The bears are piling up for the Aussie dollar

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by Chris Becker
The Australian dollar opened just below 76 cents against King USD last week, but ended on Friday more than 1.5 cents (or 150 pips) lower to finish closer to the 74 handle. To put that into context, it has lost nearly 6 cents since its high on Australia Day at just over 81 cents:

The weekly chart above shows an oscillation between areas of support around 74 cents and 81 cents, with the most recent move being the fourth iteration. The question on everyone’s lips in the wake of the trifecta of central bank moves last week – highlighted by a Fed that is determined to keep its agenda up and the ECB showing its full hand by staying mute for at least 12 months – is are we in for another rally?

Monthly chart says no:

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That is a classic bear flag pattern, formed from the last oversold low at the 67 cent level up towards the psychologically important 80 cent level, a time period where the RBA has cut interest rates by 50 basis points:

It’s taken the market all this time, plus a rejuvenated USD amid a growing trade war, to work out that the trajectory for the Aussie is clearly down. The RBA is caught between a rock and a hard place with monetary policy, and growth prospects for the economy are only being held up by fiscal fiddling.

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There are similar bearish patterns all over the crosses, including Pound Sterling (GBPAUD), Yen (AUDJPY) and even the beleagured Euro (EURAUD). My target against the USD is the GFC low at 63.5 cents as this realisation gathers pace.

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The MB Fund is overweight US equities that will benefit from a falling AUD. The first option is to use the MB Fund International Stocks Portfolio which is always 100% long as a part of your own asset allocation mix. The second option is to use an MB Fund tactical allocation in which we choose the asset mix for you, including exclusively international stocks, but with bonds and other assets as well to ensure a more conservative mix.

The recent performance of both is below:

If these themes interest you then contact us below. 

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The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance.