Find below an interesting video and a great summary of the current situation from Bloomberg asking if the Australian dollar is on borrowed time.
I agree with the points being made in the clip and have thought for some time that the worm has turned for the Aussie as perceptions about Australia and the Australian dollar have changed with the fall in bulk commodity prices and the recognition that the economic future for the nation is not as rosy as some had previously thought. Equally the RBA is undermining support further with its rate cuts.
In truth though for many months, perhaps a year now, there seems always to be a good reason to sell the Aussie – yet it remains better supported than the fundamentals have warranted and keeps bouncing back like my old Bozo the clown punching bag. No doubt it has been held up by the general global risk rally.
Is that about to change?
Possibly, nay probably.
The Australian dollar had a shocker in the past 24 hours – it tried all day Friday to get above the previous day’s highs at 1.0271 sitting in the 1.0260’s for much of the afternoon before Europe opened and the selling began taking it all the way back to a low of 1.0151, right on my support level identified earlier this week. It closed at 1.0181.
The outlook from here is looking bearish based on my technical indicators with JimmyR and the ADX suggesting further downside. But as ever preempting a break of a range is fraught with danger. However a close next week below 1.0150 suggests the AUD is heading back toward 0.9960/70. We’ll see where the real support is then.
Twitter: Greg McKenna . He is the Chief Investment Officer of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
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