Share on Facebook Share on Twitter Share on Reddit + - Australian dollar forecast for 2013 By Deus Forex Machina in Australian dollar, Featured Articleat 5:48 am on January 21, 2013 | 27 comments Find below my prognostications for the Aussie dollar and other currencies for the year ahead. 2013 – trading the shifting landscape VFX.pptx Share on Facebook Share on Twitter Share on Reddit + - YOU MAY ALSO BE INTERESTED IN BOJ boosts Aussie dollar but not as much as Bill EvansThe Bank of Japan disappointed global doves Bill Evans: RBA will not cutFrom Bill Evans at Westpac: The Reserve Bank More hints of cooling Chinese propertyFrom Investing in Chinese Stocks. Beijing Kouk flip flops on rates againFrom the wind vane: It looks like I was wrong. Comments Gunnamatta January 21, 2013 at 6:10 am Really good read! I see the market as net long AUD, and dont see it heading much lower than where it is short of some major issue unfolding – and personally see the very lagging indicator of unemployment being the issue to rise first. Good themes, calling what you see – acknowledging what you dont know. It will be a great market until it isnt – and the hope (fuelled by Central banks) turns to merde. Deus Forex Machina January 21, 2013 at 7:09 am Cheers Yeah I think this will be a year of lots of small losses for my trades but a few big trends that will really run long and hard. Greg celestialspring January 21, 2013 at 6:14 am 50% accuracy for all forecasts (including mine and yours), odds are better when you flip a coin…not so many moving parts. Read your forecast with great interest only to find that I agree with only two calls, that of USD rally and YEN going lower. The other predictions, well, have too many influencing factors to be considered investment grade and perhaps a bit of bias when it comes to the precious metals..eh..? Deus Forex Machina January 21, 2013 at 7:07 am Hey – it’s too bad I couldn’t get the recording of the webinar because that chart is actually a straw man chart. Given this is more for traders than forecasters what I wanted to explain was that forecasts are often wrong because forecasters try to pick a time and a price – I have always thought this ridiculous and refused to give end of year or quarter forecasts when I was doing the currency strategy thing at the banks. So in the Webinar I said that often the forecasts can be right in price but not in time so we should see what people are forecasting but forget about when they are forecasting. Looking to milk the trade not the time if you know what I mean. The other thing I said in the Webinar which goes to your second point is that I am going to be wrong on the Precious metals for a while as the Fed’s goosing stocks continues but my view on gold is long term and $1520 is only first stop…Silver is interesting though – I might get my backside handed to me on that one. Cheers Greg Gunnamatta January 21, 2013 at 7:19 am This whole site could do with more video/webinar stuff and multidimensionalism drsmithy January 21, 2013 at 8:11 am I’m going to stick my hand up and say I hate videos and podcasts on these sorts of interactive sites. 1. They take too long to ingest – I can read much, much faster than I can listen. 2. I can’t easily watch/listen everywhere. 3. Flipping back and forth within a podcast to reference previous content is fiddly. 4. You can’t search/reference podcasts and videos. russellsmith55 January 21, 2013 at 9:36 am Have to agree. I’m limited by something of a ‘code of honor’ on how much internet bandwidth I use at work, so I avoid videos entirely during the workday. Text is better. flawse January 21, 2013 at 7:34 am Thanks for the post Greg I guess the best prediction, as you rightly point out, is that the predictions will be wrong…at least in timing! I guess the ‘goosing’ of both stocks and economies will go on until it can’t. I suspect whither Gold goes so will the A$ to a large extent. Note I am not saying the Gold price is the mover of the A$ just that conditions that are bad or good for either are the same for the other. Gunnamatta January 21, 2013 at 7:41 am and here was I thinking going long gold in AUD as a safety punt! (Perth Mint warrants) flawse January 21, 2013 at 11:26 am Gunna I hold Gold (physical)and some Perth Mint. It’s a safety strategy. Who knows? I’ve been in Gold a long time but the for last few years the profits have been limited by the A$ rise. I’d expect the same on a fall. HOWEVER…there are 64000 reasons why that might not happen. All these mad b….rds are going to continue printing. At the moment everyone including MB thinks this is the solution to the world’s issues. It’s a question of time. The Eric Jansen quote is extremely relevant. I’ve quoted it a few times but if you haven’t seen it I’ll dig it out. celestialspring January 21, 2013 at 5:25 pm me too…this post won’t change my mind celestialspring January 21, 2013 at 5:25 pm Thanks for you reply. Appreciate it a lot! I am not a trader but more of a long term investor. Borrowing from Kyle Bass,”Gold is simply a put against the stupidity of the policy makers”. And we know that stupidity is one thing there is an abundance of and is freely available. That gold call might be correct for a short term trade but the fundamentals for a bull run on gold / pm can’t be better. And as you noted, timing and price, mostly one can get only one right; sometimes one can get none right. Thanks. Deus Forex Machina January 21, 2013 at 7:07 am Thanks for corrections, Gunna. Gunnamatta January 21, 2013 at 11:32 am pzhalsta! Douglas January 21, 2013 at 7:37 am Greg The only problem with this AUD /USD forecast is that if one goes to the meme that currencies with high and rising current account deficits (CAD) generally fall. Now the US CAD is running at about 3% and possibly falling (with shale gas and oil inputs and effect of continued low currency) and Australia running at about 5% and rising with significant shut down of production and increased imports due to continued high dollar and possible partial consumer rebound due to lower interest rates. On the other side Australia M1 nearly zero for 2 years and US M1 huge with QE plus the interest differential still significant. Which will overcome the other and when?? flawse