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Well it is maybe about 30 years since you looked so good – when Adam was a kid. Well, when yours truly worked for BHP. And I remember when it was A$1.30 to the US$. That dates me. And at the time we could not find enough steel and raw material to export. Wool prices were at their highest – albeit with a little help from the floor support scheme.
So much for the cry from the wilderness – the Australian bush that we need a weak dollar. And of course with a strong dollar all our little luxuries in life like, flat TV screens, beaut cars, and electronic gadgetry just keep getting cheaper. But how many flat TV screens do you need?
So is a high Aussie here to stay? Well you know that not all good things last forever. And even if we do see some easing, the Aussie is not about to fall out of bed.
So lets look the chart:
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And low and behold we find a lack luster chart. So what gives?
The a, b, c pattern tells us that the Aussie dollar is just about at its high – just about done. There may be some more upside but not a lot.
The Bollinger tells us that we are not quite yet into overbought territory:
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We will probably get there but mind you it can stay in overbought territory for some time yet.
So in the short term there is possibly not a huge amount of upside. So let’s look at the bigger picture – the weekly chart and the weekly Elliott:
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And this suggest that we could see some easing ahead. This is not likely to happen overnight but in the course of the next few months and even into 2012. We could see it head higher first as we can see that wave three is not yet complete – but it is unlikely to go that much higher.
And then this could see an easing back to the low A$90 cent area as this is about a 50% retracement of the move from almost a year ago.
The retracement to the low of May 2010 was about one third of the move from early 2009 so I would not be surprised to see a 50% retracement this time around.
But either way this is still the good times for importers, travellers – but there are will be many sectors of industry that will wish for a lower dollar. But a high dollar is here to stay and even if we see a pullback to low 90s this is the precursor to a much firmer dollar further out – as high as $1.10.
Enjoy the ride
Tom Scollon
Chief Analyst |