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AUD/USD: Levels, Ranges, Targets

Published 03/04/2018, 12:06 PM
Updated 09/03/2023, 03:41 AM


In a series of prior research articles, 10 year monthly average regressions were run against AUD/USD Vs OCR, AUD/USD V GDP, GDP V Headline CPI and AUD/USD V OIS. In every instance and most especially in shorter 1 and 2 year monthly averages, AUD/USD. Correlations were deeply negative. Big Glenn Stevens' many calls for a lower AUD never materialized because AUD/USD’s price is miles away from synchronicity to its own system of interest rates and economic announcements.

At a negative 29% correlation in AUD/USD V OCR, a lower AUD materialized only if Stevens raised OCR, raised OIS, raised GDP and asked where AUD/USD fits into the negative 39% GDP V Headline Inflation scenario.

Current headline Inflation at 1.9% and 1.50% OCR are clearly off kilter as Inflation must lower in order for GDP to rise and the mismatched result would see AUD lower.

Against AUD exchange rates, AUD/USD correlated negative 50% to its main pairs in AUD/CAD and AUD/NZD. In AUD/CAD is most vital because its an overall risk barometer to currency market prices and AUD/NZD is vital due to the historic abundance of trade between New Zealand and Australia.

In AUD/USD Vs EUR/USD, current correlations run +44% to inform AUD may or may not follow EUR/USD explicitly or may follow prices on a delayed response but it explains AUD short ranges.

Overall, AUD/USD’s price should trade much higher in order to connect properly to its interest and exchange rates as well to its economic announcements but headwinds face AUD as a lower AUD favors exports especially in Iron Ore and Wool. AUD must now factor the implications to many trade offs in an off kilter system to exports.

But success in Exports are located in the Trade Ables V Non Trade Ables in Australia Inflation. Trade Ables answers is Australia producing export goods at a rate profitable to Export.

Iron ore is the main ingredient to produce steel and Australia as well as China are the largest exporters of FE Iron ore. AUD is vital as a currency pair and to USD because Iron ore prices are set in the United States around 4:30 pm every trading day. China is the only other nation responsible to set Iron ore prices.

Australia as the largest producer and exporter to Wool is experiencing a massive resurgence in demand based on the Eastern Market Index, the EMI.

The average for the following set of averages is located 0.8264 and 0.8264 is just above the 5 year at 0.8180. The larger context to 0.8264 and 0.8180 is extreme prices are located from 0.6986 to 0.8690. The mid point is located at 0.7831 and is found at my Special average.

Higher for AUD/USD must break 0.7831 and 0.7855. At current 0.7763, AUD/USD is not only far outside its 18 year range but it must break 0.7831 to trade back to its proper position. The current target for AUD is located at 0.7838 and informs how vital and rough will be the break at 0.7831. AUD remains off sync to its own averages.

Only 5 break points exist below but note the levels are located at the shorter averages. Vital points are as follows, 0.7792, 0.7784, 0.7669, 0.7597 and 0.7559. AUD/USD’s bottom is located at 0.7559 otherwise AUD is outside its range and a free trade exists as AUD must trade back to its ranges.

While the 18 year averages are dead neutral, the daily view informs current averages are miles to high and this means much lower for AUD. Current AUD is oversold both from a daily and long range perspective. The strategy is a cautious sell rally approach.

The averages:

80 day = 0.7784
Special = 0.7831
334 = 0.7669
592 = 0.7559
847 = 0.7597
1102 = 0.7950
1357= 0.8309
1279 = 5Y = 0.8180
1613 = 0.8626
1872 = 0.8857
2129 = 0.8885
2384 = 0.8746
2562 = 10Y = 0.8750
2640 = 0.8754
2894 = 0.8710
3150 = 0.8610
3409 = 0.8539
3589 = 14Y = 0.8472
3665 = 0.8452
3921 = 0.8311
4175 = 0.8133
4429 = 0.7965
4686 = 0.7855
4909 = 0.7792

Brian Twomey

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