Why the AUD/USD is going to 65 cents, oil and the Fed

Good morning all, another exciting day in the big city called earth.

Oil is likely to keep falling as a new major trend. AUD could well be going to 65 cents. Stocks rallied on the Fed news being out of the way, but the stretch is clear. Still like Gold.

US Federal Reserve Chairman Jerome Powell showed how it is done.

Inflation is likely to be more persistent than first thought. We are rapidly cutting back on bond buying. We will be patient on raising rates but remain ready to act at any time.

Kind of like the so-called infamous RBA policy leak, published yesterday by yours truly?

This is so important the Fed has said these things, as we can now watch... The RBA's, Lowe, will now feel more inclined and capable of saying the exact same things at the next meeting. When he does, you heard it here first, the guy is terrible at his job. Confirmed.

What of markets? Well, as alluded to above, there is a lot happening.

This is not a short-term thing for Oil. The factors at play are the long bull trend run up from sub-zero. Though that was an aberration, and we should really see it as a move from $16. A 20% correction equates to a target of $70. Though, I do expect it will be more like 30%. Perhaps 50%. This is due to the speculative market having established highly leveraged long positions that will need to be unwound.

All the 'genuine business need' hedging by Oil companies has also been largely completed. Creating a momentary vacuum of business buying interest. On top of this, the inflationary and 'at the pump voter backlash' this is causing around the world is bringing a great deal of pressure to OPEC.

With the final catalyst being the price action, itself signalling a major top is in place. Despite some volatility, we are likely to see largely a one-way street south from here, I would suggest.

The Australian dollar could be in for a big fall. We have been fundamentally and price action bearish since .7745, when I forecast an at the time contrarian target of 70 cents on ausbiz. We saw .7070 and have had an impressive correction to the upside. Now, though, there are signs of the currency hitting fresh air pockets.

What I am about to say, many will not like, but we have to step outside of our own self-congratulatory domestic press to get a real handle on things.

Australia has gone from cool, to not a cool country at all.

We have, in a brief period of time, alienated China, France, much of the EU, and are seen as one of the most punitive of the lockdown nations. Recently, our extremely regressive attack on the un-vaccinated at the most senior of political levels has garnered significant overseas attention. Our technology paper submission on climate to COP26 was severely panned, as being unsophisticated and pure obfuscation. None of this is cool, and I use that word in the investment sense, for investment, like everything, is an emotional decision that we pretend is pure logic.

When investors and foreign exchange traders are looking around the world, they see Australia alienating its biggest trading partner, separated from the world by supply chain disruption more than ever, and having climate coping issues? It is immaterial if we agree with these assessments. It is vital to understand this has fast become the general view and investment perspective of Australia from afar.

We do not want to believe we will no longer get a friendly greeting on the streets of Paris, because we are not English but Australian, but that is how it will be now. That is lost. The slightest shift in global investment sentiment toward a nation can impact the currency outlook. This is more than a slight shift. The biggest point being sour relations, regardless of cause, with our largest trading partner.

Why invest in a commodity exporting nation, if those exports are peaking, and their central bank is asleep at the wheel with the Fed acting far more quickly?

Australian dollar risk: 65 cents.