2014 Australian Corporate Reporting Season Buy and Sells

Invast Insights
Week Commencing February 17, 2014

www.invast.com.au | 1800 468 278
This week we look at the following topics:
1.0 Reporting season buy & sells
2.0 Technical outlook & key level updates
3.0 Book review – The Demographic Cliff

1.0 Reporting season buy & sells
Australian corporate reporting season ramps up over the next two weeks and
below are some key costs, what they are expected to report in terms of
earnings and our view on whether they are a buy or sell at current levels. Our
views on these stocks are general and we will follow on with a more in-depth
analysis following reporting season sometime in May. The chart below is just
to give you our expectations and our thoughts on each key stock subject to
the numbers printing out.

2.0 Technical outlook & key level updates
Plenty of market moving events scheduled next week, we like to focus on
some instruments that will be highly impacted by these announcements.
Bank of England, Bank of Japan, Federal Open Market Committee and Reserve
Bank of Australia will release their monetary policy meeting minutes and as
such we want to focus on the Australian Dollar, Japanese Yen, Sterling and the
US Dollar.

AUD/USD
Following lower than expected employment numbers, with Australia
shedding 3.7 thousand jobs last month and unemployment rising up to 6%.
Gains were wiped out and potential to stage a trend reversal slips away.
The key resistance level at 0.9025 we put out over several videos in the past
week remains strong, as noted on the Daily chart there was no close above
0.9025 as of yet. With price currently within the Ichimoku cloud attempting a
break above, any weakness in the Australian economy could trigger further
selling in the Australian dollar.
Downside support is currently located at 0.8950 and a daily close below this
level could signal a down-trend continuation. We remain bearish on the
medium term outlook of the Australian dollar and expects a potential retest
of 0.8825 and 0.8700 in the coming days.

Figure 1 AUD/USD Daily Chart, source: Invast cTrader

Key event to watch for this week is the HSBC Chinese Flash PMI numbers.
Previous month result was 49.5 a downward revision from the actual 49.6
release. Market consensus is not out yet but it’s expected to be around 50.0.
Any numbers below 49.00 could trigger a selloff in AUD/USD as the currency
is reliant on Chinese data
GBP/USD
Impressive recovery from the UK as key economic data continues to improve.
One of the biggest concern in the past month has been the rapid drop in
unemployment rate. Bank of England upgraded their GDP forecast to 3.4%
from the previous 2.8% and lowers their unemployment outlook. While there
is a potential for inflation to go up, Bank of England is “not going to take risks”
with the current recovery.
GBP/USD continues to push higher beyond the key 1.6600 level and posted a
3 year high at 1.6673. While we expect a little pullback to occur this week

week, ultimately the longer term view remains to the upside. As such our
strategy is not to sell the correction but rather wait for the correction to be
over before attempting any further buying in GBP/USD.
Key support for the pair is currently located at the key 1.6600, 1.6550 and
1.6500. While a correction to these support level is preferable, there are two
very high impact news from the UK next week. The first is UK CPI on Tuesday –
while the consensus is not out a print higher than 2.1% will trigger a rally in
Cable. The second is UK’s unemployment rate, while it is not the only indicator
linked to BOE interest rate guidance another drop in unemployment rate will
also trigger a rally in Cable. With that in mind there is a slight chance
correction could be shallow.
Key resistances to the upside are located at 1.6725 where 127.2% fibonacci
extension is located, followed by 1.6850 where 161.8% fibonacci is located. Our
view on GBP/USD remains to the upside and we will update through our blog
once an entry is probable.

Figure 2 GBP/USD Daily Chart, Source: Invast cTrader

USD/JPY
Disappointing data from the US continues to weigh on the greenback. While
FOMC will likely continue to taper, it will do so in steps and will accommodate
significant economic changes. FOMC will release their meeting minutes on
Thursday, a focus for most traders as they look for answer to why FOMC
continues to taper QE in light of disappointing Job numbers.
On the technical front USD/JPY only managed a recovery to 38.2% fibonacci
before sharply rejected. The key resistance at 38.2% is located at 102.50 and
the immediate support for the pair can be found at 101.50 where the
trendline support is located followed by 100.75 key support.
While we previously call for an end to the drop in USD/JPY at 100.75, recent
data from the US force us to reconsider. As the pair is no back trading below
the Ichimoku Cloud, any close below 101.50 key level will likely trigger further

selling towards 100.75 and potentially 100.00. This is also the 61.8% Fibonacci
retracement from the major rally last year.

Figure 3 USD/JPY Daily Chart, Source: Invast cTrader

3.0 Book review – The Demographic Cliff
This book was actually recommended by one
of our own staff members who read it over
the holiday period. The conversation around
the office was pondering on where the
Australian economy is set to go over the next
few years and the staff member suggested
reading The Demographic Cliff which thinks
Australia is one of the best positioned
countries to withstand the challenges that are
set to come. Author Harry Dent shows why
we’re facing a “great deflation” after five years
of desperate stimulus—and what to do about
it. We don’t necessarily agree with all the
conclusions that Dent makes in this book but
his analysis and ideas are nevertheless
interesting and worth pondering on.

Demographics is a very interesting area of study and not something we have
written about in Invast Insights to date, but we plan to make this a more
regular theme in the future. Throughout his long career as an economic
forecaster, Dent has relied on his not-so-secret weapon: demographics. Dent
studies the predictable things people do as they age is the ultimate tool for
understanding trends. For instance, Dent can tell a client exactly when people
will spend the most on potato chips. He also explains why our economy has
risen and fallen with the peak spending of generations and why we now face
a growing demographic cliff with the accelerating retirement of the Baby
Boomers around the world. Dent predicted the impact of the Boomers hitting
their highest growth in spending in the 1990s, when most economists saw the
United States declining.
His future predictions might not work out as well. For example Dent suggests
the Dow Jones might fall to around 5,800 by 2015 which to us sounds absurd.
He also suggests families should wait to buy real estate in areas where home
prices (more so those in the United States) have gone back to where the

bubble started in early 2000. We think these forecasts will be wrong, but the
most interesting part of the book is the actually focus on demographics
rather than market predictions and on that level we think Dent has some very
interesting things to say. For around US$12 on Amazon.com we think it’s
worth adding to your buy list.
Visit our site to learn more about using Ctrader in currency trades.

7.0 Disclaimer
Please note that you are receiving this report complimentary from Invast
Financial Services Pty Ltd (AFSL 438 283). Invast staff members may from time
to time purchase securities which are included in this or future reports. The
authors of this report may or may not be holding a position in the securities
mentioned. Please note that the information contained in this report and
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*Distributed with the permission of Invast.com.au

2014 Australian Corporate Reporting Season Buy and Sells

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2014 Australian Corporate Reporting Season Buy and Sells