Australian Dollar Outlook – near term

February 14, 2012


I heard the other day that Australian Corporates have been buying a little Aussie lately which struck me as odd given how high it is but equally suggested the fear of further rises that is permeating Corporate Australia as I have written a few times in the past couple of weeks.

So given the Aussie has been very strong lately and I just wanted to give a quick update on what I think.

The key is that it is still biased higher long-term but for the moment I think that the risk rally globally is mature and needs either a time or price consolidation as I wrote yesterday.

To the charts:

The above chart is the hourly I work off and you can see that the Aussie has been trending strongly since early january before last weeks failure to hold above 1.08. Having fallen below the steeper up-channel it then fell through the second channel before the bounce. The key thing for me in this chart is that the old uptrend has become resistance now as we saw in the last 24 trading hours. This suggests to me that the Aussie is likely to head toward the 38.2% Fibonacci retracement level of the start of this up move from 1.0146 which comes in at 1.0577. I’m not bearish per se but it would seem natural to me that this level gets approached and tested.

Equally suggesting the market might be a little long is the positioning of futures traders as reported by the CFTC via Bloomberg. As you can see in the following chart the net long positions of futures traders is pretty high and has a loose correlation with the moves in the Aussie.

Now futures traders make up a tiny proportion of total FX market flow and this is no different in the Aussie Dollar – but I always look at the data on positioning because of the way many futures traders trade and what it suggests.

To me that is time for consolidation.

Indeed my Double Bolly Band strategy which has been long since the 1.03’s got cut out on Friday night on the move down through the 15 day moving average at 1.0674. Obviously the Aussie has performed better than that over the past 24 hours and obviously the trend still hasn’t turned but even on this very messy chart above (sorry its a messy trader chart this one) it looks to me biased toward the 1.030/70 region.  

Could it be a head fake and could I be talking it down to buy it again – of course. But for  the moment my momentum trading strategies are out of the market.

Have a great day

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

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One Comment on “Australian Dollar Outlook – near term”

  1. urban daydreams (@ontheturps) Says:

    Agree – think AUD can move lower, and even a move to 1.0250 or thereabouts is not a bear market, just a great chance to load up for the next run…


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