Australian Dollar special report
10
0
Managing real business currency exposures
Wed, Oct 29 2008, 08:47 GMT
by Clifford Bennett
Fx Max's News and promos
FxMax is very happy to launch a brand new service: the 'Market Tutor'. Download the full archive to learn more on this issue.Real business exposures need to be managed in a very real way in current markets.
Option spreads are wider, and volatility pricing is likely to remain high for some time. This daily report will contain a brief comment on the AUD/USD, but significantly we will carry out an on-going theoretical management of both export and import exposures, as well as capital risk management such as investments overseas, or local investments undertaken by offshore investors.
-
The first objective is defence against adverse currency movements.
-
The second objective is to maximise favourable trending periods.
The starting point is AUD .6225. We will provide buying and selling signals on the basis that a full one year of projected export/import flows are being managed, and in the case of investments, 100% of the value of the investment is being managed.
AUD .6410
A very strong rally, and while encouraging we still have to be a little cautious. Our exporters are hedged 40% at very good levels, but we need importers to take a some advantage of this rally just in case it turns out to be a fading event.
Above .6560 should further confirm the absolute low has been seen. Our view remains a massive US dollar collapse, AUD rally at some point, but we still need to be a little watchful for another last AUD sell off as a prelude to that US dollar implosion.
On the day the rally looks a touch tired in the .6530 .6250 range, .6470 .6330 on the narrow, minor support also at .6360. Under .6360 would suggest further caution that this rally was a momentary spike only.
Published on Wed, Oct 29 2008, 08:47 GMT
0
0
Australian Dollar struggles even with RBA support!
Tue, Oct 28 2008, 05:47 GMT
by Clifford Bennett
Key support .6005, key resistance .6160, on the narrow .6025 .6100.
Most likely form is bearish collapse, .6005 being key.
The price action remains heavy into RBA buying as forecast, and there is a real and immediate threat of a sharp collapse if the RBA is forced to step aside, as in my view it should. This would allow the market to find its own more natural equilibrium at a lower level, and that is when intervention would be more effective. As long as the USD is firm the AUD will remain under pressure. A lot of the pressure is coming from the continued unwinding of the Yen carry trades. There is a lot more AUD selling on that basis still to be done.
Technically the market needs to recover resistance at .6225 to signal a low is in place. Until then rallies should be treated with caution. Immediately on the day there is resistance at .6160 and .6100. A move above .6100 should see some stop loss buy orders triggered toward .6160, but getting above .6100 may prove difficult. People who need to sell, seem to be lining up there to take advantage of buyers providing liquidity by betty with the RBA.
Favour the downside from here, but would step back a little from that view if it recovers .6100. More likely is the RBA being pressured into stepping aside for one last collapse to 57 or 55 cents before a sustained and major up-trend commences.
Published on Tue, Oct 28 2008, 05:47 GMT
0
0
Managing real business currency exposures
Mon, Oct 27 2008, 08:53 GMT
by Clifford Bennett
Real business exposures need to be managed in a very real way in current markets.
Option spreads are wider, and volatility pricing is likely to remain high for some time. This daily report will contain a brief comment on the AUD/USD, but significantly we will carry out an on-going theoretical management of both export and import exposures, as well as capital risk management such as investments overseas, or local investments undertaken by offshore investors.
-
The first objective is defence against adverse currency movements.
-
The second objective is to maximise favourable trending periods.
The starting point is AUD .6225. We will provide buying and selling signals on the basis that a full one year of projected export/import flows are being managed, and in the case of investments, 100% of the value of the investment is being managed.
So let us begin, The Reserve Bank of Australia has intervened in the Australian dollar market and while this will offer some momentary relief, the big picture will remain dominated by US dollar movement. (Please see copy of earlier e-mail re the USD on the following page.)Therefore RBA intervention cannot as yet be viewed as the turning point in the AUD sell off. The immediate price action suggests a move above .6360 would be needed to signal a lasting low may have been seen. There is good resistance in the .6250 to .6275 area, which is where we will see some of the traders who went long with RBA buying, start to take their profits. Above .6275 would be early warning of the low being in place, but tend to think .6275 or .6360 may contain for fresh lows.
