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Possible Reversal Imminent in Important Risk Trade
The EUR/AUD is an important forex cross in the realm of risk appetite/aversion. The Aussie's high yield and aggressively growing commodity-linked economy offers a nice play for emerging market risk chasers, while the Euro's liquidity make it a relative safe haven (though in the longer term, the irony is that global competitive debasement will lend commodity-linked currencies more bullish credence than the Euro's Eastern Europe-linked toilet paper).
During the liquidity crunch of fall 2008, the EUR/AUD surged from the 1.6000s to the 2.1000s and during the QE liquidity-fueled risk asset rally from March 2009, the cross tanked back.
It is now sitting at summer 2007 levels, at multi-year support around 1.55, well below pre-Lehman levels. Meanwhile, the descending channel that has defined its descent since spring of last year is growing tired, and a reversal centered around 1.55 support may be at hand. Some consolidation around this area with an eventual breakout through the descending channel trendline may confirm a reversal at hand.
And such a reversal would indicate a return to a rush to liquidity, long overdue yet delayed by various black hole-engendering liquidity infusions from central banks.
This is an important cross to watch, especially in the context of the carry trade-fueled risk asset bubble that exists today, and a reversal could indicate a sharp mean reversion back to reality.
I personally was short the EUR/AUD from around 1.97 from the symmetrical triangle breakdown and had covered most of my position (admittedly prematurely) by around 1.87 when the cross hit its 200DMA. My entire position was fully covered at around 1.60 and I am looking to get long once the charts confirm a reversal at hand. This will also be an important indicator for my short triggers in other risk assets, including equities.
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I'm watching the EUR/JPY as usual and I have the same sentiments with this pair...it's hanging by a thread...watch out, don't try to catch any falling knives.
Thanks-this is great. Crossing a strong fiat currency with a commodity based fiat that is not the USA or CAD.
I will be tracking this from now on. Keep up the great info
In mid 2009 I warned of an impending USD rally.
The USD Index weekly chart continues to give bullish warnings and vice versa for the EURO.
The uptrend since March 2009 has been a bear market rally contained within a much larger bear cycle that started in 2000.
DOW/SP500 daily charts continue to show signs of being very overbought and a correction is overdue.
http://www.zerohedge.com/forum/market-outlook-0
I'm looking for a sharp mean reversion bounce in the EUR/CHF.
Its all about trade. In this case I don't think there is worry about eur/aud as there is lesser trade between the two than say the major currency pairs.
I'm not sure if it will stop there. It may get a bounce however.
The pair has bounced off the 5700-level since 1998, so there is no reason to believe that this time won't be like other times. Except this time is not like other times at all.
My charting indicates that you are exactly correct in that the downtrend will continue well past the support level of 5700 and will, in fact, touch its lows of July 1997 at ~4600. A massive consolidation movement would be in order that could last most of the year before a massive retracement to 2.0000.
I don't think the movement in the pair has much to do with what Europe and Australia do between each other. Rather, the movement will be indicative of what each represents: liquidity v. declining commodity values.
Another round of deleveraging, hard asset sales (such as gold, platinium, molybdenum...) and another massive flight to safety and liquidity, such as we saw at the end of '08 will be the order of the day when Ponzi's House of Cards comes tumbling down again.
Salut.
Yes and OZ sticking up interest rates. I do think there would have been some intervention if trade were greater between the two, but like you say the commodity currencies have been red hot and will remain that way for a while.
It makes you wonder what might happen when things reverse. Strangely I also have 1.46 on my chart as a key point...although I could not recall why I had that line drawn..thanks for the reminder!
Cheerio.
R
Great info and thank you; here is finally something original amidst the long stream of MSM-like very commercial-type artcles being churned out on ZH these days, lots of hyperventilation with nothing to help its readers tell signal from noise.
If charting is signal, then give me noise any day ;)
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Lucy
http://forextradin-g.net