THE tough week for auction sales was reflected in the range of prices paid on the forward market.

All forward trading activity was centred around the Spring and early Summer.

Merino qualities lost 50 to 70 cents across the two sale days this week. The 19 micron Micron Price Guide at auction closed on Wednesday at 1083c/kg clean.

The trading on the forward ranged from 1130 cents early in the week to last trade yesterday at 1070 cents. A similar pattern was seen in the 21 micron MPG. The spot auction closed at 1007 cents.

Trade ranged from a high last Friday of 1070 cents to close yesterday for September and October maturities at 990 cents.

With demand lacklustre and volatility still high, exporters are looking to cover the limited forward sales and keep a balanced a position as possible.

Pleasingly, interest has returned on the bid side post-Christmas, once again flattening the curve. Bidding in January through to March is now sitting at around 20 cents under cash.

Considering both the 19 and 21 micron indices have lost 200 cents or 17-20 percent over the first two weeks of the new season, hedging opportunities at this level for the New Year could be prudent.

From a technical perspective, the current levels have fallen to the bottom 10pc of price levels for the last ten years for all Merino qualities.

Trade summary

September 18.5 micron                                 1185 cents                           5 tonnes

September 19 micron                                    1065/75 cents                  15 tonnes

September 21 micron                                       990/1020 cents             10 tonnes

October 19 micron                                         1070/75 cents                  15 tonnes

October 21 micron                                             990/1070 cents             15 tonnes

November 19 micron                                     1120/30 cents                  10 tonnes

December 17 micron                                     1460 cents                            5 tonnes

Total 75 tonnes

The current global landscape probably requires us to also take a wider view. The following charts look at the market from a 25-year and 40-year perspective.

The 25-year chart us currently poised to break though or bounce off support that has held for the last decade.

The 40-year chart takes in other “black swan” events such as fall of the Berlin Wall and the Asia crisis.

Indicative trading levels next week

19 micron                           21 micron

Aug/Sept                                                          1070 cents                         985 cents

Oct/Nov                                                           1070 cents                         985 cents

Dec/Jan                                                            1060 cents                         980 cents

Feb/Mar                                                           1060 cents                         975 cents

Apr/May                                                           1050 cents                         965 cents