AUD/USD: Levels, Ranges, Targets

If the BOE drops interest rates then the BOE would share the same distinction as the RBA and BOJ as both nation’s interest rates are low, under performing and strastospherically oversold. The opposite is found in massively overbought Fed Funds.
The only bright spots for Australia and the RBA is found in the statement as GDP is expanding at a moderate pace and exports are expanding.

The lower OCR quantifies as GDP V OCR Correlates to minus 23 and minus 11 in shorter term averages. The conundrum in this scenario and mentioned in the statement is a higher AUD complicates the lower OCR, higher GDP equation as GDP to AUD/USD Correlates to minus 11 and + 11 in shorter term averages. The tradeoff for the RBA and previously mentioned and why lower OCR is to remain focused on GDP and Export growth as the only rescue to weather the past stimulus destruction created by the major central banks. Since Australia’s founding in the 1900’s, RBA independence in the 1960’s and free float in 1983, Australia fought, survived and won many challenges. Fortunately, AUD is overbought.

The last base reported was located at 0.7318, today the higher base is found at 0.7434. If 0.7434 is not enough to hold overbought AUD/USD in higher territory then 0.7460 and 0.7467 remain as big breaks to see AUD lower. Both points held AUD higher and overbought for many weeks. To see a run to 0.7467 then 0.7503 must first break.

The biggest break in AUD and most important is 0.7803. A break higher then AUD heads far higher over time. A break destroys the RBA higher GDP, lower AUD equation as reason to lower OCR. The minefield ahead to see AUD 0.7600’s is located at 0.7577, 0.7590 and 0.7595. Then first targets become 0.7610, 0.7621, 0.7630 and 0.7638.

Brian Twomey Inside the Currency Market, btwomey.com, Trade signals brian@btwomey.com

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