Tag Archives: AUD

Copper Breakdown Suggests a Lower AUD/USD Rate

One of the stronger correlations (over time) between currencies and commodities is the strong Australia Dollar and Copper correlation:

11-28-14AUDHG

 

Today, copper made a significant surge lower breaking key technical support at 2.88. At minimum, copper looks set to test the 2.50 (Fibo) support:

11-28-14HGweekly

 

If you take a good look at the AUD/USD weekly chart, it looks set to test below .8000:

11-28-14AUDWeekly

 

For the last couple years I have been looking forward to getting on the long side of the AUD/USD below .8000, and it looks like this time it could actually happen. However, one has to wonder….If the Dr. (Copper) has a PHD in economics, what is this current move suggesting? Some would think that the good doctor has either failed a few classes on the way to getting the PHD or royally screwed up his/her dissertation. But with China continuing sluggish growth (relatively speaking) and global deflationary pressures mounting, perhaps we should pay a little closer attention to what the doctor is telling us.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

Follow me on Twitter @pipczar

 

Disclaimer: I am short the AUD/USD from 2+ weeks ago.

 

 

AUD/NZD showdown set for tomorrow, “High Noon”

Well, it will be “High Noon” somewhere tomorrow, right?

The AUD/NZD is technically in breakout territory, but tomorrow is going to be a big day for the pair. Tomorrow afternoon we have the RBNZ rate decision, and a couple hours after we have the Australia employment numbers for May.

Keeping in mind, technically the pair is pointed to a move of 1.1300 (from the double bottom, retest of neckline) in the coming weeks, the combination of tomorrow’s news could set the pair off in that direction. (see chart below)

6-10-14AUDNZD

The RBNZ is expected to raise rates another .25% tomorrow 3.25%. This would be the 3rd hike in 3 meetings. The market has priced in a total of 8 hikes in the next 2 years to 4.5%. There is some skepticism that the market may have overpriced two more hikes in 2014. In the event the RBNZ leads the market to believe that they may not be as hawkish into year-end (especially with housing moderating recently) the NZD currency is at risk for a continued pullback.

Turning attention to the Australia jobs numbers a couple hours later, it must be noted that the last three employment numbers Australia has beat the expectations. I don’t see this time as any different as full time employment also seems to be swinging higher too. Labor force participation rate is ticking lower which may be a concern.

In the event that the RBNZ tones down future rate hike expectations and Australia comes in with a stronger employment picture, it could send the AUD/NZD higher and continue this massive short squeeze that had started earlier this year.

 

Blake Morrow @pipczar

Chief Currency Strategist, Wizetrade

Disclaimer: I have been long the AUD/NZD since below 1.0900 and maintain my position.