I see a lot of commentary for the AUD to bounce as it is oversold. Caution! What reason is there for it to bounce?
1. China is Australia's biggest trading partner. Coronavirus has China panicked and for example Fortescue has been smashed by this panic.
2. Australian growth and CPI is still flat, and Coronavirus could trigger an interest rate cut.
3. USA is in...
Vol has been super low as the S&P has roared higher due to Fed not-QE. But there are black swans awaiting the complacent: hugely overbought major stocks especially Apple. Iran conflict re-flaring. Impeachment trial in Senate. The floor at this level makes the risk reward attractive.
I haven't traded the AUDUSD for a while because it has been unexpectedly strong and not making sense to me but now we see the USD strengthening again and poor unemployment stats in Australia today. This is setting up for another roll over. I am looking for a right shoulder to develop and then a large drop could result.
The S&P 500 is showing clear signs of exhaustion with its double top and desperation to sell down any bad news. I have opened a sell at 2940 and expect a long fall over the next 3 months. (anything can happen in October!).
The AUD tried to crack 69c but ran out of steam and is now shop,wing signs of heavy exhaustion.
RBA commentary - Aus economy is weak, interest rates to cut next week, wages growth slow, unemployment ticking up. More cuts likely. If Iron Ore drops this will make the Aus economy even more vulnerable.
This trade war is going to hit the SPX hard in the next 6 months I think. SPX reached a new all time high and then collapsed. This demonstrates exhaustion to me. It is hard to see how further rate cuts can bolster this market as the trade war will have far more direct consequences on 1. Global GDP growth, US Company profits and USD rise.
Momentum of rise seems to be slowing. When this peters out short again. I note on the 200 MDA it touched several times but this seems to be a long term resistance. While US interest rates remain higher than Aus this should not change.
Watch for the SPX to make a rolling over pattern. Failure to make a new high here is a big sign of the S&P preparing to falter.
Trade war is dragging on, Fed is not coming to save with hard interest rate cuts.
I am going to ease in with half on the next rally.
Two factors I am watching closely: RBA interest rate and Iron ore price. if Iron falls then demand for AUD will fall. Expectations of an August interest rate cut have dropped following strong CPI result (0.6) vs. (0.5). That only provided a temporary rise in price as relentless selling continues. I don't see any other good news coming out of Aus.