Aussie takes a hit on Capex, U.S on holiday

After being solidly bid for most of the week, the Australian dollar hit a wall after today Capital Expenditure data which showed new private capital expenditure fell a seasonally adjusted 9.2 in third quarter against expectations of around 2.9%. Further, spending on equipment, plant, and machinery fell 8.2 percent. The larger than expected drop in capex suggests the next phase of the mining divestment is underway – clearly not a great thing for the local unit. Market participants appears to be picking their spots, with the Aussie seemingly unfazed in recent days by weakness in Iron ore. Still, it’s worth noting the importance of Capex data which is generally considered to be a sneak peek into future growth – with GDP forecasts likely to be revised lower as a result.

It was quite the contrary on Monday evening after Reserve Bank Governor, Glenn Stevens’s poured cold water on the chance of a near-term rate cut, saying “we’ve got Christmas. We should just chill out, come back and see what the data says.” In a clear sign that that we won’t see another rate cut this year, Stevens further said he agreed with the argument that rates should remain at 2% when the bank meets in December. At the time of writing the Australian dollar is buying 72.3 US cents.

The Euro has regained some composure after dropping considerably during the early London hours (100 pips) after talk of the ECB discussing two-tiered bank charges. From a technical perspective, the EURUSD daily chart appears to be respecting dynamic resistance on the 11 day EMA (exponential moving average) and following the longer-term downtrend. At this stage, we may be looking at a further grind lower to 1.05 or even 1.0450 seen earlier in the year. The Euro has stabilised around short term support of 1.0615.

EURUSD clinging to 11 day EMA

Meanwhile, the price of Silver appears be stabilising at the $14.00 level after 14 consecutive days in decline. It is difficult to argue whether the precious metal has found a new bottom or what we are witnessing here is a knee jerk reaction to recent geopolitical events in both Paris and Turkey. The recent declines are largely attributed to a strengthening Dollar and rate hike speculation from the Fed so perhaps we could be seeing a bottom in precious metals with many of the unfolding events already priced into the market.

(XAGUSD) Silver stabilises after 14 day consecutive losses

From here we anticipate lower volumes in light of the Thanksgiving holiday in the U.S. Despite this, there is a number of key data points on the agenda tonight, which may make for some illiquid and choppy conditions. Today’s data releases in the U.S include personal income and spending, consumption expenditure and durable goods orders, new home sales and University of Michigan consumer confidence.

Changes to market hours due to Thanksgiving holiday in the U.S