This article from today’s Australian investigates the first home buyers grant and it’s effect on the lower end of the property market.
The AUD was very cheap against the USD at .63 and against the EUR at 2.00 but I think the time for buying dips is now over. Okay, we may miss a 5% overstretch move higher but the signs are starting to point against the AUD and the risk/reward is not in its favour.
- It is not “too low” anymore as it was 3 or 4 months ago. The oversold status we refer to so often is now gone.
- The property bubble hasn’t really burst here yet.
- Rising budget deficits.
- Over reliance on China and Japan.
- Australia’s very open economy means that most of the stimulus spending will leave the economy very quickly
All in all, it will take only one major shock for the AUD to start tumbling again. Sentiment is now pro-risk and anti-USD at the moment and this means that the AUD will continue to gain in the short term but I’m looking at a different “trade of the year”.
I’m looking to start building a short AUD/JPY position. I’m not 100% sure of my levels just yet and it becomes more an issue of timing, but I’m looking to start selling on the approach to 80 and start building from there. My target, 40!
