The underlying strength of the Australian wool mar et, particularly the Merino sector, was again very clear for all to see this week . Numerous factors could have conspired against the positive trajectory of the mar et but didn’t, including adverse foreign exchange rates in USD,CNY and Euro against the AUD, a selection that is diminishing both in volume and quality, and our major customer, China, celebrating a national wee holiday for their New Year. Once more, resistance to the upward movement was tried by buyers, but failed dismally, as global competition ensured prices remained predominantly strong.

The Eastern Market Indicator (EMI) regained almost half of the loss of last week and 10ac clean/ g was added. The EMI concluded the selling wee at a level of 1422ac clean/ g. When expressed in USD terms, the values soared 2% to 1086usc clean/ g, which is 20% higher than at the same time of last season in February of 2016

The Merino sector of the market was dominated by the movements once more in the 18.5 micron and finer type categories. Competition emanating from Europe and the sub continent saw the better super fine types ascend 80ac clean/ g as volumes dry up as the season progresses towards Autumn. The lesser descriptions, not fitting the tighter specifications of those destinations, were sold initially flat to cheaper, but soon rallied to close firm to slightly dearer for the week .

The fine and medium (19 to 22 micron) Merino sector at the start of the sales faced subdued interest, but by the wee s end had also pushed bac into an encouragingly stronger trend, with 19.5 micron types being well sought. 5 to 15ac clean g was added to this segment.

Merino skirtings sold basically in line with the fleece trend, although not to the same extent on 18.5 micron and finer types, but still gained around 40ac clean/ g. Cardings barely maintained their price levels, but low vm (vegetable matter) types were sold very much to the sellers’ favour as vm increases markedly across both eastern markets. The comeback and crossbred (26 to 32 micron) markets are still faltering and a further 20ac clean/ g was extinguished from their values.

46,000 bales go to auction next week . Sydney’s offering is a designated super fine sale which should see higher volumes of the better wools create a good atmosphere. Chinese buyers also starting to return to their offices post holidays should also assist.

AUD Commentary - Source SAW

It was another big wee for the Aussie Dollar, as it rose from Mon-day’s low of .7527, lifting gradually through the wee , before exploding higher on Thursday after the release of Australia’s stunning Trade data. Today Friday the Aussie is trading at .7565, after hitting an over-night high of .7695. The Australian Bureau of Statistics (ABS) release on Thursday showed the trade surplus leaping to $3.511 billion, smashing market expectations for an increase to $2.2 billion. It easily breezed past the previous record high of $2.236 billion set in February 2009. November’s surplus, originally reported at $1.243 billion, was also revised up to $2.04 billion. The ABS said that the value of exports jumped by 5% to $32.63 billion, also a record high. Overnight Goldman Sachs released a report warning Aussie rate hikes coming, they said the chance of the Reserve Bank of Australia raising interest rates in November is around 40% and rising. The ban sees three rate rises for the RBA in 2018.

The AUD/USD’s rebound from 0.7158 resumed by taking out 0.7608 and reaching a high of 0.7695 overnight. Intraday bias is back on the upside for 0.7777 resistance. On the downside, break of 0.7448 sup-port will indicate that rebound from 0.7510 has completed. The AUD/USD is still staying inside its long term falling trend channel.

Southern Aurora Wool forwards report

The forwards traded in light volume as both buyers and sellers looked for guidance from the auction and offshore following the Chinese new year. Fine wools continued to be in demand with modest quantities trading out to June and prices rising in the for-wards 30 cents above last week ’s levels. Demand into the spring remains sluggish with buyers reluctant to commit at historically high levels. Risk and volatility remain high. The strong AUD, buoyed by record trade figures, looms as a concern to exporters who are looking for confirmation of off shore demand. Medium wools demand is still patchy and reflected in the lack of support in the forward months.

We expect the same pattern to extend into next week . Buyers will remain cautiously optimistic on the finer wools and sellers lifting their target prices. Enquire for options continue as growers loo to protect against a trend reversal. Option sellers are looking for higher premiums to compensate against the higher volatility of the market seen over the last month.

Industry News

Key Test Data Summary for January 2017

• Monthly comparisons for January 2017 compared with the same period last season show that there was 9.3% more bales and 9.9% more weight tested for the month.
• Seasonal progressive comparisons for July 2016 to January 2017 compared with the same period last season show a total of 2.3% more bales and 3.0% more weight for the season so far.
• AWTA Ltd has tested 207.3 million kilograms this season compared with 201.3 mkg for the equivalent period last season .