short the aussie
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Short the Aussie. Australian vs USD. Australian vs USD. Triple Top : “W” formation, conclusive test being a break through the valley floor after the 3 rd top. Should see a big drop after. Australian Dollar vs USD. - PowerPoint PPT PresentationTRANSCRIPT
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Short the Aussie
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Australian vs USD
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Australian vs USD
Triple Top: “W” formation, conclusive test being a break through the valley floor after the 3rd top. Should see a big drop after
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Australian Dollar vs USD
From a "major trend"/Dow Theory point of view, the next major trend that looks most likely to occur would be a downtrend because last "recovery" didn't surpass the previous high. Most likely to see resistance through 0.82-0.75
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Australian vs Yen
Looking at the daily graph, a series of price fluctuations can be seen after late May. Each new price smaller than the first, which makes a Symmetrical Triangle or a Coil. At the end of a Coil, the following action is either a spike upwards or downwards…….
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Australian vs Yen
After the credit crisis ended in late ’09 and early ’10, there can be seen a “Rounding Top”. This gradual rise in the value of AUD to about 81.50 can potentially be seen as a temporary peak. Following the Rounding Top pattern, a gradual decrease is usually seen.
Looking at the bigger picture, it looks like the smaller Coil pointed out in the previous slide looks to be a part of a Rounding Top, which means that the questioned direction of the Coil might be downward.
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Australian vs Yen
The general trend of the AUD vs JPY would predict that the next few years would have a general downtrend. With the credit crisis, a severe drop took place. Though a rebound has taken place as seen by the black arrow, I think downtrend will still occur nonetheless.
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Copper vs AUD
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Copper AUD
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Copper on the rise?
• As seen in the previous slide, copper and the Aussie have a strong positive correlation
• According to Barclays Capital, copper faces a, “deepening supply crunch”, which would cause record prices in the next two years
• However, some analysts have speculated about the potential of a “head and shoulders” pattern that might be forming
• If this were the case obviously prices would plummet, possibly causing the AUD to drop
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Dow Jones vs AUD
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Stocks down, AUD down
• As seen from the two graphs, the DJI and Aussie have a strong correlation as of the past year.
• The future for America’s economy is very bleak. As Raoul Pal puts it, we’re waiting for a, “future recession in an ongoing depression”**.
• Obviously, in a depressed economy, the Dow Jones will go down.
• With a possible recession, tax increases, and an ever increasing debt, the Dow Jones should decrease, as should the Aussie.
**Global Macro Investor, Issue No. 66, Aug. 2010 Published by Raoul Pal
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Baltic Dry Index
• As Pal also said, the index has, “been collapsing at an alarming rate.”**
• Australia is such a huge export driven country that with the contraction of the Baltic Index, global growth and trade will be decreasing, and in turn, will hurt the AUD.
**Global Macro Investor, Issue No. 66, Aug. 2010 Published by Raoul Pal
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Aussie’s Export customers
Country Value (millions)Percent Change last 2
mos.
China 5254 +7
Japan 3967 +5
EU 2292 -14
Korea 1868 +4
UK 1336 -19
Source: Bloomberg
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Future Trade Predictions
• Though trade has increased with China this year as of late, analysts have seen a slowdown in consumer and industrial activity.**
• According to Citi, China’s forecasted GDP growth is expected to decrease from 9.5 to 8.8 from 2010 to 2011**
• With China being Australia’s number one customer of exports, a slowdown in China’s imports and growth could put some downward pressure on the AUD
• As seen in the previous slide, 3 of the top 5 countries have had an increase in imports from Australia
• Australia is currently running a export trade surplus, this puts pressure on inflation***
**Citi: Global Economic Outlook and Strategy
***Bloomberg
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Australian 10 yr bond
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Australian 10 yr bond
• Australian rates have been kept around 4-5%
• As seen in the chart rates have been on a downward trend
• Should stay there unless inflation gets out of control
• Analysts have seen economic growth moderately slow down in the past few months due to rise in unemployment rate, lower than expected company profits, and an increase in housing prices
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When will this happen?• There has been some conflicting data on whether the AUD is appreciating or depreciating
• AUD has been very volatile over the past few months
• “…movements in AUD in recent times have been heavily influenced byoverall risk appetite more perhaps than local fundamentals”**
• With gloomy global outlook predictions, its seems that many people may take the safe “risk off” approach which may decrease the value of the AUD
• However, with the AUD’s current strong economy, people may have faith and buy Aussie
• If trade goes down, I think people will start to sell the Aussie
**Citi: Global Economic Outlook and Strategy
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When will this happen?
•As seen by the boxes, historically the AUD has seen resistance and support around the 0.72-0.80 range
•Should the AUD break through that, should come way down