Reserve Bank of Australia RBA

AUD in more pain ahead

The AUDUSD is finally trading well below the $.90 and the Joe Hockey and Glenn Stevens are happy. China indicated that they have no intention of changing fiscal policy although data does not seem to be aligning with GDP targets. The US is also decreasing taper before they will commence interest hikes in 2015.

Joe Hockey has to cool the real estate market now and hence has proposed macro-prudential measures to possibly manage and limit second home loans as currently used in Singapore and HongKong. The RBA and Joe Hockey are on the same page as the RBA and Macquarie Bank both independently indicated a 30% overvaluation property market in Australia. Money is heading out of Australia as bonds and deposits become more attractive in the US with Janet Yellen clearly indicating her intentions for a strong USD.

Positive Flash PMI data from China allowed traders to make a quick 50 pips bull run on the AUDUSD but we believe this run will be short lived. Bears are still in with a safe bet when the cross trades above $.89.

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