Tuesday, October 2, 2012

The Chicken or the Egg

Last night the RBA decided to get behind what I have been following in the charts over the past several months: The commodity cycle has crested and the Aussie was carving out a massive top. 

The call to reduce rates was premised on the signs of concern over China evident in RBA commentary in October as well. According to the RBA statement, "Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago." RBA also said mining investment may peak at a lower level that previously expected. RBA are also of view that global slowdown represents domestic growth outlook weaker. CPI is consistent with target. 
Further cuts should not be ruled out. According to Stephen Koukoulas, Managing Director of Market Economics, "I reckon RBA has more to do. High risk of another 25 in Nov. Jobs data crucial." FXSTREET.com 

The commodity bellwether continues to follow the SPX topping model through the pivot and now down the face of the initial phase of the waterfall decline from last year.