RBA king hits self as Australian dollar soars

See the latest Australian dollar analysis here:

Macro Afternoon


Another warm congratulations to the RBA this morning from BofAML:


AUD/$ is set to resume its bull trend. The almost 2wk old contracting range/Triangle is drawing to a close. The impulsive gain from the 0.8658 Jan 24 low says upside targets are seen to the confluence of resistance between 0.9269/0.9338. Further supportive of the bullish view is the potential for a short squeeze, as positioning remains at bearish extremes. Pullbacks should not break 0.8936 and can’t close below the 50d at 0.8903.

That king hit the RBA landed on its own jawbone has us out good and proper:



My medium term view remains unchanged but in the meantime this is really hurting the economy.

Houses and Holes
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  1. I guess we need to look on the bright side.

    A stronger $AUS is important for a CAD country that is determined to maintain course and attempt to drive economic activity with hundreds of billions of household debt and government debt sold to overseas buyers.

    Yes, it is very harsh on the export and import competing industries but everyone knows that is a small price to pay to make room for our true growth industries – bidding up asset prices, reality based lifestyle shows, digging up dirt and selling each other flat whites.

      • Sorry – my foot long mutton chops simply demand a flat white and something thoroughly de-gluted. I cannot get the Dragster out of 1st gear without a perfect pick me up.

      • @Phf ha ha ha. To be honest everytime I go to the cafe, probably twice a day, I never ever see anyone else ordering espressso. EVER.
        Must be a Southern European thing….

    • ‘…Especially in the emerging markets, the non-productive “terminal phase” will more conspicuously expose Credit inflation’s myriad consequences. These would likely include traditional consumer price inflation, along with problematic Bubbles, inequitable wealth distribution, corruption, and attendant social stress. An increasingly maladjusted economic structure will require ever-increasing amounts of (non-productive) Credit, at great cost to financial and economic stability. Growth will slow even in the face of ongoing Credit excess. Traditionally – and we’ve witnessed this dynamic over the past year in the likes of Brazil, India, Turkey, Russia, Argentina, etc. – the deteriorating macro backdrop will see a problematic reversal of “hot money” flows. A weakening currency will tend to exacerbate inflationary pressures, while fostering ongoing destabilizing excesses within the domestic Credit system.’

      Whilst we are not classed as an emerging market we are rather closely aligned to and dependent on EMs (well one in particular if indeed it is still classified as such). The above excerpt from Prudent Bear may not need much extrapolation to apply much closer to home?

  2. reusachtigeMEMBER

    I agree with you Macrobusiness fellows. We need lower interest rates. It will help the housing recovery along. You guys have made the right call.

    • Agreed

      Here in Melbourne we are losing jobs hand over fist, maybe we could set up our own rba-rbv as we need rates at emergency low levels, even some QE would be nice right now

    • Yes @reus, for it would not be a recovery unless property prices double 7 years from the previous all time high.

  3. So some investment bank (admittedly a large one) says buy AUD and the whole world jumps in?

    They need to trot Captain Glenn out today — not tomorrow, not next week — with a dire warning about the consequences of a strong dollar.

    • ‘Dire warning’?

      A falling $AUS is Gov Glenn’s worst fear.

      It would put upward pressure on interest rates and stress test the asset price ice sculpture he has been working on all summer.

      • +1 real living is inflating through the roof. I just got a 20% belt to my life/disability insurance wtf?

        Add tradable to this and we will be soaring – they probably will drop rates, because all they care about is the housing construction sector, the only industry we can’t offshore.

        RBA have made a dogs breakfast of it – when are they going to apologise?

    • “They need to trot Captain Glenn out today …”

      … put him in stocks in the town square, and supply rotten (doubtless imported) fruit for the natives to hurl at him.

  4. mine-otour in a china shop

    Are people also positioning for the next set of ABS data releases – CAPEX expectations and Q1 GDP?

    Could be a rollercoaster ride on the domestic data front, and alongside the overseas volaitility with the taper taper and China easing waves, it makes for interesting times.

    A great time to have a free punt on the worlds favourite gamble currency.

  5. Free_Market_Delusion

    Seems to me the RBA have backed them selves into a tight corner and will surely realise the limitations of interest rates as almighty levers of the economy.

    The decision will soon be based on the not what’s best for the country but what is least worst for the economy!

    Uncharted territory IMHO they don’t know what they are doing the best of times let alone now and into the future.

  6. Am I supposed to be impressed by this tiny increase ? I expect the AUD to weaken more in the comning months.