I appeared on Channel News Asia again this morning at 6:20am SGT. My questions and my responses in the form of brief notes are below:
Q1. What can we expect from the Australian market when it opens for trade this morning?
There is likely to be a slight decline in the ASX today after a poor U.S. lead and after falling sharply from the resistance level at 5650. It has done well to surge higher in the last few weeks off support at 5400, however it has met strong resistance from around the 5650 level, which has performed this role for the last couple of months.
Q2. What can investors expect from Australia’s corporate earnings season starting next month?
It will be an interesting time. The RBA has cut rates twice this year and I wonder if those stimulus measures will have had a fast impact on companies. Perhaps we will see better results in 6 months time compared to next month. The usual suspects, aka banks, will no doubt report multi-billion dollar profits and attempt to out-do each other.
Q3. Australia’s second quarter consumer prices rose 0.7% from the first and 1.5% from a year earlier. Will interest rate fall further from the current record low of 2%?
The good thing is that the RBA still have plenty of room to move if they need to. I read some of the comments from the RBA’s Governor, Glenn Stevens, on the possibility of changing the RBA’s inflation target from its current 2-3% to something a little more realistic. In other words, most countries are struggling with growth and perhaps the current target is a little outdated. I don’t see any movement for the rest of this year.
Q4. The Australian dollar hit a 6-year low on Monday against its US counterpart. Do you see further downside risk?
Definitely. Last year the AUD/USD fell strongly from around 0.95 down to a 0.75. It has spent most of this year trading in a range roughly between 0.75 and 0.7850 and now it is threatening to move lower. The downside risk is real and the AUD/USD could easily fall lower and below 0.70 is well within reach.
Q5. Gold is at its lowest level in more than five years. Is a drop below US$1,000 an ounce possible?
Similar to the Australian dollar, it is definitely possible. Just like the Canadian dollar, the Australian dollar has almost mirrored gold and all are struggling. Even though $1000 is a little distance away, it is well within reach and if the demand for safe haven assets continues to decline, then gold has some more distance to go yet before bottoming out.