ETF UPDATE: Aussie Dollar Pointing Lower

Posted on | by Todd | Leave a Comment on ETF UPDATE: Aussie Dollar Pointing Lower

Since early January, the AUD/USD  has traded in a 250 point range between .7500 and .7750.

Now that the FED has raised rates this year (and has given guidance for more tightening) the yield differential between the overnight rates between Australia and the USA has narrowed to just 50 basis points.

This compares to 200 basis points this time last year.

In addition, with domestic employment growth sputtering and lower inflation readings, the RBA has maintained an easing bias for overnight rates in Australia.

This strengthens the case for the AUD/USD to trade lower and return to the December lows of .7150.

Investors looking to profit from a falling AUD/USD have been buying the BetaShare YANK Exchange Traded Fund (ETF). The current unit price of YANK is $14.10.

We estimate that a move back to the December low of .7150 would increase the unit value of YANK to approximately $16.75.

Aussie Dollar Update

Posted on | by Todd | Leave a Comment on Aussie Dollar Update

Since posting a high trade of .7740 on February 23rd, the AUD/USD  has dropped over 250 points , or 3.2%.

A corrective bounce into the weekend sees the Aussie currently trading back near .7540, but the technical chart structure looks weak and momentum indicators are point lower.

In addition, The US Federal Reserve is a near certainty to raise the Fed Funds target  this Wednesday.

This policy move will lift the Fed Funds target to 1%, and, (with Aussie overnight rates at 1.5%) will further narrow the overnight lending rate spread to just 50 basis points.

This fundamental shift will likely accelerate the repricing of the AUD/USD back into the .7300 handle.

Investors can profit from the AUD/USD moving lower with the BetaShare YANK Exchange Traded Fund (ETF).

YANK is an inverse, unit trust EFT with a weighing of approximately 2.5 to 1. This means that a 1% drop in the AUD/USD price will increase the value of the ETF units by approximately 2.5%.

Chart – YANK

 

Aussie Dollar Falls Hard On Trade Data

Posted on | by Todd | Leave a Comment on Aussie Dollar Falls Hard On Trade Data

The Aussie Dollar fell hard last night breaking the key support area of .7600 versus the US Dollar and closing the NY session down almost 1.5% for the day.

After consolidating for several weeks above .7650, the AUD/USD finally broke down. Although recent economic reports have been fairly good, yesterday’s weaker trade balance figures were a sharp reminder of the damage a stronger currency can do to an export dependent economy.

Analysts were looking for the January trade surplus to increase to 3.8 billion, but instead it shrank to 1.3 billion; less than a third of the expected level. The main draw on the trade balance were exports, which fell over 3% for the month.

The RBA has been clear that a stronger AUD will act as an economic headwind as Australia moves away from a mining-based economy.

Over the last 18 months, the AUD/USD has traded in a broad range between .7000 and .7750. Technically, last week’s high of .7740 could stand as a medium-term top as US Dollar strength pushes the AUD toward the bottom end of the range.

Investors looking to benefit from a move lower in the AUD/USD can consider the BetaShares AUD-based Exchange Traded Funds.

BetaShares offers two ASX-listed ETFs which increase in value as the AUD trades lower against the USD.

These two ETFs are called: USD, which is unweighted, and YANK, which has an approximate weighting of 2.5 to 1.

Contact us for more information about these AUD-based ETFs.

Chart – YANK

 

 

ETF WATCH: Australian Dollar Pointing Lower

Posted on | by Todd | Leave a Comment on ETF WATCH: Australian Dollar Pointing Lower

The Australian Dollar is under pressure going into the weekend and in front of next Thursday’s key employment report.

This week’s RBA statement reflected a neutral stance regarding future interest rate policy, but the currency was mentioned as a potential headwind to Australia’s terms of trade should the AUD/USD continue to appreciate.

The tone of the RBA statement illustrates the bias the central bank has for a weaker AUD/USD as a means to help domestic exporters. In short, the RBA would much rather see the AUD/USD at .7000 than at .8000.

Technically, the AUD/USD has posted a lower high everyday this week after failing to break the .7700 level last Friday. The relative strength indicator (RSI) is rolling over and pointing lower at 60.50, which suggests range extension below .7500 in the near-term.

For investors who want to profit from a lower AUD/USD, the ASX offers two dynamic Exchange Traded Funds (ETFs): the BetaShare USD and the BetaShare YANK.

