This page contains a Flash digital edition of a book.
CURRENCY WATCH


FX


Chart.3 Retail sales


Meanwhile the unemployment rate( chart 5) has started to march higher from below 5% towards 6% and this is likely to increase dramatically with the slowdown in the mining sector.


This is probably the biggest issue the RBA have to deal with and it revolves around the slowdown in China coalescing with the downturn in capital expenditure in Australia. As you can clearly see from the chart below the level of investment in Australia is close to all-time lows. This is the main reason why many investors believe the AUD is in for a tough ride.


Capital expenditure (Capex, Chart 4) just over two years ago was topping out around 15%. The last three quarters have seen this data progressively get worse with it now languishing around -5%. If you didn’t think the mining boom in Australia was over, well you will now.


Chart.4 Capex


of their products. So what do they do? Stop the supplies form Australia. There’s probably a good 3-6 months’ time lag in the data from it actually hitting the currency so I’d say we’ll see some heavy selling in the months ahead.


Let’s not leave out the Housing market where most Australians have their money locked up. During 1998-2000 the Banks further deregulated the loans process and started offering a lot more funds than most people could previously afford or have access to. This in turn led to an explosion in house prices with most coastal properties doubling in value within the year.


This jump in house prices has never been corrected and is now the major issue the central bank has to deal with. Banks are no longer willing to lend such large amounts. As unemployment increases we expect the number of defaults to escalate rapidly. As the debt to loan ratio inverses we


Chart.5 Unemployment rate


There is no longer the everlasting demand out of China. Global growth has caught up with even the Chinese and there’s no one left to buy any


Chart.6 House price index


expect a snow ball mortgage default effect never seen before in Australia and very similar to the US sub-prime crises.


FX TRADER MAGAZINE July - September 2013 45


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89