Forex Investment and Currency Trading

The AUD had another strong week - albeit primarily against the embattled USD - posting fresh 2009 highs. The surge in equity prices via “the recession is over” from Fed Chairman Ben Bernanke, surging commodity prices, and ongoing talk of Australia leading the interest tightening cycle well ahead of its OECD peers are largely responsible. AUD currently stands at $US0.8740 convincingly broke through the $US0.8650 resistance level, after a few failed attempts in recent weeks, and is revisiting levels not seen since late August 2008.
While some are more cautious on the outlook for the global and local economies, Australia’s relative economic outperformance cannot [...]

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AUD-USD is still expected to trend higher towards 0.72+
A very slow basing pattern is under way, with 0.6245/0.6010 key support holding
Technically, clients should be small long and add on an upside break of 0.6629

The AUD-USD pullback in early March found support ahead of the critical 0.6245 area, with buyers driving spot above 0.65 again. This is still seen as part of a basing pattern, which is taking time to unfold. On a trend basis, AUD-USD is above the 20-day moving average (MA) at 0.6455, but is below the 60-day MA at 0.6629. A turn above the latter is expected over [...]

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The RBA has intervened on several occasions in recent weeks as AUD/USD threatened to trade below 0.60 raising speculation that 0.60 is the “line in the sand”. Though recent intervention efforts have been successful in halting a decline in AUD/USD through 0.60, an eventual break lower is a key risk on renewed risk aversion. Such a break could extend to 0.55.
The RBA undertakes transactions in foreign exchange markets for several reasons. The least frequent, but most prominent, are those to influence AUD - intervention. This is distinct from the building (or drawing down) of foreign exchange reserves associated with the [...]

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Current sentiment for the A$ is very bearish…
The overall atmospherics remain downbeat for the AUD. As highlighted by the chart across, commodity prices have moved sharply against the currency and we could add the yield spread and domestic data to this picture. However, it must be asked how much of this bad news is already priced in? Since its peak in mid July, the AUD has fallen by close to 35% in its most violent correction since the currency was floated in December 1983. There seem to be lots of other compelling reasons to own AUD here - funding markets [...]

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