Two main drivers to AUD/USD are AUD/CAD and AUD/EUR. EUR/AUD lost its way this week at EUR/USD Corelation at 18% and negative 76% V AUD/USD. The best EUR/AUD offers is +76% as AUD/EUR to AUD/USD. EUR/AUD is naturally a wide ranging pair but its also contained by AUD/USD and AUD/CAD and AUD/CHF.
What contains AUD movements overall depends on the RBA triggers it offers to its currency pairs.
Traditionally, pure commodity prices drove AUD. But AUD wasn’t falling based on its commodity counterparts. Its why Glenn Stevens called for lower AUD prices over past statements but the lower AUD never materialized despite further falling in commoditiy prices.
At this point and in desperate need to export at lower AUD prices, Guy Debelle jumped on the redesign of the AUD interest rate system, a system ongoing. Why the sudden jump is not only to match the remainder of the world in its redesign but AUD Import and Export prices are out of sync as well as its Trade Ables to Non Trade Ables as the main measure to AUD CPI. I see the RBA OCR cut as one and done but done to force the exchange rate lower. The new system will take good care of the exchange rate as the RBA is a smart bank and matches its counterparts at the RBNZ.
What emerges is AUD as traditional pure capitalist markets as has been the case in AUD since its founding in the 1700’s. What should emerge economically is a more robust economic system as the exchange rate was figured in relation to AUD main economic drivers.
AUD/CAD connection to AUD/USD is based on its long, long standing tradition dating back to trading in Spanish Holy Dollars and other forms of currency exchange. Canada and Australia share the same calculations to its Total Return bonds to again carry the tradition to the modern day. AUD/CAD materialized as a natural driver in the modern day.
AUD/USD. Bottom. 0.7186. Range breaks above 0.7302, 0.7411, 0.7459. Note 0.7302 remains since last report.
Range breaks below 0.7144, 0.7039, 0.6994.
Upper targets 0.7264 and 0.7254 and reversals. Targets overall can change by as much as 20 pips as we head into American markets. Its highly doubtful because EUR/AUD has problems. Watch 0.7302 range point.
Lower targets 0.7204, 0.715 and 0.7186 Bottom.
AUD/CAD. Bottom 0.9353. Range break above 0.9523, 0.9598 0.9665, 0.9768. Main drivers 0.9598 and 0.9768.
Range breaks below 0.9317 and 0.9121.
Upper targets 0.9453 and 0.9441. Below targets 0.9376, 0.9364 and Bottom 0.9353.
AUD/EUR. Bottom 0.6463 = 1.5472 EUR/AUD.
Range breaks below 0.6534, 0.6631 = EUR/AUD 1.5304 and 1.5080.
Range breaks above 0.6392, 0.6298, 0.6258 = EUR/AUD 1.5644, 1.5878, 1.5979.
EUR/AUD Big Break 1.5649.
Lower Targets 0.6499 and 0.6491 = EUR/AUD 1.5386 and 1.5405.
Upper targets 0.6446, 0.6438, 0.6463 Bottom = EUR/AUD 1.5513, 1.5532, 1.5472.
Brian Twomey, Inside the Currency Market, btwomey.com