Weekly AUD Wrap

July 31, 2011

FOREX

This week we saw the AUD break higher but not quite go on with it. I got stopped out of my long from the break of 1.0790 with a nice profit but I’m also long from the break of 1.1012 and a bit nervous on that one. And the USD continues to tank as the world now knows that it is no longer risk free.

We are probably passed a tipping point into the new paradigm now that the US has shon the light on itself and as Gold and the Swiss Franc rocket higher the state of disquiet about where is a good place to invest sees even the poor old Yen getting dragged to uncomfortably high levels for an economy in the doldrums.

Lets look at the USD – its the other side of the Aussie coin and can’t be ignored.

 

 What we see here is further weakness as the politicians dither. But the EUR hasn’t capitalised even after the so-called Greek solution, but its not about just Greece is it. yesterday afternoon in our timezone Moody’s, it be a Friday, decided to make a fresh warning about Spain which put the EUR under pressure.

The key winners remain gold, Swissy, Yen and Aussie.

But what the chart above tells us is that, at present at least, the idea that teh Aussie is a safe haven is a little backward. Sure its not been smashed as we would have seen in the past but have the key drivers ever been as positive as they are now? Probably not.

Anyway, what the chart above shows is the movements in the value of the Swiss Franc (browny/orange line), Gold (green line), Yen (pink line) and Aussie (white line). These are all indexed to 100 as at April 4th this year. What we see is that the Swissy is way out in front in terms of appreciation and that the Aussie is the laggard.

What does that tell us? For mine it suggests that it is the fundamental strength of the Aussie that is supporting it not buying for safe haven as some have said. It also means that if the American politicians can’t get there hous in order in the next few days there is no guarantee that the Aussie won’t revert to its usual habits and tank.

Time will tell.

Technically in the short term the Aussie has been volatile as you can see on the hourly chart above. The high of 1.1081 is now resistance and medium term support is 1.0880 which is wher the stop on my small longer term long is now from the break of 1.1012.

Longer term the line that Avid Chartist pointed out earlier in the week didn’t give way and this suggests in a longer term sense that while the Aussie remains in its uptrend we shouldn’t expect an acceleration and perhaps some further consolidation.

This would tend to fit with the subtle rebuttal of the “safe haven” notion that the chart above with Aussie, Gold, Swissy and Yen suggests.

It is going to be an interesting week coming up with some form of US debt ceiling resolution, or not, likely, the release of the RBA’s decision on monetary policy and a raft of data. Plenty of opportunities but plenty of risks.

Here is the AUD wrap I posted over at MacroBusiness on Saturday morning.

greg@lighthousesecurities.com.au

www.twitter.com/gregorymckenna

This blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If you do need economic, investment or financial advice we are happy to help.

Please Email the team at Lighthouse at info@lighthousesecurities.com.au or Greg directly on greg@lighthousesecurities.com.au

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  1. Australian Dollar Down – usual transmission resumes. | Lighthouse Securities - August 5, 2011

    […] it just doesn’t stack up and I see little evidence in market price action as I wrote in the weekly wrap last […]

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