AUD and RBA

AUD and RBA

Just 2 days after the RBA delivers possible OCR Interest rate lower news, AUDUSD rises 64 pips from 0.7140 to 0.7202. All AUD pairs rose in tandem.

Explained by the rise is not rate cut news but short RBA interest rates dropped against an AUD rise. Such negative news especially an interest rate drop would normally see a dive in exchange rates but not as it applies to AUD.

Former RBA head Big Glenn Stevens and now highly capable Debelle operate under the assumption as stated in the recent RBA Minutes and many past Minutes, a lower OCR would assist in a lower AUD as has always been the RBA lower AUD preference.

The problem derives from AUD opposite correlations to RBA interest rates. Most nearest RBA maturities trade at 1.68 and experienced a severe drop since March persistent highs at 1.80.

Lower RBA interest rates also assisted in lower Australia commodities as evident form the RBA’s index of Commodity Prices. Big Glenn Stevens never understood and again from past Minutes why Commodity prices dropped yet AUD never followed but instead rose.

AUD exchange rates remain the outlier to interest rates and Commodities. Lower AUD comes when RBA raises interest rates but AUD Commodities rise as well. The big 3 to Australia’s economic health remains a persistent and multi year problem.

At some point higher AUD will ht economic news and possibly assist in a much lower AUD but to what satisfaction to please the RBA is unknown. Possibly a rare RBA Intervention is warranted to rightsize AUD’s Mis Correlations because as was highlighted in recent posts, AUD mis Correlations won’t rightsize itself and remains a multi mis price.

AUD High / Low Vital Break Points.

AUD/USD 0.7145 and overbought.

AUD/EUR 0.6309.

AUD/JPY 79.56 and overbought.

AUDCHF 0.7135 and overbought.

AUDCAD 0.9504 and overbought.

AUDNZD 1.0556 and slight overbought.

 

Brian Twomey

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