating positive news from this meeting over the weekend
The WSJ reports that the US and China are exploring a trade deal involving a suspension of further tariffs through the spring to allow new talks “said officials on both sides”
“New talks would focus on what both sides are calling trade “architecture” “. WSJ speculates that this could encompass key issues important to the US including protection of intellectual property rights.
“One offer, according to Chinese officials”: in return for the suspension of US tariffs, China would agree to lift restrictions on imports of US farm and energy goods.
Australian capex report yesterday showed a solid improvement in forward-looking estimates for investment
Commodity prices have lifted in recent sessions
The Fed is taking a softer tone on its policy outlook, and some of the US data is ebbing – PCE deflator, US housing sales, unemployment claims.
Positions
Long one unit AUD/USD at 0.7312; s/l 0.7243; t/p 0.7548 (Capital at Risk 0.69%)
Long one unit EUR/USD at 1.1296; s/l 1.1323; t/p 1.2018 (stop loss raised from 1.1183)