Following a few weeks of uncertainty and mixed sentiment, the Australian auction market this week finally relented to a weakening price versus demand scenario. Prices for all types and descriptions across the Merino offering faltered somewhat and falls of varying degrees occurred. By and large the crossbred and carding sectors bucked the trend and stayed relatively firm around the established basis.

The AWEX EMI (eastern market indicator) decreased by around 1.8% for the week or 27ac/clean kg to close the week at 1495ac/clean kg. The stronger AUD v USD led to a smaller fall of 12usc/clean kg to 1123usc/clean kg when the EMI is measured in US dollars.

The selling week results went largely to the pre sale expectations of buyers and exporters. A sudden lack of interest from many of the larger overseas users had buyers on the back foot and reticent to continue their buy then sell approach to trading. As sales commenced the atmosphere was rather subdued, with coverage of previously sold forward orders seemingly the dominant reason for buying. Buyers were extremely selective throughout the sale week, resulting in some lots being well be-low their reserve. As such the week saw growers resisting the lower levels and over 15% of the wool on offer for the week was passed in.

The selection and type of Merino wool is still being dominated by the generally heavier VM (vegetable matter) levels, although some of the earlier shorn clips from the eastern states are showing a return to more normal VM levels fleece wools carrying less than 1%. These wools were receiving much better competition and prices were much less affected. For specific Merino types, those wools of 19.5 micron and finer were the hardest hit and some reductions of over 100ac/clean kg were recorded. Falls were reported within the range of 50 to of 80ac/clean kg.

The 19.5 to 22 micron descriptions held on rather well in comparison to their finer counterparts and losses were limited to a general 15 to 25ac/clean kg. Some LB and B fault (1.5 to 4.5%vm) types were actually solid to just slightly off in price. All merino skirtings stepped down pricewise in line with the fleece

In stark contrast to the Merino segment of the market, cross-bred types met with good competition and despite the stronger AUD, managed to stay on or about their existing price levels. Again the same with the cardings sector as prices held then strengthened as the season-long strong demand continues.

Next week has an offering of just 30,000 bales. Volumes are diminishing but so apparently are the are fresh sales required from overseas.

AUD Commentary - SAW

Traders were surprised on Friday to find the Aussie had tumbled to .7450, following Thursday's strong rally to the weeks high of .7518. That rally was attributed to rising oil prices, better economic and a tumbling USD, which hit fresh 6 month lows against most major currencies during the week. The Aussie had started the week on its lows at .7440. On Friday that reversed as the Aussie fell the hardest of the G10 currencies, with Elias Haddad, Senior Currency Strategist at the Commonwealth Bank, saying ”the Aussie fall followed a sharp drop in crude oil prices which occurred after the OPEC meeting in Vienna, the 5% plunge in oil prices triggered heavy selling in the Aussie”. The OPEC meeting agreed to extend crude oil output cuts of 1.8 million barrels per day until end-March 2018.” The fall was compounded by tumbling Iron Ore prices. U.S Equities however powered higher as corporate earnings beat expectations, with both the S&P500 and the Nasdaq finishing at new record highs. U.S Equities and Global markets generally more upbeat following the release of the U.S Fed Minutes which suggest a change to a more gradual approach to U.S Rate rises. The Fed is on track for the next rate raise in June, according to the minutes of the central bank’s May 2-3 meeting.

Technically the Aussie looks weak on the charts, having failed on two consecutive rallies this week at .7518. It appears the Aussie is now likely to fall to support minor support at .7422, if that fails, the AUD will test the previous strong support at .7350. For the time being the Aussie is range bound generally between.7600 and .7350, and looking for direction.

Southern Aurora Wool forwards report

Bidding interest in the forwards early in the week indicated a steady week ahead. Trades went through at 1920 for 19.0 and 1500 for 21.0 microns for June which was around last weeks close. The lack of offshore demand impacted on the spot auction market with fine wools most affected. Prices at auction fell through the June forward traded levels. Reaction on the forwards was less dramatic with buyers still looking for value along the strip. Both 19.0 and 21.0 microns traded forward for June at spot auction close. Buyers were a little more cautious on the fine wools into the spring and were unable to find fair value levels with the sellers. Better volumes traded on the 21.0 contract with 1420 to 1425 being achieved early in the week but pleasingly still trading at 1400 for September at the end of a week that all participants found trying.