Technicals | Jun 03 2013
Bottom Line 30/05/13
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Technical Discussion
We only reviewed the Aussie Dollar a couple of weeks back. But in similar fashion to the precious metals markets, when action is a plenty, we need to step in and review these markets more regularly. And there is certainly action a plenty with our currency at the moment. Wednesday night it dropped to 95.30 intraday which is the lowest level it has tagged since October 2011. We will look at the technical aspects of this in a second. Yet it did recover quite strongly to close a cent higher off these lows. Not a bad recovery. What we now need to look for is further evidence that perhaps some form of low is attempting, or is in the the process of attempting , to be locked in here. I'm far from suggesting a significant low as we clearly do not have enough evidence right here to be making such claims.
Yet we could be looking for a breather to the very bearish price action that has been witnessed over the past weeks. Simply put, the currency has been hammered. Down a solid 10c in just 6 weeks ! With all this in mind I was therefore very keen to watch the currency's reaction to today's Private Capital Expenditure report which records mining and other sector investment levels for the first quarter of 2013. A very important release especially considering so many experts out there are saying the mining boom in Australia is well and truly over. Personally I continue to question such statements right at this juncture, albeit recognising that the situation is quite on edge. As is always the case when these important reports come to hand, I set up my 5 minute and 1 hour live AUD feeds and assess the reaction to these reports. In summary the CAPEX figures fell for the quarter. This initially saw a sell off in the Dollar down to 95.85, yet it was strongly bought back up on soon after with the hourly price bar closing at 96.57. And at time of writing these levels have continued to sustain.
So an encouraging performance on a micro level to say the least. So overall once the dust quickly settled, the CAPEX story may not be as dire as the headline figure initially implied, with the market quickly focusing on some positives. With suggestions even coming out now that the RBA may not be as impatient to lower interest rates again at its next meeting. The 'funnymentals' certainly are a kaleidoscope of inconsistency !!. Yet overall, our Dollar's future is really going to depend on the reality of the strength we are presently seeing in the USD. We still have question marks over it, be it recognising its robust nature in recent times. Take another look at our USD review from this week to refresh yourself on the critical numbers we are looking at here.
Plenty to say fundamentally tonight so we will keep the technical picture more brief. With last night's probe down to 95.30, our longer term Elliott symmetrical triangle has now fallen over at the last hurdle with the Wave-C low at 95.80 broken below. Some what of a disappointment due to the length of time we have been monitoring the move. Yet all may still not be lost and I continue to have longer term bullish aspirations for the AUD so long as the much talked about major support line circa 94c continues to hold. This now means the pattern that price has morphed into is a potential larger descending triangle, with the internal workings unfolding as a double three corrective move dressed up as an A-B-C zig zag followed by a 3-wave Wave-X and then a flat A-B-C move with Wave-A vs Wave-C equality measuring in at 93.20. So everything is really now centring around major support circa 94.00, with a convicted move below this level that sticks, taking our longer term bullish aspirations for the Dollar well and truly off the table. The moment of truth is near !
Trading Strategy
I believe there is a valid reason for aggressive traders to dip their toe in the waters here. So trade long above 97.00 with stops below 95.30. With the report coming out of the States and currency markets likely to be volatile, lets just start with some partial positions for now and reassess over the coming weeks. And stick your head in on the 'Global Markets position status area' as well on a regular basis in between reviews as I'd like to get that stop position tightened up as soon as possible to cut down our initial risk somewhat. What a month it has been, and I don't think the fireworks are over with just yet !
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