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Global Market Update
The View from Australia

by Craig Killaby | September 26, 2021

Data/Speakers

 

> NZ August Trade Balance : -2144Mio v. 110Mio exp.

> EU September German ifo Business Climate : 98.8 v. 99.0 exp.

> EU German Federal Elections – currently too close to call as the vote split between Social Democrats and Christian Democrats are in a tight race

 

Weekend Headlines (BBG)

> China took explicit aim at cryptocurrency yet again, with the PBOC stating that all crypto transactions are illegal sending jitters throughout the volatile market

> The US Biden spending/tax plan is likely to come to a head this week, at the deadline to raise the limit on the debt ceiling fast approaches on Friday with the GOP/DEM in a fierce debate

What you need to know

Looking like a soft open to the trading week in Asia, with both the AUD and NZD off as we open up the final trading week of Q3. The Dollar regained some of its appeal in the back half of the week as investors prepared for the eventual tapering of policy from the Fed, of which we still have very little detail thus far. China took most of the headlines, as their large property developer seems to be on the brink of collapse as they have been unable to repay their interest payments on large on-shore and off-shore bonds. The on-shore bond was taken care of with investors, however the off-shore bond payment has yet to have been received as the lingering risks remain.

 

China takes next week off for their Golden Week holidays, so expecting an interesting week ahead of Friday’s holiday celebrations for the Chinese. Germans have gone to the polls over the weekend, and there seems to be a very even split between two of the parties although the incumbent Christian Democrats have seen their worse election result since 1949 as change seems on the horizon in Germany. EURUSD a touch stronger to open the week, trading above 1.1700 as I write this morning. The Dollar is up against nearly all the majors, with the DXY recovering and opening up 0.25%. UST yields are up across the curve, with the 2s,10s and 30s all finishing the week higher. The commodity recovery in metals continued, with both iron ore and copper gaining to close out the week, while WTI crude is 1% stronger to kick it all off. S&P500 opens up 0.15% in the black, while Gold is 0.5% higher.

 

The Day Ahead

 

Data

 

> EU ECB President Lagarde to speak

> EU September German ifo Business Climate : 99.0 exp.

> US FOMC Members Evans, Williams and Brainard to speak

> UK Bank of England Gov. Bailey to speak

> US August H/line Durable Goods Orders & Core Durable Goods Orders : 0.7% & 0.5% exp.

 

Expecting this week to be driven by headlines as China’s Evergrande story lingers away while the Fed members are back on the wires to provide more clarity on their policy path. The week is highlighted by the Core PCE numbers to drop on Friday, while China’s mid-week PMI numbers are likely to see some market reaction ahead of the extended holiday.

 

Debt ceiling is likely to be on the minds of investors, with politicians playing a dangerous game with the debt limit expected to be reached in the coming weeks with only US$70bio left of emergency measure room. Any sort of gridlock or shutdown would be a major event, so expect this to dominate if no agreement is made closer to the deadline. AU momentum is building as vaccinations ramp up across the country, with the likelihood of a sooner than expected reopening boosting sentiment.

 

Range Today : 0.7240 – 0.7330

 

AUD/USD Technicals

 

The pair found its new range, however lower highs may signal that more downside may be on the cards before a breakout. The YTD low of 0.7106 is still the ultimate target, while the September high of 0.7478 is capping the upside. A break of 0.7316 may leave the door open for a test of the 55DMA, now sitting at 0.7333.

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