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When it comes to investing, we should never be surprised. We should not have a pre-conceived view and should accept the data this is presented.
I have not looked at the Australian dollar for quite some time and when I did I was very surprised.
The first chart I looked at was my default 90-day Elliott:
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The Aussie falling? How could that be? It was then that I realised that just by posing that question I was displaying a preconceived opinion. I put the question out of my mind and turned to other time frames. The weekly:
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“That’s interesting,” I thought, trying hard to maintain an independent viewpoint. I could not resist examining another time frame:
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Whoa! The Aussie at $1.30/1.40?
So what do we make of all this? We should look at data over several time frames to obtain a more comprehensive picture. Those perspectives are relative to the time frames. That is, a market can be easing up, or mildly negative short-term and still be within a major upward move, or in a sideways move.
The monthly presents a very big perspective. It can take a lot of analysis to understand the projected outlook and anything can happen along the way. The ‘wheels’ of a monthly chart turn slowly. It is hard to change the monthly picture. Having said that, this strong outlook has implications for commodities prices - and thus world growth - not to mention the ramifications for Australian exporters. An Aussie dollar at anywhere near $1.30 would kill off some companies. But it will also mean more expensive commodities for world markets, leading to higher inflation.
The Aussie is seen as a proxy for growth in China and the commodities outlook in general. Next week we will look at the implications of higher commodity prices.
Enjoy the ride
Tom Scollon |