Published on Mon, Oct 27 2008, 08:53 GMT
0
0
AUD Bullish
Thu, Oct 16 2008, 09:48 GMT
by Clifford Bennett
Fundamentally everything has changed. Yet everything that has changed will in the medium to long term work in the Australian dollar’s favour.
The China/commodity story has taken a battering, yet China will continue to be the fastest growing economy among the major powers for several years to come. ... export income may well increase.
The Reserve Bank continues to correct its massive error. For the last twelve months we have aggressively tried to point out that the sub-prime storm would intensify, ... The appropriate rate setting for Australia for the rest of 2008 and all of 2009 is 4.00%. ... Australia will still maintain an extremely attractive yield advantage, especially against the US dollar.
The Australian domestic economy will flirt with or experience a domestic demand recession, but it is possible continued strong exports, a surprise to the current consensus if correct, will maintain overall GDP at flat to slightly positive. ... recession avoidance.
The US dollar has strengthened relentlessly for a couple of months now, and by any historical precedent is extremely over bought, but it just depends how much more panic buying of US cash and paper is still yet to come. ...
In summary the global worst case scenario for the Australian dollar is now fully priced, and the view here is that the market consensus may be in error.
Published on Thu, Oct 16 2008, 09:48 GMT
0
0
Australian Dollar special report
Fri, Oct 3 2008, 08:28 GMT
by Clifford Bennett
The US House will again vote later today on the Bailout Bill, now relegated to an amendment. It is entirely possible the “no” votes may again triumph, but in reality I suggest this may be one of the closest, and certainly most historic votes ever taken by the US Congress.
“YES” means a moderate reprieve for US financial institutions, and a moderate reduction in current libor and swap spreads. Australian dollar short term implications: Expect a strong rally in the Australian dollar on the basis that some will read this as an alleviation of risk, which will allow global investors to again seek out good yields instead of panic buying of US treasury paper.
“NO” means shear panic about the survivability of a great number of US banks and perhaps some European banks as well. Australian dollar short term implications: Expect a renewed wave of selling as market participants take the view this means greater risk levels again and a further slowing of the global economy which will not be taken as good news for this commodity currency.
The long term implications for the Australian dollar will be less severe.
China: Balance of Trade: Commodity Prices: Yield:
Conclusion: The Australian dollar is likely to be one of the world’s strongest currencies in 2009, on the back of continued strong China growth, high RBA rate levels, and perhaps a complete capitulation of the US dollar as it collapses under the weight of the money presses that the US Treasury /Fed will have running hot for many months to come.
Our 2009 year end forecast for the Australian dollar is US$1.01, and we may still see our 89 cent forecast for this 2008 year end as well.
Published on Fri, Oct 3 2008, 08:28 GMT
0
0
Lehman Gold AUD
Mon, Sep 15 2008, 08:15 GMT
by Clifford Bennett
We have consistently maintained our view that the US financial crisis would intensify as a result of continuing downward pressure on home and property values across the country. After Bear Sterns it was no secret that Lehman Brothers could be next, and after 158 years it is now gone. While some very sound efforts are occurring to prevent the domino effect from rolling on, Merrill Lynch has got out of the way by jumping under Bank of America, a further intensification of the credit crunch is likely. The outlook for the broad US economy just got a whole lot worse.
Gold is the ultimate reserve currency, and even more so when the cause of the economic crisis rests in the financial system itself.
The Australian dollar... Australia’s yield advantage over the US is dropping from “spectacular” to just “fantastic”.
Our long term forecast of parity, albeit delayed to 2009, remains in place.
