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Will Tonight's AUD Slide Be The Start Of Another Major Market Selloff?
As has been long pointed out on Zero Hedge, the AUD carry pair (either with the JPY, USD or EUR) has been the primary driver of market funding over the past 3 months (we have also pointed out for about 15 weeks that fund outflows are the loud alarum bells for an upcoming stock crash, a topic finally picked up by the NYT). In which case, courtesy of the Australian hung parliament, the market may be in for some tumultuous moves when the forex market opens at 3 PM EST, and looks certain to cut the weekend of the Liberty 33 trading desk early as they plan preparations for what could be a broader based sell off driven by carry evaporation. Reuters explains why the AUD is expected to drop a cent or more when trading resumes: "Australia's two major parties wooed independent lawmakers on Sunday after an inconclusive election left the nation facing its first hung parliament since 1940 and set financial markets up for a sharp sell-off. The Australian dollar and shares are likely to slide when trading resumes on Monday, analysts said, with the vote count threatening to drag on for days and both the ruling Labour party and opposition seemingly unable to win a majority." In other words, with the market correlating nearly 100% with the AUD, all those who went long this market despite the second Hindenburg Omen confirmation in a week, may be in for a rude awakening.
More from Reuters:
"The uncertainty is going to be a real killer to the financial markets," said economist Craig James of Commsec, suggesting the local currency could fall a cent or more.
With 78 percent of votes counted, a hung parliament looked likely, with two possible scenarios for minority government: a conservative administration backed by rural independents or a Labour government backed by one or two Green or green-minded MPs.
In either case, former conservative treasurer Peter Costello said, Australia faces a shaky administration which could fall within 12 months.
"It's quite possible with an unstable situation like this that we could be back to the polls within a year," he said.
Investors would prefer a minority conservative administration over a Labour-Green arrangement, UBS chief strategist David Cassidy said, noting that conservative leader Tony Abbott had pledged to scrap Labor's proposed 30 percent mining tax.
The tax on major iron ore and coal-mining operations has weighed on mining stocks such as BHP Billiton and Rio Tinto and the Australian dollar.
"Clearly the market won't like the uncertainty," UBS's Cassidy said, predicting moderate selling. But he said markets would be most concerned about a Labour-Green government, given the Greens also would be strong in the upper house Senate.
"Markets would be uncomfortable with a Labor government with Green assistance," he added.
Courtesy of Mark's Market Analysis
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Most likely
So the global economy and markets hinge on whether Ms. Gillard makes it or not ?
well would not be surprised now that August options expirations are done. Get ready for next half leg down ?
/
Don't worry, CBs are fully aware of all these correlations and will promptly be buying trillions of AUD to keep it and the stock markets from falling. Do you really think they want to have an economic and political collapse so they can be hanged sooner rather than later. Uncle Rothchild will not let that happen. Will he?
Some poor lamb will certainly get sheared - this one appears to like it. check it out :-)
http://www.youtube.com/watch?v=9oWe0Y7YT34&feature=youtube_gdata_player
Edit: hey, traders - best of luck/skill out there. and come home safe.
LOL
I thought I saw everything until I saw this.
Shepherd shearing the sheep: "OK, I'm done. You're not right in the head."
Sheep: "You jerk, I thought we were friends? (softer and weeping) I thought we were friends?"
Im getting my shorts on right away...paying huge spreads to get in early, but i fancy a "bit" of a gap tonight.
No labour party means no mining tax.
Markets love "gridlock", so it is possible for stocks to rally on this news.
Place your bets:
Gold also likes currency fluctuations these days.
(With voice of Pete Boyle as Frankenstein's monster.)
No tax, good.
Gridlock, good.
(Then your hair spontaneously ignites, blind man laughing his ass off. Crowd chanting invectives, marching upon cabin crowded with PTB)
good lookin H&S pattern there
More and more I'm noticing articles in the MSM that finally catch up to stories broken weeks earlier on ZH ; example : fund outflows in today's NYT.
Kudos to ZH......makes ya' proud.
Ah hah!
And to identify the pattern recognition further, seems that tons of "stuff" that were yesterday's/yesteryear's conspiracy theories, tin foil hatters, whatevers, gradually seep into normalcy in some form, just as recognition of "news" items, comments, insights, Op-Eds are manipulation prior to actual events.
So much fun to watch the circus. Amazing how the PTB think they're manipulating when many see the manipulation for what it is as it's happening.