January 21, 2013 at 11:35 am When you find out Douglas let us know!!! You’ll find the US CAD is expanding rapidly with the signs of recovery. Ours is also expanding with lower interest rates….but as we all know CAD’s don’t matter because you can just borrow more or sell your assets. My opinion is that China are sitting on (apparently) some USD3.2T. They regard it as fundamentally worthless bits of paper.. which it basically is. They are seeking to exchange the bits of paper for good assets. So unless Aus goes in for a bit of asset confiscation like the mining super profits tax or other forms of such, we can expect the flow of Chinese USD to continue to buy our assets even though commodity prices in the short to medium term may not be crash hot. Maybe they’d buy more while they are cheap as they have no competition from Australians wanting to invest in them. So maybe for the foreseeable future we are looking at a high A$ as long as everyone keeps thinking we can save all economies simply by printing money. flawse January 21, 2013 at 11:37 am P.S. It IS a different matter to Greg’s trading advice! Deus Forex Machina January 21, 2013 at 11:42 am Just a note to all Not advice – thoughts. Cheers Greg Gunnamatta January 21, 2013 at 11:46 am we can expect the flow of Chinese USD to continue to buy our assets even though commodity prices in the short to medium term may not be crash hot. Maybe they’d buy more while they are cheap as they have no competition from Australians wanting to invest in them. As long as it is houses they buy then I feel quite sure it will be encouraged – particularly apartments in Melbourne Douglas January 21, 2013 at 11:56 am Flawse As far as I am aware the US CAD is trending down apart from a rogue figure last reported month but the Australian CAD and trade deficits are trending up in negative terms ie higher negative. With currency markets a break can happen very quickly. If one goes back to the fashion of holding pounds in 2007/2008 when it went to about 2.10 USD and 260 against the yen but then tanked and reached 1.35 aganist the USD and 120 against the yen very quickly. In 2007/2008 Fred Goodwin of RBS could do no wrong and the UK (even though the fundamentals were poor) was the golden country even though it had lost most of its manufacturing. As soon as everyone believes the AUD will stay up then it wiil turn turkey. Another way to forecast is to follow Stephen Koukoulas and John Edwards as in my long experience they have never got anything right and the Kouk is predicting 1.25 for AUD vs USD. Sorry to throw that in but it is my view of the world. runalltheway January 21, 2013 at 9:49 am Hi Greg, I’ve got a possibly naive question: On p.21 you mention (i) the Nikkei could reach 14,000 if it closes Jan above its current levels & (ii) USDJPY > 100. Do you have a view on whether the JPY will strengthen against the AUD, as well? I’m just thinking that an Aussie investor might not profit (much) from the rising Nikkei, because the movements in AUDJPY wipe out most of the gains. I’ve had this happen before with some of my int’l investments. Deus Forex Machina January 21, 2013 at 9:57 am Yes – not advice obviously and you’d need to talk to your adviser – but to benefit from the exposure to a potential lift in Nikkei but cut out the chances that AUDJPY does the same you would look for a fund or ETF which is hedged for currency movements. Cheers Greg runalltheway January 21, 2013 at 10:16 am Thanks for the quick reply! No, definitely not advice, just wanted to make sure my logic was sound. Thanks for posting the presentation – lots of interesting ideas. Phil January 21, 2013 at 8:23 pm The Yen will get devalued in the process, so watch out on the exchange rate, as in relative to the Aussie (AUD). Phil January 21, 2013 at 1:22 pm Thanks for the views. My 10 cents worth – the western countries have an agreed pact to print money to get through a decade long problem as consumption comes off (X Gen smaller than B Boomers for 10 years – think parabola, economic contraction – peak spending 46/47 years of age – do the math). The US has a distinct advantage as the USD is the reserve currency, so they can go harder printing money and in the process make their dollar weaker and exports more attractive (lower home consumption will force them to export and continue there exploitation of the rest of the world). For us in AUS? Well, we have to wait for the economic contraction as we have survived the initial forces well, but that won’t last as age demographics are against us as well – it is a matter of (short) time. Will we be allowed to print money? As in have our go at QE?? We will have to debase our currency to remain competitive with our exports. The biggest game in town is currency and that is what is unfolding, will anyone stop the game being played right now – who knows, you would think there is a limit to this game – god help us when the pin is pulled and debt cleaned out … Food for thought! Phil GSM January 21, 2013 at 2:12 pm Thnaks Greg and you put some very good points. I think one other significant trend may emerge in 2013 re : USD continued weakness. US and other CB’s will keep “printing” and lots of it to support lower bond prices and calming anxiety of stock declines. But not much gain left there and I’m not convinced confidence at the retail level will deploy to stocks. The conditions are ripe (as economies stabilise and build the perception of improving) that reliance on cash, RE and stocks will give way to attention increasingly turning to other assets for speculation and security. That is, commodities. Currency wars tend to be messy affairs. If the perception builds that the USD has recommenced it’s descent, commodities will benefit. Which could put a major brake on company earnings and stocks eventually. And, be helpful to PM’s. Watch the CRB is 2013. Jack January 22, 2013 at 12:18 pm Just musing, I believe the Jap’s are going to really ramp up the monetising of debt, so that the YEN will drop, their asset markets should rise, i presume the YEN carry trade to AUD would also ramp up and there would be increased pressure on the AUD to rise. Would this carry through to the AUD versus USD ? The other question is how will china react ?