Australian Dollar (AUD/USD): Headed to 70 Cents?

I really like the Australian dollar for a variety of reasons:

Technically, the currency pair is trading in the Buy Zone, which I establish using Bollinger Bands. But more importantly, in addition to being in the Buy Zone, it has broken out of a triangle and is trading above the 50-day Simple Moving Average. As long as it does not close below 0.6600, the uptrend remains intact and there is a strong chance that we could see the AUD/USD rally to 0.6925-0.7000.

Fundamentally, the gap between Australian and US interest rates will widen tomorrow, which is fueling the US dollar’s weakness against all of the major currencies. However, more importantly the Australian dollar’s 23 percent decline against the US dollar is and will continue to have a very positive impact on the Australian economy. The OECD has already forecast that any recession in Australia will be shallow. Leading Australian companies like Qantas, Billabong and Fosters have revised up their earnings on the expectation that a weak currency will boost foreign demand for their products. In contrast, the strength of the US dollar will deal a big blow to US corporations in the first half of the year. More rate cuts are still expected from Australia but we should begin to see the benefits from their aggressive monetary easing in the first quarter of 2009.

source: eSignal

source: eSignal

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16 Comments

  1. You have it spot on correct! If 0.6540 holds i think we are looking upside. Also, gold is looking short term bullish and of course you know the correlation between them. FOMC to cut interest rates, OPEC to cut oil production, Auto bailout looking possible for the big 3 (based on analysts’ views), commodity currencies should appreciate.

    Thanks, Kathy.

    Your call on the EUR/GBP was great the other day!

    Reply
  2. I’ve liked AUDUSD to move higher since the positive divergence in October. Maybe the Fed decision on Tuesday will be the catalyst.

    Thanks for the analysis! The new lows in USDJPY weren’t bad for a quick one, either!

    Reply
  3. Hi guys,

    Desperately need some help from FX experts :(

    I currently have a fair bit of USD, miss out the chance to convert USD to AUD when sitting on .64 back in early March.

    Wanting to convert my USD to AUD, Is there any chance USD will come strong again?
    Should I convert USD to AUD now at .73 or HOLD and hope it will get to at least .68 or even lower???

    Any comments will be much appreciated.

    Reply

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