A quick glance at the unchanged and record equalling weekly close of the AWEX Eastern Market Indicator (EMI) at 1546ac clean/kg would appear that this weeks Australian wool auctions were rather mundane. This was far from the case, as some radical price movements were in evidence in the market, particularly at the super fine end of the merino offering.

The large volume of around 50,000 bales initially defied buyer expectations of a general correction on the mid and broader microns, and a strong first day of auctions saw the EMI push up 5ac to 1551ac clean/kg. Mid week though, the local traders, in the main, became more circumspect in their bullish operations and subsequently the market entered into a drift for all wools broader than 17 micron. Many of the larger traders appeared to be more satisfied in their open positions and moderated their inventory intake. Chinese indents remained keener, but they too adjusted to the calmer tendency half way through the final day, as buying volume became easier for them. This eventually impacted on the latter part of the Melbourne selling and flowed through to the Fremantle centre later in the day.

The trend within the Merino fleece market continued on its established trajectory, but the focus moved a micron finer to the wools finer than 17 micron. All type descriptions within this micron were caught up in the intense competition which saw prices move upwards by over 100ac clean/kg in a single day, followed by a closing day gain of another 40ac. On average these wools gained around 150ac clean for the week, but some individual lots of the better specifications were well over 200ac or 10% dearer for the week. The 17 to 19 micron super fine wools were still well sought though, with healthy gains of around 30 ac achieved on the first day, but half of this was given back on the final day, with the best wools unchanged and the lower types 30 to 40ac cheaper.

Within the Merino sector of wools broader than 19 micron, sale room operators were expecting a slight pullback from the out-set of selling, but prices maintained remarkably well till basically the last quarter of the week. Even then, the pullback was rather weak and insignificant, with the 19 to 20 micron area only 5 to 10ac lower and the very large offering of types broader than 20 micron weakening slowly by varying degrees from 10 to 30ac clean/kg apart from the heavier VM (vegetable matter) sale lots with VM levels of over 6% in their fleece lines, which finished up being 60ac cheaper for the week.

Merino skirtings travelled the same path as their fleece counterparts, but unlike the fleece concentrating to a more restricted area, skirtings remained within the same boundaries set over the last few weeks. Buyers focussed on the wools finer than 19 micron, and for the most part were selling at 30 to 50ac higher and more at the very finest. Broader types remained initially firm but then weakened to be 25ac cheaper at the close. All carding types drifted slightly and were maybe 5ac lower on average for the week, but at these record levels it is only a cent or 2 in greasy kg. The finer comeback/crossbred wools of 25 to 27 micron were well sought and sold 10ac dearer, but anything broader than 27 micron was 10ac off the pace. The large discounts for the ill prepared crossbred clips emerged once more as the market weakened, with buyers not prepared to pay up for poor or nil preparation.

Over 46,0000 bales is to be offered next week which shows supply is not weakening at all, and auctions are in line with the increased testing figures. All 3 centres will operate and it will be interesting to see how the market copes with the ever increasing levels of vm

AUD Commentary - SAW

The Australian Dollar (AUD) rallied hard midweek, punching through to a fresh 4 month high of .7750, but again failed at this significant resistance, falling back today, Friday, to .7625, which is also the low of the week. This fall is the more significant as the US Dollar (USD) has also fallen this week, hitting a 4 month low against a surging Japanese Yen, after several key Fed Officials said there might only be two U.S rate rises this year and not three, as echoed by Fed President Neel Kashkari who said he wanted to see inflation above the Feds 2% target before voting for any rate rise. Global growth numbers continue to show a good recovery, with leading economic retail spending index’s in France and Germany increasing for the sixth successive month, while in the U.K Export Orders accelerated above forecasts hitting a 10 year high.

In Australia ABS figures show Australian House Prices jumped 4.1% In Q4, and 7.7 percent for the year, easily beating estimates. The rise in the AUD has also been supported by a strong recovery in Metal and Agricultural Commodity prices, with the Reserve Bank of Australia (RBA) indicating there will be no more rate cuts. However employment growth is very weak, and inflation numbers are actually softening, prompting some analysts to say a rate cut is still a possibility.

Technical Analysis - Once again, the AUD banged its head against that old 0.7750 resistance range. Charts suggest a fall to key support of .7490 is now likely. A break of that could see the AUD fall to minor support at .7360. On the upside a break above 7760 could unleash a strong short covering rally taking the AUD to .8000 cents. For the time being the AUD remains range bound.

Southern Aurora Wool forwards report

An interesting week on both the auction and forward markets. After more that 20 auction days of gains most merino qualities gave ground into the weeks close. The forward markets finished the week on a cautious note after posting strong hedging levels into June/July and out until the spring. Post Easter 21.0 traded to a new high of 1455 Tuesday before closing yesterday down 30 cents mirroring the auction decline. New season bids held up well and although we expect some easing in levels through next week we a hopefully sound hedging opportunities prevail.

We expect interest to hold on the 21.0 though May and June around 1420 easing to 1380 into the early Spring and 1360 into the end of the year. 19.0 micron levels are 1750 August but fall away to 1700 Sept and 1650 into the end of the year.