Mar 9, 2004
The Kangaroo had hopped too much they said, and its time to rest..
The Australian dollar had been the darling of the Investors and Speculators for the last year and half. As the commodity prices increased, the value of gold and metals appreciated so did the value of the Australian dollar. Of course the Australian economy did well and the interest rates went in favor. However last few trading sessions saw the currency collapsing from 0.8000 to 0.7405, with the broad based strengthening of the US$. Technically this had to happen, as the Australian dollar was on the overbought status for sometime. This correction was expected independent of the US$ recovery.
Apparent reason to buy AUD
1. High interest rate
2. Commodity prices still buoyant
3. Gold is well supported
Apparent reason to sell AUD
1. Tightening cycle almost done
2. US$ might further recover (?)
3. Euro has been weak (well correlated)
Technically speaking, the collapse had opened a bearish trend in the aud/usd, however last week the weak US employment figures not only supported the currency, but also managed to shed some of its losses. At the moment it is hovering around the monthly weighted moving averages, while on the daily charts it rebounded from the lower bollinger band, and threatening both the exponential and the weighted moving averages from the downside. The key is around 0.7675, which will prove to be a good resistance, and if it can cross this significantly, the next resistance is at 0.7825, clearing which might open grounds for a sustained appreciation. The caveat is if it does not break the resistance levels at 0.7675, it can try lower, to test the support at 0.7465. The upcoming consumer sentiment due on 10th March followed by the Employment figures on 11th March will guide the ensuing trading sessions.
......anyway Kangaroos do not listen to us.
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