Wednesday, October 3, 2012

AUD is in trouble


Australia cuts rates to 3.25%; which was unexpected.  We are definitely firmly in the lowering cycle.  This will close the gap between the yields overseas, and we will continue to see AUD weakness in the final quarter of 2012.  

We saw trade deficits widen 2.027bn, widening 32% in one month.

New home sales showed a decline in August of 5.3%.  This implicates further lowering of rates over the near term.

Australian economic data on where it was strong during the last GFC miners+housing+employment are all now trending lower.  The two speed economy is not resolving to 1-speed; lower rates of growth are on the horizon.  I think the AUD should normalise to the 95c to 1.00 level in the next 12 months.  Shorts on any rally near 1.02 look to be a good position to take.