Something worth considering is that this news has been pretty well discounted by the market. Conditions have been bad over there for a while, and the best institutions have known it for a long time. The numbers are terrible, but if they are in line with expectations, the market won't give much of a response. The audusd market may have already reached a saturation point of willing sellers.

Something that is interesting to me is that, despite this news, markets have been net long audusd for a very long time almost without interruption. Take a look at this graph and use the slider: http://www.dowjones.com/products/djfxtrader/infographics.asp

You'll notice that while most other major crosses fluctuate between long and short, audusd is almost always long. There must be a reason for that, but I can't come up with anything.

 

Besides the EURUSD which is IMO way higher than at should be if it wasn't for 1) repat flows, and 2) Asian buying; the AUD is my favorite short right now.

Even if you think Europe isn't as messed up as it is, the inevitable landing (soft, or otherwise) in China will have a direct effect on AUD exports and thus economy.

Also, lower oil prices are directly correlated to AUD (and CAD) weakness. With crude under $100 i just dont see either dollar being over parity vs the greenback.

 
zeropower:
Even if you think Europe isn't as messed up as it is, the inevitable landing (soft, or otherwise) in China will have a direct effect on AUD exports and thus economy.
Once again, this trade really depends on market expectations. I think a soft landing in China would actually cause the AUDUSD to rise, because everyone has been talking about the "inevitable landing" for 12 months. Everyone is already positioned for bad news from China, so it would require a pretty hard hit for the AUDUSD to make a big move.
 
Best Response
gammaovertheta:
zeropower:
Even if you think Europe isn't as messed up as it is, the inevitable landing (soft, or otherwise) in China will have a direct effect on AUD exports and thus economy.
Once again, this trade really depends on market expectations. I think a soft landing in China would actually cause the AUDUSD to rise, because everyone has been talking about the "inevitable landing" for 12 months. Everyone is already positioned for bad news from China, so it would require a pretty hard hit for the AUDUSD to make a big move.

Regarding the CN landing, yes many have been pointing to a bubble in their R/E market and that their construction spending is not sustainable, but what i think is different now is we're actually seeing it confirmed by the data. Chinese Stocks are well off their highs and not even close to their 2008 high (unlike the SPX); mnftg and non-mnftg PMIs came in weak; the last FDI y/y print came in at -2.8% vs 0.6 prior; banks keep getting cuts to their RRR; GDP, while still nothing to whine about, was underestimated last quarter; and theres basically a plethora of other data out there suggesting the landing is nigh.

Yes, could be priced in... I just don't see a stronger Aussie relative to the USD being sustainable.

 

mining- probably the main china-dependent sector- is doing well it is everything else that is doing poorly

i think the market is still trading audusd as a play on China in its own right, regardless of what happens in China, I think Australia is in deep trouble

from the services index, the numbers haven't been this bad since March-April 2009 (when audusd bottomed at 0.65) currently at 1.01, much closer to recent highs of 1.10

im gonna guess the reason the audusd always been net long has been because of the carry trade interest rates haven't fallen below 3% in recent history- so i'm guessing all the carry traders are keeping the currency up

the rba is still projecting 2-3% gdp growth on the year. i doubt that will happen

 

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