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Australian market in ‘drift’ mode

15.12 AEDT, Friday 23 November 2012

Australian market in ‘drift’ mode
By Tim Waterer (Senior Trader, CMC Markets)

With the latest Chinese PMI data having made for pleasant reading, most higher yielding assets were able to maintain some buying impetus despite the US holiday depriving the market of some liquidity. Most markets across Asia pushed higher on Friday, remaining boosted by signs that the contraction period endured by Chinese manufacturers may be at an end.

Elsewhere, the Australian Dollar has been wearing a path in the 1.0370-1.0390 range in the past day. The solid Chinese PMI data kept the currency well supported however there was not enough buying momentum to make a sustained push through 1.04.

Given that the AUD has been able to shrug off some dovish comments from the RBA earlier in the week, the currency could be looking at spending good time next week trading above 1.04. If we have the obstacle of the next aid package for Greece cleared, and a continued closing of the gap between Republicans and Democrats on the Fiscal Cliff discussion, the desire of traders to seek higher yield will increase. But of course if the opposite happens and traders again lean heavily toward risk aversion then support at 1.03 for the AUD could again come into play.

With US investors switching from trading to turkey, the Australian market was in ‘drift’ mode much of Friday given the absence of any fresh leads from Wall Street. Local sharemarket activity took on a rudderless appearance in the wake of the US Thanksgiving Holiday, with the ASX200 unable to build upon the 1% gain from Thursday with no new developments abroad.

On the one hand the US holiday may have stalled some momentum, however another school of thought would suggest that it allowed a consolidation of the rebound performance this week. In any event, stocks seemed content to just saunter into the weekend, with traders knowing that more volatility could be just around the corner. A decision on Greek aid could be delivered early next week which will catch the interest of traders. And of course there is that other ‘little’ matter of the Fiscal Cliff which remains to be resolved.


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