Australian Dollar oversold?

May 23, 2012

FOREX

I am not walking away from my call on May 9th  that the Australian Dollar is going to head toward 90 cents but there seems something wrong with today’s very aggressive selling which has knocked it all the way to a low of 0.9742. Sure it is broad based USD strength in Asian trade today,

  • Gold is off 1.15% to USD 1559.75 oz
  • the Kiwi Dollar is off 1.23% to 0.7516
  • the Hang Seng is down 1.73% to 18708
  • ASX 200 is down 1.07% to 4077.3 and
  • S&P 500 futures in night trade are off 0.5% to 1308.20

So realistically you’d have to say that thinks are going my way, that even though comments about the potential Greek Exit from the former Greek PM overnight is what ignited the reversal of fortune for the Aussie and other risk trading assets it is the rerating of global growth that is really kicking the Aussie hard.

And things are going my way, the market is reappraising growth as I have been suggesting and even though my tactical view that we might get a bit more of a bounce from the weekend and Monday’s pieces proved incorrect and ephemeral that I should remmber the old Jesse Livermore axiom and just say in a bear market be bearish.

And it is a bear market for the Aussie –

Here is the chart I used for the 90 cents piece on May 9th

And here is how this chart looks now

The trend line goes back to the start of the rally in 2009 and as this is a weekly chart the break is decisive in the overall direction of the market – which is now biased lower.

So I shouldn’t be fighting my own call on the basis of short term oversold conditions you can see in the chart above on the hourlies but I just can’t help myself and tactically as a short term trade I’d be catching the falling knife and buying for a bounce.

A USD Index close tonight above 82.00 and a Euro close below 1.2640 would however tell us all that the run to 0.9430 has begun.

Good Luck but remember the disclaimer below please.

Greg McKenna

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 or needs.

If however you do need advice on Investments, Economics, Funding and Liquidity, Interest Rates and Forex and Derivative markets 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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