A decision overnight by President Trump to delay the imposition of new tariffs on a wide variety of consumer products including laptops, smartphones and children’s toys until Mid-December has boosted risky markets after a shaky start to the week.
Whether the tariff delay signals that the odds of a trade deal have improved after senior officials held their first phone conversation since the war escalated in early August it is hard to say. Potentially the tariff rethink comes after White House officials convinced Trump the new round of tariffs hurts the U.S. more than it does China.
The temporary thawing in relations has attracted buyers back into the commodity markets. Crude oil futures rallied almost +4% to end the day back above U.S. $56.00 while copper futures closed almost +2% higher.
After a -30% fall over the last six weeks, much needed support has returned to the price of iron ore. The SGX active iron ore futures contract closed at $89.25, up +2.8%, and Dalian futures closed +2.15%. Further support will come from a Goldman note that said with the iron ore market “in a deficit, prices have to rise”.
This brings me to the subject of today’s note, the AUDNZD cross which has staged an impressive rally since the RBNZ cut rates last week.
As can be viewed on the chart below, AUDNZD, has broken and closed above the trend channel it spent the past four months trading within. In Elliott Wave terms, the decline from the 1.0732 high to last week’s 1.0264 low is viewed as a corrective pullback (wave b of an irregular “abc”). This suggests the current rally can extend towards the April, 1.0732 high.
I favour building a small long position at the current price of 1.0520 with a sell stop placed at 1.0425. Assuming the trade is still live after tomorrows Australian labour force data and AUDNZD has maintained its break above the trend channel, I will look to add to the position and raise the stop loss up to 1.0445. The target for the trade is 1.0720/30.
Source Tradingview. The figures stated are as of the 14th of August 2019. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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AUGUST 14, 2019 12:49 AM