As a mate of mine just said to me – the Aussie dollar looks like a lead canoe this morning and my thoughts on it heading below parity remain undiminished.
Here is the chart of how it looks at present and nothing in the fundamental outlook has changed from the piece I wrote the other day. The target is the green zone which is the 0.9960 level I identified a while back now and also the 0.9986 level which is the 138.2% move of the recent selloff then bounce that has now given way. This remains my initial target:
But just like last year when I formed the view 3 year swaps were going to fall precipitously, so I am now starting to get the tingling that the Australian dollar has had its time in the sun and will, over an extended period head back toward 0.9000 against the USD. As I say, this is a big picture, long term view and I am working on my thoughts so this is just a warning about the Panglossian expectations of Aussie dollar preeminance.
Anyway, here is a chart a mate from one of the big banks sent me which highlights how precarious the Aussie is on the weekly charts. He reckons 0.91 is starting to look likely as the very long run 200 week moving average:
This is a long run chart and captures the move from 0.6249 to last years high. A normal retracement of such a move would be 38.2% which brings it back to 0.9225 – remember this was my target last year when we got into the 0.9300/0.9400 region and it would have to be something catastrophic that drove it through here and the 200 day moving average.
The Aussie is a safe harbour not haven, and if the current economic storm gets worse, the Aussie will no longer be a port of safety for international investors.
I’ll update my view through time and for the moment the 0.9960/90 region remains my initial target both fundamentally and technically.
Have a great day
Gregory 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.