The following are quick observations of movements in various markets as we head into a new week:
All About the Aussie
Over the past two months, the Australian Dollar has taken a bit of a beating against virtually all of the major currencies. This move was buttressed by a rate cut by the RBA in May, which impelled a drop to levels that are at least nearing major support areas against most of the major currencies. Against the US dollar (click all charts for larger version):
This is a weekly chart going over 10 years of action of AUD/USD. The horizontal price line drawn in is a clear zone which will be instrumental in the direction of this pair. Given the large drop from roughly 1.05 to 0.94 in just over 2 months, it would be understandable if there was a slight reaction to the upside. This is what I am looking for this week, price action permitting. This reaction may be short lived however, as once the action from 2008 is taken into consideration, my personal view is that we are in the midst of a corrective phase in this currency. A perfect end to that continuation could see a flush below the line, creating a longer term bear trap, and a longer term buying opportunity for more value oriented speculators. Regardless, I think there will be plenty of pips for both bulls and bears in the shorter term, the only question is which order will the profits accrue.
A weekly chart of EUR/AUD over 10 years of action. The AUD weakness is expressed here as a breakout from the downtrend beginning in 2008 via an inverse head and shoulders. This pattern, with the neckline at around 1.30 implies a target area of roughly 1.44, or another 400-500 points from where price currently is. As you can see however, there is little resistance to be had to the upside until the lofty heights of 1.55-1.56. Those prices are surely a long way off, but for now it is clear that EUR/AUD has broken out. In the short term, it is not beyond a correction from an even figure such as 1.40.
Weekly chart of AUD/JPY over 10 years. Again, the AUD looks to be in correction mode, but against the yen, this correction looks much tamer in the wider context. Abenomics seemingly has lifted this pair out of a nearly 3 year long trading range, and the rejection of all time highs may be a mere desire of the market to retest the top of that trading range.