Australia data: October Construction PMI: 45.9 (prior 51.4)

Australian Industry Group Performance of Construction Index for October

• prior was 51.4

Australia data -ANZ consumer confidence 117.8 (prior 114.1)

This is weekly data, not generally an immediate market mover

• Up 3.2% for the week
• Wiping out the drop over the prior 2 weeks
• Strong rise in the economic outlook subindexes
• Views for economic conditions over the next 12 months up 7.8%
• Views towards economic conditions over the next 5 years up 5.2%
• Consumers' views towards their finances compared to a year ago up 3.0%
• Views on current finances 1.7% higher

Westpac monthly consumer confidence: -1.1% m/m (prior +1.1%)

Westpac Consumer Confidence for November

Australia Consumer Inflation Expectations Dip to 3.2% in November

A private measure of Australian inflation expectations eased in November for the third time in four months, vindicating the central bank’s aggressive attempt to re-inflate the economy.

The Melbourne Institute’s 12-month gauge of inflation expectations weakened to 3.2% in November, from 3.7% the previous month.

In November, the proportion of respondents expecting inflation to fall within 0-5% rose by 4.5 percentage points to 73.1%. This was driven in party by a drop in the proportion of respondents expecting consumer prices to increase by 6-10+% respectively.

Australia’s official consumer price index (CPI) rose 0.7% in the third quarter, pushing the annual inflation rate up to 1.3%, the Reserve Bank of Australia (RBA) reported last month. Both readings were stronger than expected and showed steady growth compared to Q2, when annual inflation grew at the slowest pace since 1999.

The RBA’s trimmed mean CPI rose 0.4% quarter-on-quarter.

Also last month, the Melbourne Institute monthly inflation report showed a third consecutive advance in consumer prices, raising cautious optimism that inflationary pressures were building. This private measure of inflation rose 1.5% in the 12 months through October, compared to 1.3% the previous month.

AUD/USD Breaks Below 11-Month Rising Trendline

AUD/USD broke below a rising trendline that dates back to January this year to set a bearish tone over the medium-term. The pair initially broke lower on Thursday but managed to close the day out above the trendline. A break occurred today around the European open, with follow through in the North American session.

US banks are closed today in observance of Veterans Day, attributing to a low liquidity environment. The market reaction on Monday, when American traders return, will be important to the validity of today’s technical break in the currency pair.

Commodity currencies are seen broadly trading lower today with the New Zealand Dollar posting the largest losses among the majors, followed by the Aussie Dollar. The US Dollar index (DXY) remains relatively unchanged on the day. The index has traded in a narrow range below resistance from prior highs posted in late October, for most of the day.

Precious metals are seen moving sharply lower today. Gold prices have dropped for a second consecutive day to trade below levels seen ahead of the EU referendum. Silver prices had shown resiliency as a range was formed following the US election despite a drop in Gold prices and a general increase in risk appetite. A turn lower in North American trading shows Silver prices outpacing losses versus Gold prices with a decline of 3.70% shortly after the US equity open.

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AUD/USD forecast for the week of November 14, 201

The AUD/USD pair tried to rally at the 0.7750 level during the week, but found enough resistance to turn things around and slammed into the uptrend line. If we can break down below the 0.75 level, the market should then continue to reach towards the 0.71 handle. At this point, I don’t really have any interest in going long until we break above the 0.7750 level on a daily close. Ultimately, I think that this is going to be a volatile market any of course you have to pay attention to gold as it has such a heavy influence on this currency pair.

AUD/USD Weekly Forecast November 14-18

AUD/USD moved sharply lower following a failed test of key resistance in last week’s trading. The pair tested the highs established in August but failed to follow through to the upside and dropped nearly 3% in the subsequent decline.

The pair has been driven lower by a decline in commodity prices, as gold has been under heavy selling pressure, dropping more than 3% on Friday and taking out important support at the $1,246.9/$1,243.2 zone. Gold’s decline below this support leaves the precious metal vulnerable to further losses over the short term, a factor which could work to keep AUD/USD under pressure in next week’s trading.

AUD/USD broke below the late October corrective bottom in Friday’s trading, leaving the next support to watch at the mid-October low at 0.75067. More significant support stands at the lows established in late July and mid-September near the 0.74423/0.74214 zone. Failing to stabilize and exhibit signs of establishing a bottom at this zone would leave the pair vulnerable to a eventual move to 0.7300.

Short term, the pair is oversold. Thus, at attempt to rebound could start off next week’s trading. Failing to move back above the late October corrective bottom would imply a weak market condition and suggest further losses are likely.

A sustained move above this former support would leave the short term target at the 38.2% retracement of the recent sell-off, near the 0.76812 level. However, given the weakness expected in gold and the sharp downside reversal which took place in copper on Friday, as well as the strength in the dollar, any near term bounce in AUD/USD is expected to be short-lived.

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Australia - ANZ weekly consumer confidence: 118.2 (prior was 117.8)

ANZ-Roy Morgan Australian Consumer Confidence

• The previous week it had a +3.2% bounce to 117.8

• Details were mixed
• Households' views on economic conditions over the next 12 months +1.2%
• Views towards economic conditions over the next 5 years +3.5%
• Views towards finances compared to a year a

Australia - Q3 Wage Price Index: +0.4% q/q (expected +0.5%)

Australian Wage Price Index for the July - September quarter

• expected +0.5% 
• prior +0.5%

• expected +2.0%
• prior 2.1%

• For the y/y, private sector wages +1.9 per cent, public sector +2.3 per cent

Westpac on the Australian jobs report today - "an extended weakening"

• The annual pace of growth is currently well under what our Jobs Index is suggesting it should be (somewhere around 2%yr)
• While some undershoot following an overshoot is to be expected, this is an extended weakening.
• The six month annualised pace of employment growth is now just 0.5%yr, it was 2.3%yr back in March.
• Rapid slowdown in the growth of the labour force is why, given we are moving through a soft spot in employment, that the unemployment rate has been able to fall further
• If the participation rate had held at 64.87, as it was reported to have been last March, then the soft patch in employment would have lifted the unemployment rate to 6.3%. While some decline in participation is to be expected during a soft patch, the current decline to 64.4 looks overstated and thus the low unemployment rate is not a true reflection of the relative tightness in the labour market
• The largest correction  in male participation has occurred in the states where male employment is under the most pressure due to the unwinding of the mining boom
• This looks far more like a fundamental event where older males are becoming disillusioned with the lack of employment and deciding to leave the workforce (most likely to retire) than some statistical anomaly

• Hours worked rose 0.9% in October and the annual rate lifted to 0.9%yr from 0.2%yr in September
• In the past a weakening in hours worked was sometimes a harbinger for softer employment and so far this has held true
• We do note that hours worked per full-time employee has turned around, from -1.0%yr in June to 0.2%yr in October
• However, hours worked are very volatile so we need to see if this trend continues before we can have any confidence that we have seen a turning point for the labour market. Part-time hours worked are flat in the year.