Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent. Greg Weldon is a well respected voice in the financial community and we hope to hear more from him in the future. Enjoy!
As for the what is going on while most of the 'Ville sleeps ...
On the back of yesterday's data-release showing a significant slowdown in 1Q GDP ...
We note the continued push higher in Australian fixed-income prices, as yields decline to new med-term move lows amid fresh 'official' data revealing disinflating (Sydney and most of the regions) to overtly deflating prices (Melbourne) Home Prices.
The fact that this leading-edge Anglo-housing bubble has finally begun to blow cold could be an important macro-message, as pertains to the 'reflation-theme'.
Also Negative for the 'reflation theme', is the DUMP in the Aussie Dollar versus the Japanese Yen, as the cross violated the uptrend line in place since the bull market began in 3Q-01 (basis the weekly chart) --- and --- is threatening the 2-year exponential moving average (104-week) which rests about 80 pips below the current level in the AUD-JPY. And observe a possible KEY REVERSAL DAY developing in the Aussie Share Price Index.
Hoofy may well end up 'hoofing it' into the outback, in search of his reflation profits if the Aussie Share Price Index (SPI, pronounced 'spy') decides that a push back towards LESS hawkishness from the RBA ... is not enough to counter potential rate hikes in the US and/or China.
On the other hand, thoughts of a 'refreshed' liquidity surge might send this commodity exporting and banking weighted stock market, over the top. The decline in the AUD-JPY and Aussie government bond yields, points to the former.
Wednesday's low in the SPI at 3445 (June futures) is CRITICAL in terms of downside risk, while today's high of 3488 is PIVOTAL as a potential upside swing point.
Minyan Greg Weldon
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