Intraday Market Thoughts

Early-week Double Whammy for AUD

by Adam Button
Jun 17, 2013 12:42

The pillars of Australian dollar strength for the last decade have been China and investment; weekend news points to weakness in both. The yen was easily the best performer last week while the US dollar lagged. CFTC positioning data showed EUR shorts quitting. Ashraf will return from overseas on Mondaay evening and Premium Insights return as normal. 2 EURUSD and 2 GBPUSD hit all targets from the last week's insights.

Early trading puts the yen ahead slightly while AUD and CHF lag. The Australian dollar may come under more pressure as the market digests the latest round of bad news.

The first is from a report in the 21st Century Business Herald which cites an internal review by China's commerce ministry. It said actual year-on-year export growth was only 7%, far weaker than the official 17.4% reading.

Traders have long suspected Chinese data were manipulated but this would be a huge revelation and undermine the credibility of the economy. Foreign investors may also re-think allocating money to China and that could cause a trickle back into US dollars.

The other story is a decision by Mitsubishi to shut down a nearly $6 billion iron ore project. We have long warned about the waning appetite for Australian investment and some of the weakness is already priced into AUD but headlines like this re-affirm the theme.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -8K vs -52K prior JPY -73K vs -83K prior GBP -54K vs -78K prior AUD -63K vs -59K prior CAD -36K vs -40K prior NZD +3K vs +6K prior CHF -21K vs -26K prior US Dollar Index longs at 43K vs 44K prior

The big takeaway is the capitulation of euro shorts. We have warned that the market was stuck in some euro short positions from unfavorable levels. The wipe out of EUR shorts shows that last week's strength may have had an element of short-covering, rather than a change in fundamentals.


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