Wednesday, June 13, 2012

AUD ready to regain parity - trade 1352

Given the strength of the GDP figures last week, the likelihood of the rates cuts are now firmly skewed to the final quarter of the year.

I think we've seen the sell-off by the AUD in recent weeks now over, as we see the Fed liquidity expectations move the USD lower.

Technically we bounced at a support level of .96 and the move is consolidating around the 20DMA, which is the level we manage the risk in the trade.
The plan is to get set just below 1.00, offload half the position 1.015 and play a retracement on the bear move up to 1.04.

The macro events for the week are the Greek elections this Sunday, and the upcoming Fed meeting - which has been pegged by Goldman Sachs as a 75% chance of some liquidity measure.  The type of measure will dictacte the velocity and size of the move in the AUD.

The muted response from the 100bn loan to the Spanish banks were not the remedies to the euro situation that the market has wanted, and we need to keep a close eye on the market towards whether we get some eurobonds or a EU bank to alleviate market fears of contagion.  All the european yields are spiking in the past few days, however the equity prices are holding up relatively well, which one working theory in the blogosphere is that the money is moving away from bonds to equity markets.