I finished up listening to this week's show on FSN. It was non-financial topics --- all conspiracy stuff --- the CFR, the FED, the Media. Lot's of interesting tidbits.
================
http://www.financialsense.com/financial-sense-newshour/big-picture
Financial Sense Newshour Big Picture Archive
21 Aug 2010History and Mechanics of an Agenda
Dennis L Cuddy PhD
Jerome R Corsi PhD
The History of the Council on Foreign Relations, the Globalist's Agenda, a Global Currency, the Bilderbergers, and the Trilateral Commission
The Dark Side of the Federal Reserve
G Edward Griffin
Bill Still
Founding of the Federal Reserve; How the Nation's Money System Really Operates
The CFR and Media Elites
Cliff Kincaid
John F McManus
Media Bias; Globalist Agenda and What They Want to do to Achieve That Agenda
Rainman,
(or Mr.Smith)
You think that's an accident?.( of course the Talking Hd's know dick squat,but their superiors get their marching orders from elsewhere).
Hell no..........it's held back, it's called CONTROL THE NEWS.
And, you control the Mkts.
Calling all Black Swans, stat!! Can't wait for this farce to end so we can get to the real biz at hand: JUSTICE. I hope a new type of guillotine can be invented and mass produced so we can get rid of the fascist scum.
Your hopes have been answered:
http://www.youtube.com/watch?v=mQmEXYCJtoA
i guess never knew what i had here in that ugly old unused planter/vase thing in the living room. all i need to do is turn it upside down and throw it like a frisbee and world dominance is mine... all mine. bwahahahaha
http://www.youtube.com/watch?v=HM-E2H1ChJM&feature=related
911 Inside job
Now that the HO is being discussed everywhere, now that the crash is being predicted in the mainstreamist of the MSM, now that the folks who are always wrong are pulling their money out of funds, we have the underpinnings of a big rally.
the SUMMER RALLY is over ...this person predicts with a lot of coniction ...and a lot of analysis:
http://www.youtube.com/user/StockMarketFunding#p/u/0/k_yD9Uifyt8
link doesn't work
try this instead
http://perfectstockalert.undergodincorporated.com/index.php/nightly-market-analysis-videos
The tendency for the markets not to make it lower is a big warning sign, and as RobotTrader points out, the woman might be out of the building and we have rally on. The aussie was too strong friday to just get whacked down.
The fence sitters were unwinding shorts on friday, but they will be back.
It starts Tuesday, and excellerates all week. Obamo leaves MV for Washington to deal with the crisis....Go Barry Goooooo
Ahhh... ya gotta love the spelling-challenged right. Ya know, oklaboy, outside of Okla "excellerates" is spelled "accelerates". Maybe you could send that little gem to Sarah...she could probably use it to discuss the excelleration of refudiation. Ain't that home schoolen wonnerful?
Better to be spelling-challenged than reality-challenged.
Obama is nothing but Mr. Conventional Wisdom. There's a million just like him littering our media, universities, and government and business bureaucracies... his viewpoint is a-dime-a-dozen. The give-away is the MSM flattery... if the lightweights of the MSM think someone is brilliant well, that someone has nothing new to offer. "Brilliant" means he agrees with the dogmas and biases of the media class.
His "solutions" are trite because his mind is trite. We've been following the guidance of these types for 4 - 5 decades now, and they've led us into this economic box canyon we're enjoying today.
The time of the conventional wisdom post-WWII elites is over, the time for new blood is now. If some of them can't spell worth a lick, well that's just too bad.
Could you at least remove the "new" out of blood?
Shhh..! I was being subtle and speaking in code!
okla,
Well do ya blame him?,the MV water is full of fecal matter.
Must have been a LOT of high class folks there, the prior weekend.
The entire US Senate!..........at MV, put down their own version of a slick, a ShiteSlick.:>)
I'm extremely long USD against the AUD (and short SPY), so this would be great, but somehow I'm not expecting a 1 cent gap when trading resumes.
I'm in a similar spot. If price preceeds fundamentals on this one, the aussie will be up (unfortunately).
The most violent of knee jerk reactions come not from the retail investor but from those who we're told are experienced and have a steady hand, the professional trader.
When they think they're about to be shorn, they're out the door faster than the clippers can be fired up. All the great market panics have been institutionally driven. HFT will only magnify this.
Sorry, gotta do it --- WOOL BITCHEZ!
In lieu of that, get a little gold.
Oh, but fond remembrances of Portfolio Insurance. (Hedge across markets...problem liquidity.)
