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‘Peter’, a SharesBulletin subscriber asked – some time ago so sorry Peter about the delay – for a review of the AUD/USD. And I thought it would be of interest to TTN readers also.
So straight to the chart:
click to enlarge
If you are an exporter you may like the direction of the Aussie – down, down, down. If you are an importer or are wanting to buy a consumer durable then you won’t like it. Consumer durable? Give us plain speak Tom. Ok. Durables are things that last. Well that was how it was when the term was first used. Things like cars, TVs, fridges etc. But we know they don’t last like they used to – like ‘in the good old days’. There is a sort of ‘planned obsolescence’ and therein lies a problem. Planned obsolescence was working until the recession hit – yes it is here – and we stopped buying. And if we haven’t stopped yet we will soon – especially ‘durables’ because they are going to be heaps more expensive.
We stop buying ‘durables’ and ‘consumables’ and China and others slow down imports of raw material, demand for the Aussie dollar falls – which could again become the ‘lil Aussie battler’ – and demand for our currency will fall. London to a brick.
But you may ask is the savage fall of the Aussie – just that – or is it the rise and rise of the American dollar? There is no definitive answer to that. It is a bit of both but which is the more dominant cause I could not put hand on heart and state categorically. I am sure there is some Rhodes economic scholar that has the answer. But not Tom.
For many holders of USA debt a fall in the US dollar would be very nasty indeed. I am not suggesting that they are holding the US dollar up but pain will set in if it falls.
So that is why I say it is all a tangled complex web.
And I am going to add one more ponderable. The above daily chart showed a continuing downward path for the Aussie but if we look at a weekly chart we can see a slightly varying scenario:
click to enlarge
And that is the prospect of a relief rally before the final fall from grace.
If I was to show a chart for say copper – of which we export heaps – it would be almost the exact same for the above. That is we may see an easing in the US dollar, a rise in US denominated priced copper and other base metal prices and a rise in the Aussie for a while.
Sometimes it is really clear and other times it is ‘clear as mud’
Enjoy the ride
Tom Scollon
Chief Analyst
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