Inside the Currency Market: AUD/USD

Last RBA statement, low commodity prices due to increased supplies, East Asia and China slowing, Terms of trade falling, economy slooowly expanding, yet GDP slow overall, employment increasing. Inflation contained but target seen in 1 – 2 years, Low OCR borrowers increasing, Housing increased, construction increasing from Housing.

Index of Commodity prices fell 1% in September, 2.7% in AUD terms led by declines in Lamb and Coal yet Iron Ore increased, a main staple for Australia.

Like New Zealand, Australia increased down payments for housing and helped so far but only pockets of good exists such as Sydney and Melbourne. If terms of Trade are falling, means AUD Tradeables V Non Tradeables inside the CPI numbers has severe problems, same for New Zealand. Its big warning to lower OCR and the main reason to do so. Lower OCR lowers AUD and in turn assists in trade expansion, to meet CPI target by increases in Tradeables. Tradeables are production within Australia used to ship overseas, mainly US and Asia. Australia is a fighting nation and will survive this downturn as the majors figure out their difficulties.

AUD remains the same story as previous. The sell point is 0.7281. My own MA system reveals 0.7260 and 0.7303 are vital breaks. The bottom is 0.7223. AUD is stuck in long time ranges and the range trade is the only way to view AUD.

AUD above 0.7303, next 0.7380 and 0.7382. Below 0.7140 and 0.7138, 0.6969, 0.6957.

Brian Twomey, Inside the Currency Market, btwomey.com

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