i think the Aussie could have a downside risk from its current position, because there will probably be some bad news coming out of Europe.
May 31 is a crucial one for the AUD. Over the last week the AUD has slid in an orderly fashion from USD1.011 to below USD0.99. The foreign exchange market is in risk- off mode due to European politics, and the AUD has been caught in the net. However, when the market is in such a mood, all good news is discounted and bad news supports recent anti-AUD sentiment... May 31 is crucial as the quarterly update of the private sector’s commitment to business investment over the next twelve months is released. The prior December quarter survey was a blockbuster, reporting around AUD120b of mining investment for next year 2012/13, confirming that business investment will be the key driver of growth for the next year.
As the Australian stock market continues to under-perform we can only be made more aware of how serious our failing has been. Fortunately there remains more hope with regard to the stock market than our domestic economy. While the local economic downturn is likely to have a further 3-6 months to run, the value of stock portfolios should improve somewhat, again a rescue function on behalf of China and broad Asia, but also due to a likely waning of Greece and contagion fears generally.
The Australian dollar may finally be breaking free of the Euro slide. Both are lower than I expected, but the Australian dollar has finally showed signs of improvement on the cross against the Euro, and the price action against the US dollar is definitely at last looking like a major low may have been seen. The level to watch over the next 24 hours is .9785. If we were to get back above what has been a reasonably significant sell order at that level, then we should have seen the low. A move above .9825 would be positively exciting for any bulls, and there are not too many of us, which is always a good place to be.
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