The break of market leader EUR/JPY 132.51 formalizes a vital inflection point in currency markets I’ve been watching for the past year. Its called generally Realignment but its an entire structural readjustment of markets and currency pairs. Realignment represents a new period that will last as little as 5 years and as much as 10 years. Every pair is affected and it means more very high volatility as the market settles into its new period. Market adjustments are price adjustments and can take anywhere from months to even 1 full year to settle fully to offer the past 2 examples. The major pairs like EUR/JPY adjust quickly but a pair like AUD/CHF takes much longer. So far what I see in realignment is AUD, NZD and EUR type pairs lower for many years. We are finally witnessing a clear delineation in USD Vs EUR monetary policy. This confirms further Realignment and the 3rd since years 98 and 2000.
Two big points for AUD/USD are falling lines at 0.7223 and 0.7285. The RBA like the ECB is working hard to drop AUD much lower. An interest rate drop appears to be on the way. AUD movements are not tied to EUR/USD as Correlations are minus 40% but highly correlated to NZD at + 79.
Targets near term are 0.6894 and 0.6864, further out 0.6509 is the current bottom.
AUD/USD. Bottom. 0.7066. Range break above 0.7148, Below 0.7054 and 0.7030. Overbought sell point 0.7128. Strategy. Longs above 0.7105, target 0.7128. Points on the way up, 0.7113, 0.7118, 0.7123, 0.7128.
Shorts below 0.7100, target 0.7083, then 0.7066 bottom. AUD strategy is continue short, sell rallies and look for much lower prices.
Brian Twomey, Inside the Currency Market, btwomey.com