It reminds you that to trade leveraged assets such as spot effects is a risky endeavor.

Abuse, Of course, leverage will amplify.

Loss is just as well as gains.

And this, um slimmer also tells you that, of course, everything I say is my opinion and my opinion could be wrong. 00:00:57.440 --> 00:01:7.270 With that in mind, let's have a look here at what the Australian dollar has been doing. 00:01:7.270 --> 00:01:20.100 I don't think it's, ah surprise to anyone that it has been somewhat ah, somewhat aggressively declining here.

Once we took out the bottom of this support shelf which has been with us, and we've been watching it from all the way back to early August of last year, this ah, move extended.

And you can see at this point we are hovering just above levels that we've not seen in, uh, over a decade at this point.

So, uh, substantial extension downward. 00:01:51.800 --> 00:02:4.930 It would seem at first that um there is, in fact, a break lower that that has been had a sze wee see here. 00:02:4.930 --> 00:02:14.390 We landed squarely at 38.2 fib off this fib expansion where this was the dominant move lower.

And this was the correction off the swing low.

Now it is Ah, at this point, looking as though it is a breakout.

Ah, but I'd be careful about reading too much into to this.

Um, because, as we see here, we're setting lower lows, but our size, notably diverging.

So take a look right here.

It's a bit subtle yet, but you'll notice, um, if we were to zoom in to a four hour sharp right here, it is much more over. 00:02:57.670 --> 00:03:0.930 So this is that same down move. 00:03:0.930 --> 00:03:3.570 So here's that range bottom. 00:03:3.630 --> 00:03:7.750 Here is the supporting line that you saw right here. 00:03:9.040 --> 00:03:11.530 Range bottom, supporting line.

And we've just zoomed in a bit to the four hour where you can see very clearly here as we're setting lower lows, our size, notably diverging and something similar preceded a bounce right here.

Something similar proceeded abounds here.

So as we set lower blows rs, I bottomed out and started to diverge. 00:03:48.240 --> 00:04:2.120 So it appears like what price action is implying is that we may get something of a correction here, not maybe necessarily immediate downside. 00:04:2.120 --> 00:04:3.390 Follow through. 00:04:3.970 --> 00:04:14.750 At least that's what the technicals suggest in my mind that there's maybe scope for a further recovery and really the point.

Oh, uh, critical inflection is gonna be right here.

So this is the 66 68 66 86.

Something like this area that's again, this bottom.

And if you look here, it's this.

So, in other words, there maybe scope for a bounce into this level for a retest before whatever down move resumes.

And, of course, if we were to bounce and close above it on the four hour, it would look like a balance and close above here then.

Clearly, something in the underlying dynamic has changed because the dominant Siri's police near term the dominant Siri's of lower highs and lower lows will have been violated.

And so what you're looking at at that point, then, is something of a neutralized, uh, bearish bias that then perhaps set the stage for a larger a larger correction.

But longer, longer term.

Let's take a look at a monthly chart right here.

You can see the overall directional.

Ah, by a still lean strongly in is the bearish direction. 00:05:48.620 --> 00:06:1.630 So here was structural support going all the way back to lows set in, Um, mid 2000 and one will say early to mid 2000 and one. 00:06:1.630 --> 00:06:10.550 So we're talking about a 19 year, um, support line here that was ultimately overcome.

And this new, longer term trajectory appears to have scope, uh, to at least, uh, somewhat continue to find follow wth through into this area down here.

So just above the 60 big year, because, of course, the most recent price action we've seen is ah, break through this support shelf in the 69 to about 70 18 area a retest and consolidation off that well, breakout and shortly thereafter, in January, recoiling from squarely at the outer layer of this support turned resistance down and issuing the lowest close his old way back here near the crisis lows in March of 09 That was, of course, when risk sentiment bottomed after the great financial crisis.

So at this, what the Ozzy has apparently retraced all of its ah post crisis gains and now is looking at the bottom established during the crisis as support.

So that is really where we, uh, appear to be heading over all and in the context off that declined Then there might be a bounce where, presuming we recoil from here or some level above it if there is a breakout, this, uh, of overarching ah, positioning would suggest that gains are Maur.

So we selling opportunity in this context sort of scan the the various time horizons, then they are a, um, an opportunity to go long, at least in my mind.

Now, of course, there will be tactical investors that will try to play both sides.

Uh, nothing wrong with that approach per se.

But it isn't what I do now as far as economic data is concerned. 00:08:44.040 --> 00:09:4.850 And, uh, event risk in general, as far as what can actually helped to catalyze price action through the remainder of the week, we have a, um, variety of things lining up, but generally speaking, it is ah, quieter week. 00:09:5.440 --> 00:09:14.980 Now, of course, the backdrop for everything that's been going on with the Aussie on the downside is increasingly acute.

Concern about the want strain Corona virus.

See that very clearly on display right here.

So you'll notice that blue line here.

That's the Aussie.

And it is declining here, right alongside stocks.

That's the S and P 500 Crude oil.

As the dollar gains, gold rises, bonds rise.

So this is about it's textbook of a risk on risk off response. 00:09:59.840 --> 00:10:8.950 There's one could, um, see, you can very clearly see it right here.

So here is vey Ozzy heading lower stocks heading lower.

Crude oil heading lower.

Anti risk assets rising.

The yen had a bit of a hiccup last week seemingly because we have a, um or we had a bit of a scare, uh, last week, as faras Japanese government plans to restrict foreign ownership off Japanese firms and there seemed to be a bit of a reactionary ah, run from yen based assets.

But, um, the situation has evolved such that, um once the actual details of the program hit the wires, it became clear that this was not anything particularly onerous.

ATT least the marketing to have judged as much, and that mostly mirrors similar efforts that have been undertaken recently in Europe.

Uh, and in the U.

S.

largely in response to a concern about the buying of strategic assets by foreign powers.

In particular, it seems China is getting a lot of attention, uh, with these kinds of rules.

But, um, nothing here seemed to be particularly heavy handed. 00:11:50.500 --> 00:12:0.150 And so, uh, the yen normalized back to its typical anti risk role once that kind of hiccup hit. 00:12:3.040 --> 00:12:12.050 So in other words, it seems like the few weeks of improved sentiment that appeared to follow.

Ah, the idea that maybe the virus was not going to be that bad.

I can see that here.

So here was the fourth quarter.

We can perhaps take a look at it here.

So again, the blue line is the Ozzy.

So you see it recovering here and then as we get into the beginning of the year, this is really where we start to see things begin to look defensive.

So that, of course, is going to be a continued narrative through the rest of of the week as we get incoming newsflow and, of course, remain an aspect off event risk that will be difficult to account for because we really don't know which headline is going to hit went for examples in the past 24 to 48 hours.

The main narrative waas a knot, especially groundbreaking meeting of G 20 central bankers and finance ministers.

That raised an alarm.

But I didn't really say anything that markets presume.

We didn't know already. 00:13:44.240 --> 00:14:8.880 But news that the virus had substantially shown up in Italy and Iran really seemed, uh, to set creators off because that's quite a ways away from the percenter and suggest that maybe we have a much larger issue with much bigger scope for economic disruption. 00:14:8.960 --> 00:14:34.720 Then, uh, was thought and around that Ah, we have now then, ah, a greater level of concern that if it is not disrupted by what little, um, event risk there is may continue to drive a risk off narrative and thereby toe continue to pressure of Yossi.

On the other hand, it also means that there is a need for this kind of, um, narrative, too be sustained by constant virus level escalation whereby the virus news would get perpetually worse.

If that isn't happy opening the very sort of, uh, absence of new bad news given through how immediate this narrative is, may actually set the stage for a bounce, just as the intensity of incoming newsflow moderates, if only temporarily.

And that may well be the way that the corrective bounce that is being into that in technical positioning actually comes to be now, as far as economic data is concerned on, um, the calendar for this week are a number of things that aren't necessarily Australia specific but nevertheless fit into the conversation. 00:15:50.200 --> 00:16:4.470 So on Thursday, in particular, things get interesting because we're going to have a Bank of Korea monetary policy announcement and, needless to say, careers on the front lines of this growing virus outbreak. 00:16:4.470 --> 00:16:5.950 End of economic implications. 00:16:6.540 --> 00:16:20.830 But no any sort of knock on effect on Korea is likely to similarly echo in Australia in so much as China is Australia's largest export market.

And Korea in this case would be a proxy four regional economic conditions.

So if whatever the Bank of Korea says is particularly dire, and the implication is that policymakers will need to step in with substantial support in that growth may take a substantial hit.

There could be a risk off implication well beyond Korea.

But certainly the narrative would be very Ah, very close to home for Australia and the Ozzie. 00:16:59.840 --> 00:17:9.950 And to the extent that this encourages, um are be a rate cut speculation we may get the Ozzy lower.

We've seen.

As a matter of fact, this already start to take shape.

Here is, um, a chart of see Australian dollar index that I, uh, constructed that's in the red here and in the white is Australia's ASX 200 index and in the turquoise, the 10 year Australian yield.

So you can see that as the yield declines implying Ray got expectations, there's a decline in sentiment, so stocks are falling and, of course, the currency is falling.

This is materially different from the longer term dynamic here where you see the Ozzie and yields are declining.

But stocks are going up on the presumption that are lower.

Yields are good.

Nothing is so bad that we need to be worried about this.

This is just chief credit, which equities have been reading as positive since the beginning off 29 2019.

But of course, as we zoom in now, look instead.

Even recently, these relationships were inverted, but most recently here. 00:18:52.340 --> 00:19:7.230 Just since the beginning of that the month there's been a re cup pulling, and that re coupling has seen stocks join yields and the currency on the downside, implying that markets are appreciating that there is a negative growth. 00:19:7.430 --> 00:19:17.450 Uh, knock on that is, um, already being speculated on by financial markets.

Also on Thursday, Australia's own A and Z business confidence gauge is due and then, outside of Australia, a number off oh, off key points later today, we're going to see US consumer confidence numbers.

