Aussie Dollar – where to next?

February 1, 2012

FOREX

The Aussie Dollar has once again overnight failed at recent resistance just below 1.07 as you can see in the first chart below.

20120201-055013.jpg

This is similar to last week’s failure so the question is what next?

Clearly January has been a great month for risk assets. Soc Gen’s Credit Trading guru – Suki Mann – put it this way this morning.

We close our credit in January looking back at a superb month for the asset class. The numbers are impressive. They show that we’ve had the 5th best month of tightening in credit spreads ever, previously only bettered on three occasions in 2009 and again in October 2011. The principal driver for the stellar tightening was the financials rally and that can be credited to the confidence boosting LTRO which has alleviated the liquidity and funding concerns most banks may have had across the euro zone. This has bought the market much time and given all that sidelined cash excuse enough to get involved – and it has indeed done so in outstanding style

It’s that last part of the quote above which has really got things moving – LTRO plus sidelined cash has, at least in January, pushed risk assets sharply higher. The Aussie Dollar has been a primary beneficiary and medium term I think this more ebullient mood in risk assets has legs.

But nearer term For mine though I think the market is a little vulnerable to a pullback in risk appetite and sentiment in the next little while. I saw a chart the other day of the long run history of the US economic surprise index which showed it had moved into the extreme positive territory meaning that data has exceeded expectations for some time. But expectations move with the data and this extreme reading suggests there is a chance, high in my estimation, that the data now undershoots expectations a little – last night’s US consumer confidence for example.

What that means is that risk assets might need to consolidate a little.

Aussie Yen has already hit my initial target of 81.00 from last week and Monday’s piece but the Aussie Dollar only fell as low as 1.0520/30 not quite into my 1.0450/1.0500 region. Semantics really when you can see the very obvious uptrend below and when my Double Bolly Band model is still long but I do expect a move lower before any sustainable move toward last years highs can be attempted.

20120201-061432.jpg

www.twitter.com/gregorymckenna

Please remember these are not recommendations for you to trade these are my views and I have my risk management tools and risk parameters that you do not have access to. Thus, 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

, ,

Subscribe

Subscribe to our RSS feed and social profiles to receive updates.

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: