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The AUDUSD has staged a phenomenal meltdown since April this year.  Imagine on 11 April, the AUDUSD was at 1.0581 and by 11 June it was at 0.9324, that is a 1,257bps move!!!!!!!!

The current spot at0.9230, a slight improvement from the post FOMC low of 0.9166.  Where is the AUD going, the target of 0.9200 has been hit.

This is why we need to look at the monthly price chart: –

audusd_monthly chart_21 June 2013

The low was 0.6248 on 1 February 2008 and the high was at 1.1016 on 1 July 2012.

76.4%  ~  0.9912

61.8%  ~  0.9230

50%  ~  0.8678

38.2%  ~  0.8126

23.6%  ~  0.7443

Does the RBA necessarily need to continue easy monetary policy by reducing interest rates further?  I don’t think it needs to, the economy has lower debt compared to any other developed country.  Debt to GDP is also the lowest of any developed and matured economy.  Australia was not involve in the CDO and CMO crisis, it just practiced old fashion banking.  You are not going to be as exciting as the UK or the US, but Australia has less volatility and is more steady all around.

I believe at the current FX levels, it will help Australia to be export competitive for a developed country.  Pharmaceuticals, food and beverage are still very large export industries for Australia, besides, the traditional commodities and metal ores business.

Could AUD reach the 50% retracement level of 0.8678, it is possible, however, what will bring it there?

I believe the bottom is near and thereafter, we can take an opportunistic option trade to ride the upside.

 

 

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