Economic Outlook for Australia
Hey everyone, this is my first time posting my thoughts so I would like as much feedback as possible. Things that I overlooked or things that you would recommend adding to my analysis would be greatly appreciated. I am trying to learn how to take the high level macroeconomics and convert it into actionable trades. Thanks in advance for any feedback you feel like sharing.
1) What is the central bank’s policy and direction based on the meeting minutes?
It seems they don’t really want a strong currency because it could affect lending rates.
Growth is very dependent on China.
They chose to leave interest rates the same and it seems overall that they are happy with the current status quo. If the exchange rate increases too much they may take action.
2) What are their concerns (risk factors)?
• China (too reliant on them for growth)
• Decline in business investment
• Labor is mixed results
• Appreciating exchange rate could complicate finical lending
3) What are they optimistic about?
• Domestic demand and exports increased
4) What are other sources saying? Watch or read 3 sources and summarize:
source 1: The interpreter (good) Outperforming on most areas
source 2: Even with decreased investment the outcome looks stable
source 3: Australian economy is strengthening but it’s very fragile.
5) Commodities that could affect the market and their direction.
• Copper: Has been in a consistent down trend for more than 5 years. It would need to break about 2.5 to signal a reversal.
• Iron Ore: Was also in a down trend but is now starting show signs of reversal. Cleared 56.43 to create a higher high and then found support around the 51.1 area.
• Nickel: Has shown that it has broken back to the up side and started to increase in price again
• Zinc: Back up near previous highs
• Lead: Lead was in a slight down trend but has recently created a higher high.
• Coal: showing improvement as well.
Summary: I believe the commodities that support Australia’s economy are looking to increase in value.
6) Commitment of traders Report.
• Commercial hedging demonstrated at 3302 Buy/30200 Short.
• Leveraged funds noticeably long.
• Other reportable showing mostly short. (others are usually wrong)
Difference (bought or sold): 36467 buying
What questions did your research make you ask?
Why are businesses not investing in Australia anymore? Investors are drying up because banks are loaning out less to investors and requiring more money upfront in approved loans. This is because of the massive influx of Chinese investors and the problems it has created. We should be able to tell when the Australian economy runs into real trouble if the banks continue to hold back on loaning even with their preemptive cuts over the medium term.
1) What is the direction of the market via the daily chart and H4 chart?
Daily: Though the major trend has been down the past months have showed strength with Higher Highs and Lows overall showing a change to the upside possibly.
H4: Recent lower low. Watch to make sure it gets back into the higher area.
2) Does it have a trend line that has been verified at least 2 times? If so then how many times?
Trend (Yes/No): Yes but on the 4H
Number of Touches: 2
Bias : Bull / Bear
Reasons: Commodity price increases could create a massive turn around as price action demonstrates a high correlation with AUD price action. Though it seems an increased exchange rate could cause more lending problems I think the Australian economy is very sensitive to external pressure and will continue to rise because of the commodity turn around. The housing bubble is a concern that must be watched.
Pair with Weakening Currency : GBP/AUD
Look for trade opportunities based on support and resistance, pivots, fib levels, HVTs etc….
Trade One: GBPAUD
Entry: Month Pivot retracement 1.7267
Trade Two: GBPAUD
Entry: Monthly M2 break through and then retracement 1.7092