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Money Matters
- NZD/AUD - Update
- NZD/AUD - Time to buy again?
- Chart of interest - China stocks and AUD
- NZD and AUD - Key Levels
- GBP/AUD - Divergent Central Banks
- USD Pairs - an intriguing week
- USD Pairs - an intriguing week (part 2)
- AUD/USD - Downmove should continue
- Dr Copper - Another clue
- AUD/USD - Is the correction over?
- View archive...
Money Matters
Viewing entries tagged with 'AUD'
NZD/AUD - Update
All
A couple of the local banks (WBC, ANZ) have today put out ‘buy’ recommendations out on NZD/AUD in line with my thoughts (NZD/AUD – Time to buy again? – dd 25 May). The ANZ report in particular has some excellent material explaining why the NZD should be higher. Get your hands on it if you can.
However, there is one noticeable development above all, that has caught my eye and screams that the NZD is undervalued against the AUD.
That is, the increasing number of Australian firms closing arms of their business in Australia in favour of increasing operations here in NZ. I heard of another example this morning on the radio but can’t for the life of me recall who it was. However here is an Australian article dd 18 April (a little old) that explores the reasons why Woolworths, Imperial Tobacco and Heinz are part of this trend.
http://www.smh.com.au/business/australian-jobs-on-the-move-to-nz-20120417-1x5jv.html
This trend is developing because the NZD/AUD is so low and the very fact that this is happening will, in due course, bring the cross rate back to higher levels (long term average is 0.8400). Indeed one could argue that if Australian business fully embraced this new trend then the cross would ultimately be 1:1.
Regards G.
NZD/AUD - Time to buy again?
All
There is no doubt that world growth is slowing and early indications are that China too is slowing at a much faster rate than has previously been anticipated.
In this environment, the one currency that looks the most vulnerable to me, is the Australian Dollar (AUD). Over the last 4 years the Aussie has been a huge beneficiary of major investment flows given it’s relatively high yield, its position as a proxy for Chinese growth and its AAA sovereign rating. The ‘long’ positions must be enormous.
In November the RBA started cutting interest rates. To date they have cut a full 1% off the cash rate from 4.75% to 3.75%. During this time the RBA have remained relatively upbeat stating that although the economy was clearly ‘two speed’ (East Coast retail, finance and housing industries very weak – West/North mining booming) the spend from on-going mining investment (capex) would hold the economy in good stead. However, in the last speech on record, the RBA noted that the flow through from mining hadn’t supported the economy quite as much as they expected. Hot on the heels of that significant statement the giant corporate BHP advised that their proposed $80 billion capex program was to be pared back as they saw demand for their products waning. Not good, the last bastion of Aussie growth being undermined (pun intended).
Thus more rate cuts look likely in Australia over time. Contrastingly, whilst the data out of New Zealand has been soft of late, the hurdle to a RBNZ rate cut from the already ‘emergency’ setting of 2.5% looks very high. The likely fillip from the Canterbury situation certainly a major factor in that view. The NZD/AUD is historically very sensitive to a narrowing interest differentials. And this cross is a nice diversification away from pure AUD/USD if you’re already on that trend lower.
Technically the chart looks supportive of this view. The uptrend line off the ‘double bottom’ low of late last year looks to have held nicely this week.
NZDAUD – Click here to view chart
Cheers G.
Chart of interest - China stocks and AUD
All
Chinese shares have been heavily beaten down over the last 2 years. However yesterday’s action looks to me to be a potentially significant break higher.
Chinese Shares – click here to view chart
Taking a look at AUD/USD I have the AUD/USD testing, and rebounding, off CRUCIAL support at 1.0280 last night.
AUDUSD – click here to view chart
I wonder if the China stock move may come into play going forward (U.S. shares of course are doing very well too with the Dow at 4.5 year highs) overriding the recent focus on the big RBA rate cut which is somewhat old news (and the accompanying statement was, well….. rather neutral).
Regards G.
NZD and AUD - Key Levels
All
The NZD and AUD have proved amazingly robust overnight in the face of a significant downturn in global sentiment. The overnight price action looks to have created corresponding CRITICAL levels in both pairs.
NZD/USD – Classic ‘uncertainty’ Doji yesterday. The pair had a wide range overnight effectively finishing mid-range near its open. A break of the low at 0.8085 would likely confirm the end of the range (particularly if the AUD/USD confirms as per below).
NZDUSD – Click here to view chart
AUD/USD – The overnight ACTION seemingly confirms the 7 month uptrend boundary.
AUDUSD – Click here to view chart
Whilst I remain bearish, the collective price action is supportive for now and not confirming of my view.
Regards G.
GBP/AUD - Divergent Central Banks
Hi all
The minutes from both the RBA and the BOE have been released this week and the circumstances of the two central bank are startlingly different.
The RBA stated “a case could be made for further easing” and clearly identified the Q1 inflation data due on the 24th as a likely catalyst for such action. The market expects an outcome close to the bottom of the RBA’s 2-3% inflation band whereas only 2 quarters ago the rate was above the top of the band.
The BOE in contrast admitted “ inflation was not falling as quickly as policymakers had hoped” and that“inflation could stay above 3pc into the second half of this year”
With the range bound nature of the USD pairs this divergence in central bank expectations makes this a lovely diversification trade.