Fond rememberances of LTCM. (Coefficient correlations expected to be -ve, turn +ve in panicked environments...problem liquidity.)
T'were peddled as infallible. As have been all financial panaceas, as if there is a free lunch.
Or, could this increased volatility of the AUD be just the thing to break the correlation entirely between AUD/JPY and ES going forward? If not, it could be a near term setup for a very profitable convergence trade for those with the stomach for it...
My guess is that there are enough longer term longs in global portfolios to sell both the AUD and stocks here. Repatriation back to home currencies in times of uncertainty.
We'll know soon enough. Initially I thought about the hung status, but it also means the mining tax is gonna be threatened.
with everybody short on Hindenburg omen or whatever its called, china making positive statements on move towards 'democracy', wuhan and cpcc reporting kick ass earnings=Shanghai up, and aussies most likely abolishing the mining tax now, no israeli strike on iran... guess what - mkt up big on moday, with commodity related stocks leading the way.
what uncertainty btw? this is great news... in the worst case scenario you get what was expected, in the very likely scenario now you get the mining tax reversed and BHP and RTP can go around the world scooping up cheap value contributing to upcoming M&A boom.
I expect JOYG and BUCY to be up big on this news.
Agree with Young........I think RobotTrader has a salient angle to make - no pun intended, either.
Also 2x POMO Tues and Thurs, Germany's Weber implying unequivocal support for European banks at least until Q1 2011, the British in for shark size chunks of US Treasuries???, the lurking possibility of intervention by BOJ, and no mining tax.......all props for a rally or at the least a floor under selling and paper over the fundamental negatives.
May be wrong, but that is trading and price discovery.
Good points, but I suspect that bonds will get the proverbial sh*t kicked out of them if the scenario you describe plays out! But the bond thesis is tougher since media and Taleb would be proven right pretty much on the spot if bonds fell - and that would be a surprise..
Agree except for the anomly/deviation in pricing between bonds and equities........does not seem to matter if equities rise or fall........bond prices keep rising........but that is probably related to all of the artifical pricing from the distortions of excessive intervention by the CBs.
Question everyone: What's the status on the mining tax, wasn't Gillard open do discussions of killing it?
Thats what I had thought, at least that she was willing to drastically cut it back in scope in the hope of being electable
Mining tax on hold, due to the ouster of the ruling prime minister and party.
the initial move might well be lower, BUT .... 3 of the 5 independents that the major parties are wooing are ex-coalition (opposition) members who represent rural australia (ie very conservative).
It would be extremely odd if these 3 were not to back the coalition (unless they are happy to lose their seats inthe next election). So that would point to the mining tax being dead, which would be a positive for the ccy.
In short, i don't think shorting aud here is necessarily a lay up, but if you are nimble you might be able to catch some offside.
Don't forget that the Aussies learned how to (mis)count the vote from some of the greatest con artists of all time, most recently by the USA political parties, both of which engage in voter fraud. So there's still hope that as the actual count drags out, some back room dealing will "influence" the outcome.
I always have faith that fraud will rise to the top. Always.
the count is almost complete, and once the 5 or 6 seats that are still to be decided are determined it will merely be a game of brinkmanship and negotiation.
Re the ccy ... i will add though that technically it stinks.
Still think we get a vapor-bounce before the real over-the-waterfall moment comes. I'll be watching those options...
.
well, tomorrow is monday , so yeah you are prob right. Spoos seem to only rally on mondays. And no one nuked iran did they....
spx heading towards 800s in the shorter term.
let history be your guide. it's a depression fueled by a major bank crisis and overleveraging, which has several more years to play out.
I'm ready. You ready? Bring in on.
Can someone hear a hissing sound...?
A very transient trade methinks. If you weren't prepared for this on Friday then you weren't following the Aussie news. If you weren't watching the Aussie news last week, you shouldn't be trading the AUD today. In the current global market of any kind, if you are late to the speculators ball, you are going home in a hearse!!
As to the AUD/JPY SPY trade, remember that correlation is not causation. Though the media will spin it as an excuse for a move in either direction tomorrow, Oz is simply too marginal an economic player on the world stage to trigger any sort of significant move.
okaaaaaay
Except psychological... and that's when the fight started...
BINGO ....HIT ME!!!
What will that do to equites tonight??? I hope it gets the ball rolling atleast.
Reflections on Australia's Housing Bubble
http://israelfinancialexpert.blogspot.com/2010/08/guest-post-reflections-on-australias.html
Looks like AUDJPY @ 76.50's and EURUSD @ 1.2700's
This is going to be interesting.
