Ralph Shell @ 1:05 PM, Wednesday August 11 2010
The Australian Dollar has had several nice trending moves this year, and we wonder if we are beginning a new move to the downside or merely backing off for a ' well deserved correction.' The most recent move began on July 6th at .8525, and rallied to a little over .92. Currently we are selling off and trading at .8990.
The Australian economy has been one of the quickest to recovery from the global recession. The central bank responded with periodic rate increased. Currently the 4.5% rate has been high enough to attract money, from the carrying nations, likely to be either Japan or the US.
Recent economic news from Australia fails to reflect the earlier anticipated vigorous recovery. Australian home loans were down on a m/m basis 3.9%, under the anticipated 2.1% and the previous periods +3.0%. Earlier it was announced that the core business sentiment had contracted, and that the Westpac Consumer sentiment was at 5.4, down from 11.1. At the latest meeting the RBA kept the rate unchanged at 4.5, but they must be aware of the contraction of economic growth forecasts. A group of economist surveyed by Market Watch this morning estimated the quarterly GDP growth in the US may be reduced to 1.3% in the 2nd quarter.
The psychology of the market has changed this week. Recently the global currency speculators had shunned the USD. According to the latest COT report, sellers were very active, selling 82,935 USD contracts and buying something else. That is a massive one week shift against the USD. In the A$ last week the specs bought over 11,000 contracts and sold the USD.
Today equity markets are retreating after pessimistic comments from both the Fed. and the Bank of England. The Dow is down over 230 points following the leads of lower markets in Asia and Europe.
Despite the lowered growth prospects for the US, it is again gaining safe haven status. Yields on today's auction of $24B 10 year Treasury notes was down to 2.71%, the lowest since early 2009, as money seeks safety in the Treasury coffers.
The AUD/USD looks like a sale should the markets continue negative. The 91/92 area in retrospect s now looks like an attractive sell. It is probably too late for that trade as we are now a little under .90. The turnover in the MACD makes us a little more aggressive, but we would still like to have a little recovery bounce back to.9025 to initiate a short. The stop should be at a little above the top of today's candle at .9140.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.