Aussie Dollar In Free Fall! New Upleg In Stock Market?

Posted on Posted in Daily Blog Post

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We all know that the market sometimes can make us look good and sometimes causes us to look bad or ugly. When we have a good runs of a nice profit, we start running around telling people how good we are but when we lose money, we prefer to keep quiet. This is our human nature and behaviour and that is why the Cycle timing works well.

In a bullish and stable market, majority of the traders or investors seldom react to the bad news. But now the market become very choppy because they start to listen and react (or even over-react) to all kinds of news from all the talking heads in the T.V. Therefore, sometimes it is quite difficult to trade in this kind of news driven environment. One moment, your trade is on good paper profit and the next moment, you get whipsawed.

The key to success is to win more and lose less (in $) in the overall trades in any market condition and also able to avoid Major Losses!!! Here, I am talking about the short term trading. Be reminded that ‘Big Money is made in the major cycle swing’ but it requires absolute discipline and patience for that cycle to born.

Yesterday, I flagged out short term signal about the Major correction of the Global stock markets ( except Wall St) that have moved in mature mode over the past few weeks following Ben Bernanke’s testimony that the Fed could potentially scale back stimulus efforts later this year.

Today Thursday, U.S. stocks rallied with the S&P 500 index up 23 points, and Dow jumped 180 points, marking its best day in five months, bolstered by upbeat economic data and a late-session report in The Wall Street Journal that eased worries about the Federal Reserve’s monetary policy. U.S. stock indexes spiked lower on the opening hour but started surging again (in response to Wall St Journal) as positive economic reports overrode concern about the Japanese market

Is this a typical bull market quick correction or are we heading to another major top before the final crashing correction of at least 10-15%? Is the support of the Dow 14850 strong enough to keep the bull alive? Where to from here? They are well reported in the member’s newsletter.

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Today, let’s take a quick glance of Aussie Dollar.

 Aussie Dollar In Free Fall

 The dollar was trading almost 105 US cents 2+ months ago ahead of the Reserve Bank of Australia's decision to reduce interest rates to new historic low of 2.75 per cent. The cut certainly triggered the drop of Aussie dollar, and since then, it has plummeted almost 10 US cents lower the last 7 weeks.

Fundamentally, there are more reasons why AUD is plummeting from a peak of $1.10 to the current price level at 95.50.  How far can it go down? Is the AUD bull dead? Does it mean that USD or other fiat currencies (paper money) are more attractive and valuable than AUD? Let’s me tell you one fact: Australia is one of the lowest indebted nation in the world. Australia recorded a Government Debt to GDP of only 20.70 % in 2012. All other advanced nations are registering whopping record debts of at least 80%. USA is over 102%. Japan a crazy figure of more than 260%. Germany and France all well over 60%.

Why AUD has to come down. AUD’s free fall is a current hot topic here. You may read here some of the reasons (as reported in Sydney Morning Herald media today) that cause the fall:

“ANZ currency strategist Andrew Salter said the fall in Australian dollar was “just collateral damage,” caught up in a volatile market place.

“It’s something that’s not really Aussie specific at the moment, it looks to be a consequence of what’s going on in the Nikkei and yen in Japan,” Mr Salter said.”

Mr Salter said the volatility surrounding the Australian dollar was linked to uncertainty surround the US Federal Reserve’s intentions relating to quantitative easing.

“I don’t think markets have a clear understanding of that. We’ll wait for the FOMC meeting next week.  Until then, I think this volatility continues and in times of uncertainty you go towards investments that are safe and the yen is traditionally one of those,” Mr Salter said.

 

BK Asset management managing director Kathy Lien agreed that speculation about the possible tapering of the Fed’s asset purchase program was the main factor driving the Australian dollar and share markets higher.

"The Fed may not be as eager to taper asset purchases as was suggested," she said from New York. "That's, obviously, good for risk assets and negative for the US dollar."

"I think, overall, there's been a lot of volatility in Japanese markets," Ms Lien said.

"Investors are disappointed at the lack of action on both the fiscal and monetary front and they're punishing the Japanese government for it with the volatility in the Nikkei (share index) and the yen."

She said the main focus for markets on Friday night, Australian time, would be the release of the University of Michigan consumer sentiment survey.

Two key factors that the so called experts always like to ignore’ or ‘don’t want to talk much about’ are:  the ‘capitals flow (strategically managed/manipulated by top elites’ banks) and ‘Cycle Timing’. Today, with the technology advancements and computerised HFT (high frequency trade), they can move the billions around in fraction of seconds.

There is a time for everything. I want to tell you that AUD bull is down but not dead yet. Certainly, if you look at the chart, it has a long way to fall to much lower level, probably around 80 cents in 2 years time. 90-91 and 93.40 cents will hold for a while before the next level of major support around 85 and 80. Remember, it won’t go down vertically in one short space of time and there is always a counter-trend rally for a period of time. I believe AUD is one of the major ‘short’ trade that we should try again within the next few months.

AUD normally move against USD. USD is the reigning King at the moment but his kingship will be stripped off sometimes into the near future.

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