Intraday Market Thoughts

Abbott Wins Australia, EUR Bulls Flee

by Adam Button
Sep 8, 2013 23:34

Australia elected a new government to be led by Tony Abbott. USD/JPY gapped higher at the weekly open. The latest CFTC positioning numbers showed traders backpedaling out of euro longs.  In the latest Premium Insights, EURUSD and gold remain in progress.

The Australian election went about as forecast as the Liberal-National Coalition defeated Kevin Rudd's Labor Party. The new government promised to reboot the mining boom as it scraps the carbon and mining taxes. AUD/USD is tepidly stronger in early trading, up a quarter cent to 92.11.

The margin of victory was slightly smaller than expected and although the new government has a majority in the lower house, it faces a difficult battle with independents holding the balance of power in the Senate.

One cautionary number for the Australian bulls was Chinese August imports. They rose only 7.0% compared 11.4% expected. Export numbers were strong at 7.2% vs 5.5% but imports are a better leading indicator.

Finally, Tokyo won the 2020 Olympic bid. The related spending will mean some minor growth on infrastructure but the more powerful effect may be a boost to the Japanese psyche, giving the people a fresh reason to believe in Abenomics.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR +22K vs +40K prior JPY -79K vs -78K prior GBP -43K vs -38K prior AUD -71K vs -71K prior CAD -35K vs -25K prior NZD +1K vs flat prior CHF +1K vs +1K prior US Dollar Index longs at 12K vs 12K prior

The numbers reflect the close on Sept 3, which was the first trading day of the month. There had been steady growth in euro longs but just as the market began to like the euro, it rolled over. Traders have been burned many times on euro longs and were quick to head to the exits, something that likely continued since.

There has also been a rapid shift into beds against the Canadian dollar. Many of those positions are now underwater so be on guard against a squeeze lower in USD/CAD.

Act Exp Prev GMT
Imports (AUG) (y/y)
7.0% 11.3% 10.9% Sep 08 2:00

Latest IMTs