No surprise really that toward the end of the week, and after a week like we saw, that the Australian dollar rallied hard up to 0.9880 then failed. It seems to me that the short term trading nature of the market is the key driver at present and while on conventional analysis the Australian dollar has done much much better than it should have, the reality is that its fundamental and technical supports have been kicked out from under it.
Non-farm payrolls in the US were better than expected but have you seen the under employment? 16.5%, that’s truly ugly and you get a sense that some Amercians aren’t waiting to be told the economy is back in recession because they are having their very own depression. [NB this paragraph was edited to delet an erroneous add back of unemployment to underemployment]
Add in ongoing turmoil in Europe with UK and Portugeuse banks being downgraded, with Italy being downgrade by Fitch along with little old Belguim and you get a sense that there is still much wood to chop for any global recovery.
But last week’s price recovery in the Australian dollar and other risk or punting style assets was all about a step back from a pessimistic crescendo where the market pricing had simply moved a little too far from the reality. Well perhaps not in the case of the Australian dollar – but it just ran out of sellers.
So where are we now?
The Australian dollar is in a downtrend but last week’s lows were right on the bottom of that channel, a recovery is and was in order. Have we seen the extent of this recovery with the move up to 0.9880 on Friday night? Hard to tell. My personal view is that I am wanting to sell rallies as they occur as I expect that last week’s low will eventually break, opening up the way for a deeper retracement.
The charts look to me as if we are going to retrace lower this week but I’d doubt we’d break the lows just yet. So more a rangy week than a directional one. Having said that though anyone with even a casual affininty for Elliott Wave analysis can see the wave count since the 1.1080 high in July.
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.