Published on Mon, Sep 15 2008, 08:15 GMT
0
0
AUD Rejects 80 cents
Wed, Sep 10 2008, 08:04 GMT
by Clifford Bennett
The Australian dollar has now had everything thrown at it.
Gold has been far more heavily sold off over the last 24 hours than I expected, and with the Yen firm, people have been selling the AUD on the back of carry trade unwinding as well. With the previous days premature US dollar euphoria over the twin FM salvage attempt also priced in, and not to mention the AUD bulls, well there is moi!, having been sidelined after the failed rally on Monday, it was all against the Aussie going into last night.
The point, everyone who wants to sell AUD has, and everyone who needs to buy AUD has not, a powerful buy AUD proposition in its own right. Then there is also the powerful fundamental story, yes that’s right, powerfully bullish fundamentals!
It may once again be the bulls turn.
The AUD could move back to 88 cents in a matter of weeks.
Published on Wed, Sep 10 2008, 08:04 GMT
0
0
AUD Flash
Tue, Sep 9 2008, 09:40 GMT
by Clifford Bennett
AUD No One is LONG!
Just a quick pre-empt of retail sales today.
Personally I expect -0.4%, but it is a new methodology with the survey size reduced by two thirds, so it can surprise?
From a trading perspective everyone is bearish the AUD after yesterday's failed rally. All the shorts are loaded back up, and I would suggest no one is long. Hence if data is at all surprising to the positive the AUD could have a strong rally.
More probably the data will confirm the domestic demand outlook is not good, in which case the AUD could get marked down 50 or 80 points. Tend to think that could be the low however.
Note, the Euro had major new lows while the AUD did not have a new low at all overnight. This suggests as with the Yen and Singapore dollar, that it may be time to buy Asia again, and that is a positive for the AUD too.
Favour .7990 holding if data is negative, and then strong recovery. Favour .8080 holding for a strong rally if the data is positive.
Published on Tue, Sep 9 2008, 09:40 GMT
0
0
AUD and Markets Flash
Wed, Sep 3 2008, 06:18 GMT
by Clifford Bennett
Yesterday we suggested the market could experience an exhaustion phase to .8290 or even .8010. So far we have had a low of .8270, but then quite a good bounce of 120 points, before again settling in a heavy way toward day end.
Scenario is much the same as yesterday, the market looks heavy in an immediate .8280 .8350 range. Minors .8300 .8330. A recovery of .8350 would be a little encouraging of a possible bottom scenario, but have to respect the continued immediate downward pressure while that level contains.
While there is further risk toward .8010 as a worst case scenario, tend to favour .8210 perhaps .8270 holding.
There was no doubt oil was going to have a bad day yesterday as the full trading of “no storm sell oil” flowed through the market. This helped the US dollar to new highs, but this may not be sustainable. Favour nibbling at going long Oil today, more comfortably tomorrow, like buying Gold on the day, and equities continue to work a range that should build for a sustainable up-trend. Dow Jones in bullish consolidation while 11,200 holds.
GDP in Australia today was as we expected, and the RBA will continue to cut rates. The market is however very short the Australian dollar now. While looking for a low in the AUD, am not keen to pre-empt the bottom, and will wait for signs of encouragement such as a recovery of .8350 and especially .8410.
Published on Wed, Sep 3 2008, 06:18 GMT
0
0
AUD Flash
Tue, Sep 2 2008, 08:13 GMT
by Clifford Bennett
The AUD began to rally post RBA announcement only to be caught up in another whirl wind rally by the US dollar.
The USD appears unstoppable at the moment as it makes new highs now against the Euro and Sterling.
Taking a technical look at the AUD there is a chance of immediate support here on the daily chart holding, but really until the market recovers resistance now at .8465, there is risk, the dominant risk is, a sharp exhaustion phase to .8290 or even .8010. See daily chart below.
Having tried to pick the bottom too early on too many occasions, if it breaks immediate support at .8400, one has to accept that further downside risk.
