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FX CURRENCY WATCH


The House price index (chart 6) has gone through some lean times in recent years but it appeared to be on the rise. The local banks have come under close scrutiny for creating their very own ‘sub- prime crises. Making funds available to those who cannot afford it, in the hope to create extra service fees has left a market high and dry. I wouldn’t say the housing market is at panic stations yet but it’s not far off.


The problem though will ecsalate as the Housing market starts to spiral out of control. This will in turn put greater pressure on both the Retail Sales and Unemployment sectors. Long gone will be the massive Bank profits as they start to manage mortgage defaults across the entire country. Cutting rates by the RBA is no longer a quick fix.


Last week’s GDP data came out much worse than expected and it was pretty much the death knell as far as many professional traders were concerned. The decline in global growth has finally made its


Chart. 8 Monthly chart AUD/USD


AUD dollar faces which a lot of other currencies don’t, is the fact interest rates have a long way to go down. This makes it a sitting duck for traders, as you can see from the chart above which is a Weekly chart looking back over the last 10 years.


Chart. 7 GDP


away across the vast seas to land on Australia’s doorstep.


No longer do they have the comfort of having the Chinese cash cow at their doorstep, buying every mineral reserve available. The mines are shutting down and with capital expenditure on the decline they are preparing for tough times ahead. The unsurmountable economic pressure on the AUD/USD should see a significant move to the downside. We aren’t talking 3-5 cents, more


46 FX TRADER MAGAZINE July - September 2013


The AUD/USD goes down a lot quicker than it goes up. The GFC saw a 39 cent move in no time at all and that occurred at a time when the Australian fundamental outlook was extremely strong.


So what are the prospects for the short term


future? I’d say without a doubt the short term move should hit 0.8500. From here it will get tricky as you have to weigh up the US and European economic predicament, but I wouldn’t be surprised to see the dollar print sub 0.8500 in the next 6 months.


Brad Gilbert


like 10-15 cents down towards the 0.83-0.85 cent mark. The local economy is nowhere near prepared for the rough ride ahead which makes it an even more compelling argument for a much bigger move.


Let’s not forget the dire situation in Europe which only looks like getting worse. The problem the


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