That'll be a really important gauge for overall global growth. 00:19:46.480 --> 00:20:9.040 Uh, at this point, with Europe looking a bit better but still relatively close to, uh, three year lows on on growth and the main engine in the A pack region China, obviously hobbled by a series of misfortunes the U. 00:20:9.040 --> 00:20:11.780 S trade war, the Hong Kong protests.

Now the Corona virus with the main engine of global growth, ends up being ah ah, us.

And of course, in the U.

S.

The main part of GDP growth is private consumption.

So really much of what we're talking about here, the nation recovering global girls in the fourth quarter and the the durability of that in the face of this virus.

Uh, the main story really is about the durability of US consumer confidence and willingness to spend. 00:20:55.500 --> 00:21:1.380 So this really is a very, ah, very timely release. 00:21:1.750 --> 00:21:6.030 The expectation is that we're going to get a narrow improvement in February. 00:21:6.120 --> 00:21:12.040 But, uh, needless to say, we could see a downside surprise.

If these virus risks take their toll, then, um, on the on Wednesday, we're gonna have a speech from the city President, Christine Lagarde, Off course, Anytime a central bank had speaks in this kind of, ah touch environment, it'll be interesting to listen to, I would say, Most importantly, here, the thing to keep in mind will be how willing is the E.

C.

B. 00:21:41.940 --> 00:22:2.140 Provide policy support even as it reassesses its mandate, which is expected to continue through the, um, rest of the year and then Thursday, uh, a revised set of US GDP numbers. 00:22:2.990 --> 00:22:8.980 No major deviations expected from earlier, um, estimation. 00:22:8.990 --> 00:22:11.810 So probably not a big market mover.

They're assuming everything lands broadly in line with expectations.

And then on Friday, uh, probably the most interesting bit again, a kind of broad indicator off global performance.

Canadian GP data do for the fourth quarter, and the expectation is that growth plunged from 1.3 to just 0.3% for the annualized rate on one hand of substantial decline is already in the forecast.

So oh, relatively bad number wouldn't be especially surprising. 00:22:55.590 --> 00:23:7.950 But, of course, on the other, confirmation of a substantial drop off in Canadian growth would send a negative message about US consumption. 00:23:8.740 --> 00:23:12.810 Candidate exports close to 80% of everything it sends abroad to the U.

S.

So there is clearly a very strong economic link there.

And it can be very instructive to look at what's going on in Canada as a barometer of US business conditions.

And, as I say, the U.

S is critical engine of growth, especially at this moment.

So it'll be very interesting to see what these numbers mean and how the markets will respond.

Uh, the feds favorite inflation gauge that BC indexes Also on tap, that's expected to show that underlying price growth accelerated just a hair from 1.621 points out percent.

I wouldn't necessarily expect much of a response if we were to get a number in line or close to it because of course, nobody seriously contemplating that any kind of a pick up in inflation here is going to actually translate into Fed tightening.

Fed quite clearly has no interest in anything of the sort.

When that is the week ahead.

Let's take a glance at your questions.

Um, Paul's asking if that is the case with risk off sentiment, why would the Aussie bounce?

Uh, so again, uh, in order for markets to continue moving in any direction, they must have continued him for us to move in that direction, right?

We know markets don't move in straight lines. 00:24:53.440 --> 00:25:7.260 So while there is an underlying macro Project three ah, there is a consideration for near term swings.

You can see that quite clearly on both a shorter, a shorter term timeframe, a longer term timeframe.

So you might say this is a decline, but obviously it is certainly not a decline.

Um, without any kind of back peddling or backfilling.

No, I would expect the overall direction toe hold, but for there to be, perhaps, and of course we'll see.

But the technical seemed to suggest that perhaps there is scope for a bit of that here. 00:25:54.340 --> 00:26:0.500 Ah, One question here about thoughts on Ozzy Yen and Ozzy Cat. 00:26:0.500 --> 00:26:1.050 Sure. 00:26:1.740 --> 00:26:15.620 So here is Aussie yen, which you can see here seems to be continuing to make an attempt at resumption of this longer term decline.

This is going all the way back to September of 2017 here and back.

Ah, here late December.

You can see that there was this fourth quarter correction in risk on assets, as we can see in any number of risk on assets, be it gauzy Kiwi CAD shares rates.

And since then, of course, to start the year, a move back in the risk off directions.

So you can see we've now taken out the bounds off that fourth quarter recovery. 00:26:55.640 --> 00:27:1.910 Not only that, but having bounced off initial support, we've now also taken out the bounds over that correction. 00:27:2.540 --> 00:27:4.520 So it looks like a TTE this point. 00:27:4.520 --> 00:27:27.910 We're once again in a position to challenge this support 72 46 to about 72 with a break underneath that opening the way, perhaps into, um, this sort of upper 17 71 area.

And then from there, of course, this much more substantive support, uh, right around have clustered around the 70 figure on the topside. 00:27:44.020 --> 00:28:7.010 You can see that in order to invalidate the downside scenario here, we have to do quite a bit of work for prices will have to climb all the way to through here and take out this and this which would essentially wear this around this area here. 00:28:7.260 --> 00:28:18.190 So about 76 50 60 or so that would need to be overcome to really make the case for lasting gains.