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Tag Archives: RBA

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.

 

 

AUDUSD hit a high during NY session at 0.9790 after after a two wave move once at 10pm and another time at 11pm Singapore time.

Since then, it has been retracing all the way down to the current 0.9715 level.

I SHORT the AUDUSD this morning at 0.9745 and squared the position at 0.9720 for a quick trading profit of 25bps or 0.25%.

I believe RBA will keep rates the same and will have nothing exciting to say in the press conference.  I believe the RBA and the Aussie government are stuck in a corner as to how to re-energize the economy.

The Aussie economy has been reliant for too long on resources to fuel its growth in the past 5 years.  It has also relied heavily on foreign capital and domestic capital to fuel the housing market.

Let’s not forget that during the worse of times the past 2 years, the Aussie has been trading between 1.03 and 1.05.

I believe we are passed the bottom, and in the near term, the AUDUSD will range bound between 0.96 and 0.98.  We need to see some credible news from the Aussie government as to how they are going to structurally change the economy domestically to fuel growth.

The danger is alot of central banks are still holding AUD, when the situation in Europe and the United States is better, capital will flow out of Australia back to the home countries and it will put downward pressure on the AUD.

What can we expect from the RBA?

Will the RBA reduce rates again?  I am not so sure that they will as the Aussie economy is not in such bad shape.

I will share my thoughts with you and also potentially a trading strategy.

Tune in.