The latest economic numbers in Australia point to a stunted economy but there are also signs this could be the bottom. In FX trading on the US Thanksgiving holiday, the dollar didn't get any love as it was the laggard on the day as the yen led the way. Japan's Oct CPI rose 0.3% y/y, beating expectations of 0.2% and previous 0.0%.

Click To EnlargeIs the Worse of the Aussie Behind ? - Aud Net Longs Nov 26 (Chart 1)

Yesterday's Australian capex numbers were the worst in 30 years of records. Private capital expenditures fell a whopping 9.2% compared to the -2.9% consensus. The immediate reaction was a 40-pip decline in AUD/USD but it's stabilized since.

That's two poor readings for Q3 ahead of the RBA decision on Tuesday and GDP on Wednesday. What's impressive is that  the market hasn't shuddered despite such scary numbers. If the Aussie can make it past the RBA and GDP without another push lower, it's a good sign that the worst is behind for the Aussie.

China and commodity prices will continue to be factors to watch but barring surprisingly weak news, the soft hands have probably already exited Australia. Once Q3 is in the rearview mirror, the RBA may look towards the middle of next year and an improvement in the non-mining sector of the economy.

Note that that in Sept/Oct/Nov there has been a series of higher lows in AUD/USD. The employment report was probably a mirage but AUD has been hit by some terrible news including 6-year lows in copper prices and the never ending decline in iron ore. We often ask: If something can't fall on bad news, why should it fall at all?

 

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