by Chris Becker
It doesn’t take a lot these days to excite market economists, and when the Aussie dollar jumped from 75 cents to 78 cents, in March and then again in April, both times a bottom was called by the consensus commentariat. I just call it normal volatility, as monthly average true range (ATR) was tracking at a low 3.5 to 4 cents, a lot lower than the 2013-2014 average over 4 cents or the 6 cents plus in the post-GFC era.
Noise? No, but something to get excited about? Yes – if you understand that being structurally short AUD in your AUD-denominated portfolio is critical to its future health. Because it’s in rallies like these from so-called “bottoms” in a bear market where the risk/reward ratio is the highest, or in other words, less risky than trying to short the breakdown.
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