This Great Graphic, created on Bloomberg, is a monthly chart of the Australian dollar. The decline this week has brought it to the trend line drawn off the 2001 and 2008 lows. It is found now near $0.7025. The cyclical low was recorded at the start of the week near $0.7050.
The corrective bounce, helped by the stabilization of Chinese equities and commodity prices, petered out near $0.7170. There appears to be scope for additional corrective pressures, if it can get back above $0.7150 now. The hourly bar charts appear to have carved out a potential head and shoulders bottom. It projects toward $0.7230-50. A break of $0.7100-$0.7110 would cast doubt on this possible short-term bottoming pattern.
The Reserve Bank of Australia meets on September 1, which is the same day that Q2 GDP will be reported. The RBA is on hold. The slide in the currency has helped ease financial conditions, and the RBA has suggested it can provided the still needed accommodation.
It may take some time, but we expect this trend line to eventually break under the weight of the negative terms of trade shock in Australia, the slowing of the Chinese economy, and the still anticipated divergence with US monetary policy. Over the longer-term we look for the Australian dollar to approach $0.6000.
Great Graphic: Australian Dollar Tests Monthly Trend Line
Reviewed by Marc Chandler
on
August 27, 2015
Rating:
Reviewed by Marc Chandler
on
August 27, 2015
Rating:
