Big Glenn Stevens surprisingly reported Broad Money in the RBA statement. A time once existed when Bank research reports contained premiere focus on interest rates and money supplies. Societe General was one of the best until they fell into the trap as all others into the daily Bloomberg market reporter so to be seen with inane information. The smartest person in the room these days is not the smartest person in the room. Today, Danske bank is the smartest, hardest working bank out there. I always had big respect for these guys.
M1 remains a premiere indicator as to not only levels but velocities and today especially velocities in a negative interest rate world. An example. Danske bank focus on EUR/USD longs was derived from low M1 and low velocity readings. Its a smart trade. Each nation shares a unique relationship to its M1 counterpart. For EUR/USD, low M1 is a rising EUR. But bottoms and tops are found in M1 readings as it must be factored and possibly set on a chart to see the picture for those that require a picture. ECB M1 for February dropped 10.3% February, and Minus 10.5% January. Its holding EUR from its drop. Eventually, M1 will rise so EUR/USD will begin the drop. Low M1 sees low velocities generally. Velocities warns how fast or slow will be the rise and fall. But both viewed either by itself or together supports a higher EUR/USD and despite a drop in interest rates. Somewhere the interest rate supports the Money supply and velocities. Its a smart trade taken together for interested.
The RBA M1 currently stands at 319.5. In June 2015, M1 stood at 308.7 and first ever 300’s. In 2008 crisis, M1 stood at 233.0. As M1 rose, AUD dropped. Now credit borrowings was supported as June 2016 was 0.5, today 6.6. Supported by heavy borrowing for higher required down payments for Housing. Housing holds Australia’s economy. But AUD Bank Bills are not Eonia and Euribor as Europe prices V Australia yields share a vastly different relationship, for the most part, its negative.
AUD Big points are found at 0.7632, 0.7625, 0.7620, 0.7618, 0.7611, 0.7607, 0.7598. AUD is close to bottoms. Ever notice every time Big Glenn Stevens says AUD/USD to high, it rebounds. That’s the risk as AUD/USD is far from a top. Don’t push your luck on further shorts. The damage has been done, for the most part. Now overall, sell rallies and be patient cause AUD is not EUR/USD.
Target is found at 0.7624, Failure point 0.7613. Pip ranges are long term 20 pips V 16 short term. Upper most Targets, 0.7638, 0.7654 and 0.7665. This pip range point says range range for the day. Range points above 0.7645, 0.7749, 0.7856. Below 0.7544, 0.7443, 0.7373, 0.7340. AUD is at and close to bottom ranges. Longs must clear 0.7557 then 0.7594. The trade is range focus.
Brian Twomey, Inside the Currency Market, btwomey.com