Economic Insights
Australia’s trade balance deficit widens to AUD2.64 billion
The Bureau of Statistics released the Australian trade balance this morning, and the announcement was not exciting at all. The trade deficit widened to AUD2.64 billion, the widest deficit in four years.
Source: Bloomberg, FXPRIMUS
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The disappointing export figure reflected the high local currency since it benefits importers instead of exporters, even with iron ore exports rebounding on Chinese government infrastructure investment.
Today’s report offered another opportunity for the Reserve Bank of Australia (RBA) to lower its cash rate to 2.75% in the next month, in the “low commodity prices environment,” to stimulate growth and curb the higher Aussie. However, I previously mentioned that the Aussie dollar value could more likely track the Chinese economy and global risk appetite instead of the RBA cash rate trend.
The good news from today’s report was that two of the three largest sectors still showed sales growth in the MoM basis: iron ore and natural gas.
Currency Insights
USDJPY – Buy the dips
The USD slightly weakened overnight against most of the major counterparties, while equities in the U.S. and Europe closed lower. In general, the market was very quiet and the watered-down Basel III liquidity rules had a very limited market impact.
I still prefer the USDJPY at this moment, especially when it dips, with great support from the Bank of Japan (BoJ). In the technical view, I see the coming support at 87.25. The 1st resistance is at 87.90 and 2nd resistance is at 88.40.
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Previous Daily Market Report: Daily Market Report for 14 December 2012: Risk Currencies Hold Well On Upbeat Chinese Data