The USD is an unweighted, inverse unit trust which gains a percentage value tied to the AUD/USD. The YANK is also an inverse unit trust, but has a 2.5% weighting. This means that a 1% drop in the AUD/USD will see a 2.5% increase in the BetaShare YANK ETF.

Trading The US Inauguration

Posted on | by Todd | Leave a Comment on Trading The US Inauguration
This has been a busy week for foreign exchange traders with the USD trading on both sides of the ledger and in wide ranges. With the inauguration of Donald Trump later today, investors appear to be taking defensive positions against the US Dollar. Earlier in the week, Mr Trump was quoted as saying that he thought the USD was too strong and was at a level which hampered US exporters.
Not surprisingly, the USD Index dropped over 150 points on that news flash and is now sitting on support just below 101.00.
Since then, senior Trump advisors have been downplaying those comments by saying they were meant to be directed specifically toward the Chinese Yuan, and not as a general view of the Greenback.
With respect to comments from Donald Trump, the investment community will have to grapple with how to take these seemingly spirited and personal views. Clearly, some of his more strident positions taken during the campaign have been softened, but the market will be subjected to these unannounced twitter and press comments throughout his Presidency.
In the larger picture, of the numerous and complex factors that impact foreign exchange rates, the wishes and desires of elected officials don’t often seem to be particularly important. Our longer-term bullish view for the US Dollar is based on the divergence of monetary policy , the relative health of the US financial system, the domestic interest rate trajectory and the uncertainty of the European election results.
On balance, and in simple terms, we would like to be positioned into the US inauguration with a “Risk-Off” posture. This means looking at long USD positions against the all other G-7 currencies except the JPY, a long bias toward the US Treasuries (lower yields) and short US equities.
The AUD/USD traded about 1% higher on the week as Chinese Inflation and Retail Sales data gave the Aussie a lift. The pair is now pushing against a key resistance level near .7620, which will likely find selling pressure.

Aussie Dollar Pointing Higher

Posted on | by Todd | Leave a Comment on Aussie Dollar Pointing Higher

After holding above long-term support at .7150 going into the end of the year, the Australian Dollar has started 2017 on a firmer note. Higher prices for Copper, Crude Oil and Gold combined with the sharp rise in Australian Service Sector activity have added to the positive fundamental tone.

The technical picture has also improved as general US Dollar weakness has lifted the Aussie above its 30-day moving average near .7340 for the first time since early November. This morning’s better-than-expected Trade Balance report should keep the currency well bid throughout the Asian session and into the weekend.

With the US Non-Farm payroll data expected to print a little softer tonight, we see scope for the recent move in the AUD/USD to extend back to the December 15th high of .7430. We would consider that price a good level to exit long positions.
Chart – AUD

AUD/USD

Posted on | by Leon Hinde | Leave a Comment on AUD/USD

The AUD/USD, in particular, looks vulnerable to further downside range extension. After posting a technical double top at .7755 on August 10th and 11th on Thursday, the AUD/USD finished the week with two consecutive losses for the fist time in almost two months and the first close below the 30-day moving average since July 25th. Technically, the pair has been in a strong uptrend over the last three weeks but the RSI has now rolled over below the 50.00 level.

The 11.3% surge in building approvals (reported this week) was 10 times more than expected and the strongest reading in over two years. However, it was not sufficient to lift the Aussie above the high of .7580

AUD

AUD/USD

Posted on | by Leon Hinde | Leave a Comment on AUD/USD

AUD/USD

Since the start of 2016, significant turns in the direction of the AUD/USD have worked as a good leading indicator to trend changes in the other G-7 currency pairs and the USD, in general.

Some foreign exchange commentators pin this forward looking correlation to the fact that over the last six months the AUD/USD trend has been acutely sensitive to Central Bank policy expectations and price swings of commodity metals and minerals……..Which have also driven the USD versus the other G-7 pairs.

Recall that the AUD/USD bottomed out at around the .6850 level in Mid-January over a month before the EUR/USD turned higher from the 1.0820 level in early March. More recently, the Aussie peaked out at .7835 on April 21st while the broader turn in the Major pairs didn’t reach the highs until May 3rd. Further, over the last two weeks, the AUD/USD bottomed on May 24th while the others didn’t turn until May 30th.

This is significant because the AUD/USD rejected the .7500 level during yesterday’s Asian session and posted a key reversal lower during the NY session with the close below .7430. And while the RBA held on rates on Tuesday, the price of copper extended its recent slide to 4-month lows just above $2.00 per pound.

Whether or not AUD maintains its role as a leading indicator for price action will be determined over the next few sessions.  We still prefer the short side of the pair.