I see the AUD opened down
http://au.biz.yahoo.com/100822/19/2f4a0.html
You say that the AUDJPY is 76.5, but the Australian Dollar / Japanese Yen Sep '10 closed Friday at 76.26.
Are your quotes current?
Thx
Blasted internet!
Yeah, I got the wrong handle my friend. AUDJPY @ 75.84 as of this writing, EURUSD @ 1.2703
My apologies.
We'll get real data when Asia starts trading.
Cheers
Theres a crock right now!
one penny?
Not quite.
Yet Another Chicken Little Event
Guys like you cannot understand these "little moves" have big consequences.
http://www.theodora.com/wfbcurrent/australia/australia_economy.html
The GDP of Australia is about $819 billion. Now knock a penny off that entire amount, and it is like losing 1% of the entire GDP in one day, something like $8.19 billion dollars. Take that to the "GDP per Capita" and you have $38,500, of which one percent is $385 that everyone in Australia loses overnight.
THAT is the problem with currency oscillations and the FX market with the futures manipulation and the fiat currency rates not based on anything.
See the "big picture" yet?
+1 and a shrimp on the barbie on me.
Yep. I see the big picture.
Opened down one penny. or about 0.9%. A few hours later, it's trading at -0.52% and trending up hard.
The cold hard fact is that Aussie consumer prices are not going to change one iota tomorrow based on the currency exchange rate delta, except perhaps for petroleum distillates.
By the time the Aussie market closes, the exchange rate may have appreciated to flat.
And if not, may well rebound by the time the recount is finished.
For that matter, on June 7, aud/usd was 0.8102. The appreciation since then is equivalent to a 10% GDP bump. Or a 10% dividend to each and every Aussie.
Throw another shrimp on the barbie, indeed!
It's a chicken little event.
Take a wide angle perspective on this rifle shot event.
what a load of shite.
99% of people don't even notice the fluctuations, and if they do, they certainly don't fear them, and only a truly massive move would change some people's behaviour.
price fluctuations provide extremely valuable information .
i suppose you would prefer nothing ever change? You know, stagnancy?
most of us are perfectly capable dealing with change, you should stop projecting your fears and inadequacies onto others.
Buy'em!!!!
Mining Tax is dead... for now.
Didn't the UK have a hung parliment a few months ago?
Hasn't there been disputed elections in the US in recent years?
Doesn't anyone see a trend? Interesting that the last time such things happened was in the 1930's.
Overlay this on a gartantuan bubble in the government bond market, potentially explosive?
uh Yeah..
Mexico a few years back with vincente fox,
Notice after the US/Bush backed Fox was "installed", a huge surge in crime has ensued.
Iraq right now.
The US backed candidate in Iraq used to run the Iraqi prisons..
The recent mining and commodity export boom has brought Australia tremendous wealth over the past decade. Although the industry was concentrated in WA and Queensland, inflation sprawled throughout the nation as evident in the housing bubble and increasing food and energy costs.
The Rudd government saw this early and tried to stifle the expansion to cushion an inevitable implosion that would ravage the entire economy by imposing a high tax on mined exports since the excesses were a direct result of this industry. Of course he was soon ousted in a coup and all plans to provide the economy a safety net were postponed if not killed.
With global demand dropping off a cliff, China can no longer stockpile commodities as a show of economic strength and GDP validity. Australia will bare the brunt of China's defection three fold, namely;
- a collapse in iron ore exports
- en masse dumping of Chinese owned speculative RE investments
- small business investments used to secure immigration status.
This will certainly be Australia's endless summer of destruction. Targets AUD/USD: $0.72-$0.75 although $0.82 has major support. ASX AORD: 3800-4000This will certainly be Australia's endless summer of destruction.
exactly. And the in-party coup followed massive public media attack funded by the deep pockets of the Mining Corporates combined with the Liberal Party. Fascism, overt, in public, on TV.
No surprise we a have a hung parliament. And agree with ozzilindaus 1, 2 and 3.
The futures markets are oblivious, though some major municipalities will be looking to refinance very soon:
http://quotes.ino.com/analysis/extremes/futures
Not a lot of movement out there. AUDJPY 76.11, EURUSD 1.2700...
Guess we'll see when the U.S. session hits.
And....
AUD/USD is now higher than Friday's close.
As I wrote...a chicken little event.
See the Big Picture now, mate?
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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