For the moment .8400 .8465, and clearly heavy due to renewed USD strength.
Published on Tue, Sep 2 2008, 08:13 GMT
0
0
Australian Dollar special report
Mon, Aug 11 2008, 07:37 GMT
by Clifford Bennett
If the AUD breaks back above .8880 it may have bottomed, not just for now but for the medium term as well.
Still a slight chance of fresh lows if people continue selling on the basis of expected on-going US dollar strength, but I believe we may have seen the lows for Oil and Gold, and there are a lot of people who are now short the Australian dollar, and no one is long!
The highest energy potential in the Australian dollar market at the moment is to the upside.
A move back to 90 or 91 cents is possible this week, and this would become our confirmed targets on a break of immediate resistance today at .8880. For the moment cautious as liquidity starts to build this Monday morning.
Published on Mon, Aug 11 2008, 07:37 GMT
0
0
Australian Dollar special report
Thu, Jul 31 2008, 08:09 GMT
by Clifford Bennett
The Australian dollar remains under pressure short or near term as the market starts to accept that the next move by the RBA will be to the downside.
Today’s retail sales data, down 1% for June, confirms our forecast drop in domestic demand.
The second half of 2008 is a high risk period for the domestic economy. Falling property values, a function of an over heated speculative market, threatens to push the domestic economy at least into the “recession we did not have to have”, helped by RBA rate hikes on top of fuel costs. Increasing numbers of market commentators are coming to our view that the RBA has raised rates too far. The inflation pressures in the economy are largely a global phenomenon, where a response with domestic rate increases only dampens demand, but not necessarily inflation. It is a different economy and the RBA needs to understand its only choice is between firm growth and weak growth. Inflation may no longer be within their influence to the same degree as was historically the case.
As the RBA has overdone the rate hikes it may now have to play catch up to a slowing economy as the Fed did. The only problem here is that the RBA may remain too focused on inflation data, without spending enough time looking out the window.
The RBA should cut rates by 50 points by January, but it remains to be seen if they will.
For the Australian dollar we may see further downward pressure as particularly short term speculators stay away until the direction of interest rates is more clear. The major medium term support is in this .9450 .9380 area, which is where I would have expected the AUD to commence yet another rally. Certainly today’s trade surplus is encouraging of our still bullish medium term outlook. As previously mentioned it remains possible for Australia to experience a severe down-turn in domestic demand while the currency continues to climb toward parity by year end.
For the moment though most participants in the Australian dollar market are likely to be fearful of the move toward rate cuts as has been seen in New Zealand. Of course even with 50 points of cuts by the RBA, and that would be the best we could hope for at this time, Australian interest rate levels remain high by world standards. Therefore while there is some selling pressure right now, for perhaps another few days, continuing high relative interest rates, and a move toward sustained trade surpluses, are likely to see the AUD begin to move higher again next week.
On the day .9410 .9470 and still heavy. Looking for a major low .9410 to .9380, but not in a hurry to pre-empt the low just yet.
Published on Thu, Jul 31 2008, 08:09 GMT
0
0
Australian dollar to go the way of Oil!
Thu, May 29 2008, 07:48 GMT
by Clifford Bennett
On vacation
Think Australian dollar; Think OIL ! The same albeit late realisation that oil is a finite resource in a booming global economy, will increasingly be applied to the not so little door-step-of-Asia commodity producer and by proxy the Australian dollar.
Clearly when you have called the Australian dollar to parity in the year 2008, and done so since mid 2006, it is a little concerning to see some of the major banks who publicly derided that forecast at the time, now coming to the party so late. It is of concern because it suggests most of the largest players who have got it wrong, have just taken their losses and finally gone long the Australian dollar. This is a warning sign that yet another one of those typical AUD sharp downward corrections of several cents may occur within the next two weeks. Let’s not forget however that the dominant risk remains very much to the upside at all times.