A look at the charts is very enlightening. The pattern in GBP/AUD terms is what in classical charting is called a ‘cup and saucer’. In effect what you are looking at is a tea cup with handle. I don’t think I can recall ever seeing one so perfect.
GBPAUD – click here to view chart
Now for a bit of perspective this is happening at the (potential) end of a massive 10 year range making this a great trade for the value investor.
GBPAUD 10 Year Range – click here to view chart
Identifying trades is only one part towards the successful business of trading. Call in to discuss strategies and position sizing to benefit from this circumstance.
Regards Graham
USD Pairs - an intriguing week
All
I used the term ‘intriguing’ in my headline but I could just as easily substituted ‘nasty’. My sell recommendation in the AUD/USD was in the money by 100 points the very next day but two days later the AUD/USD was 220 points higher. Only the nimble made money.
Overnight the world seemed to go mad on embracing ‘risk’ but the world economies that I read about look decidedly troubled. Personally I am a bear on global growth which is suggestive of equities going lower and presumably ‘risk’ being shunned. However the charts as I interpret them do not support my view for the moment. That leaves me side-lined.
A few charts of interest that I am watching.
Dow Jones Index – I interpret this chart as the beginnings of a new bear market. The 7 month up-trend has been broken and the rally of the last two days I believe is just a re-test of the break down. Also bear markets are noted for their volatility and where you can see the grinding nature of the last few months up, the latest moves have been very ‘noisy’ (big down, big up).
Dow Jones – click here to view chart
NZD/USD – The kiwi is historically VERY highly correlated to the performance of U.S. shares. And yet this chart absolutely contradicts my equity market view right now. Right now, if the kiwi closes the week above 0.8261 then a ‘bullish engulfing week’ would be suggestive of higher ahead.
NZDUSD – click here to view chart
Not only is the kiwi showing ‘bull’ signals but EUR, AUD, GBP, Gold and Silver are all displaying positive signs on my short term models. Usually I’d just follow them but for some reason I can’t shake the ugly feel I get from reading about the prevailing fundamentals.
Personally I’ll be sitting the week out and looking for more clues come Monday.
Regards G.
USD Pairs - an intriguing week (part 2)
All
Friday’s price action is highly suggestive that my preferred ‘negative equities –slowing global growth’ theme (see below previously) is the prevailing wind. I’m suggesting selling EUR/USD here and now with sell signals in NZD,AUD, Gold and Silver very close at hand.
Technically if you look at the ‘risk’ complex they are all very ‘trend ready’……………..that is they have been confined to very narrow ranges (and thus very narrow Bollinger Bands) for a month or so and that is typically where the best moves spring from.
NZD/USD
NZDUSD – Click here to view chart
EUR/USD
EURUSD – Click here to view chart
Gold and Silver look on the edge of the precipice too with a move through last week’s lows likely to be a precursor to substantial falls.
Regards G.
AUD/USD - Downmove should continue
All
Just a quick note first up this morning. The AUD/USD pair should continue to fall today following the significant ‘risk off’ theme overnight. With the Dow recording its largest fall this year, the IMF suggesting commodity prices will fall and China trade will slow, the AUD should be an easy target.
The charts shows not only a ‘bearish engulfing day’ (my all-time favourite indicator) but a break of the 7 month uptrend support line (NZD has broken its respective support too).
Dr Copper - Another clue
All
Since my piece of last week ‘Watershed USD strength – digging deeper into the FED speak’ market action has been somewhat mixed with the long standing relationship between a soft USD and stronger global share markets breaking down. So what is going on?
One clue could be the performance of industry integral, base metal, Copper (or Dr Copper, PHD as Gartman likes to refer to it). The following chart documents the rather large 6.2% fall last week.
The fall suggests traders see slowing global demand (and less scope for a growth supportive U.S FED?). This should be a poor sign for the likes of NZD/USD and AUD/USD with AUD and Copper being very highly correlated over the years.
G.
AUD/USD - Is the correction over?
Hi All
The correction down off the 1.08 highs in the AUD/USD (and correspondingly the NZD at 0.8470) started after FED chairman Bernanke made no mention of QE3 in his semi-annual congressional testimony in early March. Through this period the market has concluded that the FED is finished with super easy monetary policy. I have constantly disagreed with this notion. Overnight, and on Monday, Bernanke has been quite clear. He views this recovery as weak and the recent improvement in jobless numbers as non-sustainable. My interpretation is that super easy is here to stay for a considerable time. Indeed the last FOMC minutes reaffirmed the commitment to that until ‘late 2014’.
Another focus affecting the AUD (and NZD) has been that Chinese growth is slowing. Firstly the Chinese themselves revised down their growth to (a still whopping) 7.5% and recent data releases have been weak. However I will contend that the very lengthy Chinese New year celebrations in the most important of all years (Dragon) are impacting on these recent releases and that we will soon see an improvement (Sunday’s PMI release?).
Looking at the charts, overnight the AUD/USD made a strong comeback precisely off my up-trend line off the October 2011 0.9400 low.
My suspicion is that the time to buy is upon us for a return to the dominant up-trend. That said, there is significant event risk in the form of the Chinese PMI released on Sunday and no doubt digested in the thin trading conditions of Monday morning.
A specific trade recommendation has been made available to our client base. If you would like to know more, please feel free to contact us.
Regards G.
