Large volumes were again the predominant issue affecting prices this week at the Australian wool auction markets. Plenty of wool available had buyers in a particularly relaxed frame of mind early in the selling wee and prices backed off accordingly. The first day of sales saw most descriptions falling between 20 and 30ac/clean kg. A significant final day rally pushed all types on offer up 10ac/clean kg at least and most pundits are saying it was a trend-changing move back to the positive direction. While it seemed all other financial and commodity markets were blaming moves in their markets on the “The Donald” effect, our wool mar et was left to price adjust purely related to just simple supply and demand issues.

The Eastern Market Indicator (EMI) eased by 20ac on the first day before producing a suggestive 7ac rise on the final day, as all buyers appeared to move back into purchase mode. As a result, the EMI concluded the week at 1290ac/clean kg, a net fall of 13ac/clean kg for the week 's series.

In the Merino fleece offering, an extremely lack lustre start to the wee was witnessed as most wool sold 25ac cheaper from the outset and some heavy VM (vegetable matter) types went 40 to 50ac cheaper. An exception to this weakness were the some spinners to best top making types of 15.5 to 19 micron which held firm due to the stiff European competition continuing. Overnight on Wednesday China interest was revived and some significant forward bookings were written. Once again the shipment time is relatively prompt indicative of the lack of greasy Merino wool in front of machines.

On the back of the renewed demand, prices rose on the final day across the Merino type spectrum by 15 to 20ac/clean kg. Of particular note were those sale lots of 17.5 to 21.5 micron containing LB (light burr) fault of 1.5 to 3.0 vm. Some of these individual lots were 40ac dearer with 19 to 22 micron the most sought. The market strengthened throughout and closed at the highest point.

All crossbred types(26 to 30 micron) continue their cheapening trend and price levels fell away once more by 15 to 40ac/clean kg. Most affected were the mid micron 27.5 to 29.5 types and descriptions. At the finer end in the comeback area (24 to 27 micron) there are signs of a halt to the slide as prices held on and rose a few cents towards the end of the week.

Wool continues to flow into store following unseasonal delays. The spike in volume appears to have settled, with next weeks roster expected to be the last of the bigger volumes. Quantities are then set to revert to more normal levels of mid 40K bales levels being offered. In a large part of the country, those farmers running a mixed enterprise are now getting on tractors for harvest and shearing is put on hold.

Over 50,000 bales will be on offer next week and it looks like buyers will be approaching the market with much more confidence than the past two to three wee s. After just a few weeks of prices being to the buyers favour, it now looks like the season trend of sellers advantage is back in play and strong auction results are now forecast through to Christmas.

Southern Aurora Wool Forwards Weekly Report

The forward market started the wee surprisingly well following falls of around 40 cents in most qualities the previous session. 21 microns traded good volumes for late November and December at just under cash at 1360. With the world’s attention focused on the US elections, risk was definitely on the table. Financials, commodities and the AUD all suffered as news of a likely Trump victory came through. The wool auction was already under pressure and gave up a further 20 cents to settle on the key support level of 1350 with concerns that the seasonally supply flush could test 1350. Forwards anticipated the support holding and finished the week well bid around those levels and the auction closed with a positive tone. Interest in options continued with 1340 strike options being offered at 38 cent for the early autumn.

Next weeks auction will be pivotal to medium term price action in the forwards. The support level broke last spring and saw prices retract to 1214 before returning to hold the 1300 to 1400 throughout the new year.

AUD COMMENTARY - SAW

The Australian Dollar is struggling today Friday, trading at .7620 against a rising US dollar, despite some equally stunning rises in key bulk commodities over the last 24 hours. In Iron Ore the spot price surged by 3.92% overnight to $70.98 a tonne, surpassing the previous peak of $70.26 a tonne struck on April 21. The price hasn’t been this high since January 9, 2015. It has now added 27.1% over the past month, extending its gain in 2016 to a jaw-dropping 62.9%. From the all-time record low of $38.30 a tonne struck on December 11 last year, it’s added 85.3%. Coal and a number of base metals have also been surging higher.

China’s yuan was fixed at it lowest level in 6 years, as the People’s Bank of China fixed the Chinese yuan at 6.7885, its weakest since September 2010, amid worries President-elect Donald Trump could name China a currency manipulator.

Elias Haddad, senior currency strategist at the CBA, has been brave enough to attempt to explain the crazy moves. "We make the observation that Trump’s economic policies are very inflationary. Assuming Trump’s policies pass Congress, we anticipate higher US bond yields, a flatter yield curve, higher US equity markets and a stronger US dollar. Higher global bond yields reduce the attractiveness of typical higher-yielding currencies like AUD.” A stronger USD will continue to weigh on AUD/USD however the AUD is likely to receive support from higher commodity prices, an improvement in Australia’s terms of trade and a narrower trade and current account deficits,” Looking further ahead, our view had been a Trump win would push AUD/USD down by 10% over a one year horizon.

Technically the Aussie failed for the 10th time in a row to break and hold above .7700. The major downtrend still holds, with the first line of significant support at .7450.