Exporters should continue to hedge the next few years of exposure on all and any dips in the Australian dollar.
We at Sonray have been forecasting, since last year, a further appreciation of the Australian dollar beyond 2008 and parity, to US$1.0800 and perhaps US$1.1200 in 2009. Our long term bullish outlook for the Australian dollar remains in place, and has long been based on the long term decline of the US dollar which still has a way to go, perhaps to Euro 1.85 and 2.05 in the next 1-3 years. That means an increasingly efficient door-step-of-Asia commodity producer, with a central bank reading from antiquated texts and delivering above necessary interest rate yield levels, will remain an irresistible investment for any global money manager.
It is crucial for Australian exporters, if they are to maintain market share in a booming global economy, to understand this is not some short term price aberration. This is the Australian dollar seeking out the top of the new 20 to 30 year trading band, which is likely to be in the order of 90 cents to US$1.1500.
The AUD technically may pull back to .9570 again, perhaps even .9510, but the more likely immediate scenario is .9605 support holding for a break to 97 and perhaps 98 cents in a matter of days. From those highs we could see that momentary sharp correction back again to 96 or 95 cents, but this is not something that should be banked upon. The dominant risk remains to the upside, and once the AUD breaches parity, it is unlikely to stop there. On the day .9605 .9645 and bid.
Published on Thu, May 29 2008, 07:48 GMT
Archive
- Managing real business currency exposures
Published On Wed, Oct 29 2008, 08:47 GMT - Australian Dollar struggles even with RBA support!
Published On Tue, Oct 28 2008, 05:47 GMT - Managing real business currency exposures
Published On Mon, Oct 27 2008, 08:53 GMT - AUD Bullish
Published On Thu, Oct 16 2008, 09:48 GMT - Australian Dollar special report
Published On Fri, Oct 3 2008, 08:28 GMT
FxMax http://www.fxmax.com | clifford.bennett@fxmax.com
Legal disclaimer and risk disclosure
Any degree of success, profit or loss, achieved as a result of using FxMAX services, is entirely the client’s achievement. Any involvement in any market, including foreign exchange, either alone, or with the advice of any individual or organization, can result in significant financial loss. Past results do not necessarily indicate future performance. In viewing or using FxMAX services the client must understand that FxMAX intends to provide a positive contribution to the client’s involvement in foreign exchange markets, but cannot guarantee such intention will be realized. Regardless of past track records any individual or organization can fall prey to sustained periods of loss, of having an incorrect market view, of getting it wrong. The client uses the services of FxMAX entirely at their own risk. FxMAX accepts no liability whatsoever for any loss incurred by the client of any nature whatsoever. Neither will FxMAX make any claim to any profits or portion thereof, achieved by the client of any nature whatsoever, as a result of using FxMAX services. FxMAX, its web site FxMAX.com, and its publications regardless of the media of publication, contain information considered reliable, and all reasonable care has been taken. FxMAX makes no assertion explicit or otherwise, as to the suitability, or accuracy, of the information provided. FxMAX accepts no liability whatsoever, to the user, or third party user, of materials and comments provided, or for any errors or omissions contained therein. Neither does FxMAX or employees or presenters accept any liability for the use or implementation of any suggestions or comments made in publications, web site, or elsewhere. FxMAX, its employees, presenters, will not be liable for any claims of loss of any nature whatsoever, arising from use of FxMAX commentaries and services. FxMAX undertakes no responsibility to maintain or continue the provision of information or other services on the web site or by any other means whatsoever. Opinions, forecasts, and comments, of any kind are based on information available at the time of publication, and such opinions, forecasts, and comments, can change at any time and without notice. FxMAX advises users to seek independent financial advice before acting on any of the information contained in it’s publications of any nature.Interested in forex trading? forex brokerage firms!
FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)
[Read Premium full description]
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
©2008 "FXstreet.com. The Forex Market" All Rights Reserved.