Australian Bear Raid

AU ECON: AiG Performance of Construction Index 30.9 in September vs 32.2 in August.

■■ The national construction industry continued to exhibit substantial
weakness in August, contracting at the sharpest rate since last
September. A steeper decline in new orders was the major factor
undermining industry activity, highlighting the fragility of overall
demand conditions.
■■ The Australian Industry Group Performance of Construction Index
(Australian PCI) in conjunction with the Housing Industry Association
fell to 32.2 in August, from 32.6 in July. The index has now remained
below the critical 50 point level separating expansion from
contraction for 27 consecutive months.
■■ Apartment construction was a principal area of weakness with activity
contracting sharply over the month. Subdued conditions also persisted
in commercial construction and house building, although the pace of
decline in activity moderated in both sectors. Despite outperforming
other sectors, engineering construction declined at a steeper rate in
August with reports of project delays impacting on activity.
■■ Most businesses linked the ongoing decline in activity to reduced
levels of incoming work and a shortage of new tender opportunities.
Businesses also cited difficulties in securing credit or other funding for
construction work, a decrease in public sector spending on building
projects and weak consumer confidence as factors weighing heavily
on activity.

RBA sees cash deficit at A$ 965 million.

Let may say something before I go off for tonight Correlation and dynamic hedging work given the observed variables are highly inverse/direct related. However, lets not assume that S&P up dollar down and AUD up this is beyond fallacious to say because you need hard numbers to prove this. Nassim Taleb who is a brilliant economist former trader explains that black swan events occur and they create these model they think are in perfect observations and can be quantified but the impossible happens and the completely unobservable occurs causing boom/bust cycles. Yes if you pull a 20yr chart you can make an argument of the ES is direct with AUD/USD and dollar is opposite in certain times but what about

1997-2001 when AUD/USD went from about 0.82-0.47 while S&P was around 750 and traded to 1400 (noted this was the tech boom) I can give you several more examples where BLACK SWAN events occur and AUD/USD and ES DO NOT TRADE DIRECT.




the next time you hear someone say this crap tell them to create a option market with you where you bet 100K or less on correlation and if one market like AUD/USD and ES will trade direct or not at a given time till expiration. He wont' do it because he knows that this is not the case and that Dollar/AUD.USD/ES/GOLD ARE NOT THAT EASY TO SAY IF X DOES THIS Y WILL DO THAT!


I hope to show Saturday more in detail what I mean from the above but looking at the other AUD forum its a joke how ppl think that markets are that easy to observe if X market does this Y market will follow. At times it does not and when that happens is when accounts get blown or the government steps in ...Just ask LTCM

Woolies spins off property portfolio
Vale to suspend 3 Brazilian iron ore pellet plants as world steel deman slows- S. African strikes spread to iron ore
SA unions, Chamber and Gold miners’ strike a deal
Arrium ups forecast of Iron ore output for fiscal 2013-last ditch effort before the takeover?
Mining Magnet says Mining is still strong

JP,
You are an abundance of info. I closed my 2lots at 1.0226. I am looking to re-enter higher. Keep up the good work. Its appreciated.

VERY nice trade now the profit taking and false bull move occurs could carry over till next week.

Momentum, China, etc.

i am coming out : I am long term aud bull

However, I learned here about channels. Thanks for that JL.

I use no indicators. I will have a look at fibo as well.

Technically I only use round numbers for trading occasionally. Easy to trace & spot.

Anything else that is of importance, technically speaking ?

Hi JP,

I am new to Forex hence gonna ask u stupid question. Hope u dont mind.
Is AUDUSD going back to 0.9 area? On daily i can see we are moving towards that direction. Does gold price affect the aussie currency? What kind of thing do i need to look out for when i trade this pair?

Regards

Snooze I will answer these questions on Saturday afternoon when i post a chart and fundi that really explains what I think several econimist are not putting into their models. As for the Gold/$a correlation that does not exist at least this last half of the year correlation coefficient has been swayed towards Inverse. I will post a chart below for a little example of what I mean.

1st if dollar continues to weaken this does not necessarily give AUD/USD a strong reading for a buy. Why? because this week alone AUD/USD has been focused on the fundamental picture and expectations are now being lowered and the focus will still be on this in December yet again

2nd. A strong Gold market does not imply a strong AUD/USD at least not for the last several month as the below shows. Could this change sure but right now CorCoef is inverse


3. THE more strong EUR/USD the more AUD/USD will not be the bell of the ball. why? Money is coming back into Europe and flows both speculative and real will come out of places where they have been parked for some time like Australia deposits, repos, Commercial Paper, Bonds, BA's, ect. so EUR/AUD and AUD/USD sometimes have a great reading when corCeof is in play and right now EUR/USD vs AUD/USD aud/usd will not be following eur/usd in lockstep at least for now.

PnL as the week comes to a close. Added only once post RBA announcement on spot side closed out AAPL wkly call as it was whacked yesterday and today but this as I stated when i put it on was a hedge in case profit taking in AUD/USD would be strong Thursday/Friday.

Other than that not much going on waiting for either a break at this level or a retrace restest next week.

Hi JP,

Ok now i understand more. Interesting! I thought a weaker USD maybe a good buy, guess i am wrong about it. How are we gonna look out for such data? What does corCeof means? I tried to google it, some Fitness club came up. LOL! U have been really helpful. Will stay tune to your analysis. Hope to learn a thing or two from you. Thanks!

sorry i use alot of acronyms CorCeof is correlation coefficient here is a brief reading on it
http://www.forecasts.org/cc.htm


As for what to look for I recommenced reading the Alchemy of Finance over the next week or so written by the man himself George Soros. He explain much better than I could the Divergence between expectations and reality and then delves into what causes this, how to spot it, and he talks alot about Credit/Banking which is where I am focused on in Australia..

I would recommend you start looking a financial newssites from Australia/China and start following Stocks on the ASx because as I have stated many times the corporate side is much better at telling the ppl what is happening or what the expect much better than Governments/Treasury's every could

Hi JP,

Wow, I am impress with you financial knowledge. Ok i will read on the book you have mention. Ok i will google on the financial news website for CHN n AUS. Is there any to recommend? There is soooo much to it in forex. a lot more to go! Thanks JP!

JP whats your view on this week?
Retracement? and how high will it go?

Trexy,

this is a big support if we hold here thant 1.0220 will be tested to the upside. Then if we break that 1.0345 is where I will start selling more all the way up to 1.04

My target still stands at 1.0050 for exit by then we should show a new wave upwards not exceeding 1.04.

RSI on Daily is about to cross below 20 which is an extreme reading be on the look out for cover in the next two days otherwise were hitting 1.0050 quick.

Open PnL for the weeks start: I will look to hedge if we do not break this level by Tuesday lower.

snooze,

let me find the spreadsheet I used to use for free/small fee news on Australia im sure its in one of the boxes of memory sticks I have

Thanks JP!
By the way JP, When u say Aus and China are related, can i say that China Rely a lot of services from Australia? So The China stock goes down so does Australia? Trying to understand their relationship.This is getting more n more interesting!