The AUD has been the second strongest major currency in recent months behind the fast-recovering pound but I feel the run is coming to an end. My reasons for turning neutral from bullish are
- Price- quite simply the AUD is not cheap anymore as it was against the USD at .63 and the EUR at 2.00
- Friction with China over the Chinalco-Rio failed deal- we don’t yet know what the repercussions will be, if any. If China even looks like sneezing, the AUD will fall sharply
- The real money buyers will soon dry up leaving the market long at wrong levels
- Unemployment data- much of the recent rise, especially the last leg from .77 to .82, has been fuelled by “excellent” jobs data showing the economy is still strong. Many of the jobs lost in Australia have been in better-paying white collar jobs and these newly unemployed will generally not register as being so.
I am looking to trade a .77/.84 range in the AUD in the near future with a bearish bias. Those looking for a return of the risk aversion play should consider AUD/JPY, which I now feel will top out around 85 in the very near future.
