A major consolidation and clear demand signals were features of this wee s’ selling at the Australian wool auction sales. The entire Merino fleece offering stayed under good competition and prices remained generally firm, give or ta e a few cents. Crossbreds continue to wilt under a slowing demand, whilst the positive story of the wee was the strength within the cardings sector and also the merino skirtings. Not much change occurred on the major trading currencies during the auctions so it was a wee where it was up to the offering and physical orders to give direction. Amongst all the changes within types the Eastern Market Indicator (EMI) managed to stay roc steady at the 1331ac/clean kg mark, unchanged on a daily basis and week to week.

Within the Merino fleece sector the continued re-emergence of the largest Chinese indent buyer was key. After having been quiet (compared to their normal pattern) since the commencement of the season, they too to purchasing very aggressively, as was signalled at the end of last week . On many wool categories, in mainly Fremantle and Sydney, they were almost unbeatable as they looked to source volume from the outset. Their weekly tally came in at just short of 5,500 bales or nearly 25% of the total volume on offer within the sector. A largely unchanged price occurred as all other exporters seemed to just buy what was absolutely needed for covering, and not willing to ta e on the larger buyer and push the market up.

Merino skirting prices hit levels of 25ac/clean g better this week , as top makers looked to secure a higher percentage of the offering. Stiff competition was provided by the larger trading houses looking to cross off some of their outstanding forward positions. Of particular interest was the lower vm types finer than 18.5 micron, with odd lots peaking at 45ac clean dearer.

The last two wee s has seen a significant surge in interest for all types within the Merino cardings sector. Whilst low supply was certainly playing its part in the upward push, a strong advance in demand, mainly from Chinese factories, has seen price levels appreciate a further 20 to 40ac clean g. Types suitable for scouring are being extremely well sought and in many cases, sale lots were being bought at levels 50ac better than the previous week.

The crossbred offering (26 to 30 micron) continued the cheaper trend of the season so far, and a general 20ac/clean g was eliminated from the values. For those types broader than 27 micron the price levels are hitting what most appear to be attractive levels for manufactures and speculators alike.

Volumes next week have grown by 5,000 bales since last Friday so now almost 50,000 bales goes under the hammer. The current and clear trends in place at the moment are expected to continue, with Merino firm, cardings dearer and crossbreds lack lustre. After next week auctions, quantities on offer will be bac to “normal” levels, so next week may provide good buying opportunities, given demand is good and there is only 7 weeks of sales left pre Xmas.

Southern Aurora Wool Forwards Weekly Report

Another interesting wee on the forward markets. Increased volumes at the auction is anticipated over the coming weeks. This combined with a volatile AUD had buyers and sellers searching for fair value. This played out with November trading from 1400 to 1420 during the week and the AWEX 21 Index settling in the middle at 1409. December traded at 1400 and March at 1385 indicating a willingness from both buyer and seller to value a degree of certainty going forward.

The messages remain mixed with erratic demand coupled with potentially bumpy supply patterns leading to increased interest in the forwards and slightly better volumes traded. Pre Christmas demand subsided as the week progressed but appeared to settled around 10 to 15 cents under the current cash. New year levels are well maintained around 1370 to 1380 in the first quarter with most interest focused before Easter. Post Easter levels remain above 1350 need some demand verification to push higher.

The 19 micron contract traded consistently through the week from 1525 to 1532 from January through to March capturing most of the gains obtained over the last two months and it’s increases premium to the 21 Index. Options were sort during the week with the tightest market being the 19.0 micron put option for January with a strike of 1530 Bid 25 cents and Offered 35 cents.

Weekly Financials and AUD Commentary—Source SAW

The Aussie Dollar had another quite dramatic week, as it fought its way from Monday’s low of .7589 to briefly peak midweek at .7709, immediately following the surprisingly strong Australian CPI data, only to be then hammered lower, with the fall continuing Thursday and Friday. The AUD had every reason to break higher midweek — surging commodity prices and a strong CPI number which had scuppered expectations of a near-term rate cut from the RBA. And yet it couldn’t do it ! Just as remarable is that this the ninth consecutive time it has sneaked above .7700, only to fail. Today (Friday) the Aussie is trading at .7585.

Sean Callow, senior currency strategist at Westpac, believes the inability of the Aussie to make a sustained break is due to two factors — stretched long positioning among speculative investors as well as firming expectations for a US rate hike in December. “Positioning is one headwind,” he says, pointing out long positioning from speculators now sits at the highest level seen since May. “The Aussie could be running out of fresh buyers,” he says. “There is also the strength of the US dollar,” he says. Longer term, Westpac sees the Aussie continuing to weaken against the US dollar, forecasting that it will finish next year buying 68 cents.

Technical Analysis - The break of 0.7647 minor support suggests that rebound from 0.7505 has likely been completed at 0.7733 and chart bias is turned negative with 0.7505 the first downside support. In the bigger picture, AUD/USD remains inside the long term falling trend channel.