Iron Ore Gets Hammered

Posted on | by Todd | Leave a Comment on Iron Ore Gets Hammered

With the financial media focused primarily on the US missile strike in Syria, many investors didn’t notice the 7% drop in Iron Ore prices on Friday.

The spot price of Iron Ore fell $5.50 to $75.45 yesterday. This is over 20% lower than the February 21st closing price of $95.00.

Making matters worse, the September contract for Iron Ore on the Dalian exchange also closed 7% lower after trading down to its 8% limit for most of the session.

The sharp fall in Iron Ore will have its biggest impact on BHP, RIO and the Aussie Dollar.

The AUD/USD closed the New York session at a 1-month low of .7495. This is the first close below .7500 since early January and opens up the next support level at .7425.

Investors who would like to profit from a lower AUD/USD can look at the BetaShare YANK Exchange traded Fund. This is an inverse fun which gains value as the AUD/USD falls.

Call in for more details about YANK and the other ETFs that we cover.

Chart – YANK

ETF Update: Buy The YANK

Posted on | by Todd | Leave a Comment on ETF Update: Buy The YANK

The USD Index had its strongest week in over two months as better-than-expected GDP numbers, combined with hawkish comments from FED officials, lifted the Greenback against all the major currency pairs.

The bulk of the gains were against the EURO and YEN, with the AUD/USD finishing the week pretty much unchanged.

We don’t expect this to last. With the RBA overnight interest rate policy firmly on hold, the divergence of interest rate policy trajectory between the USA and Australia will push the AUD/USD lower.

Technically, the AUD/USD closed the week below the 30-day moving average with the RSI momentum indicators pointing lower. We see the first key support level at .7580 and have a medium-term target near the January low of .7160.

Investors who want to profit from the a lower AUD/USD can look to buy the BetaShare YANK ETF. YANK is an inverse ETF with a 2.5% weighting. This means that the share price of YANK will increase by 2.5% for every 1% fall in the AUD/USD.

With the YANK currently priced around $14.20, we estimate the share price to rise to $16.40 when the AUD/USD reaches .7160.

Call in for more information about YANK and the other ASX listed ETFs

 

Chart – YANK ETF

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.

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.