aud usd

$AUDUSD Bulls be aware – dangerous levels ahead.

The $AUDUSD has taken back all its losses since 28th December 2014. The tide seems to have turned and the glossy rise of the USD based on Shale production is dwindling into what seems a short lived bull for the greenback.

$AUDUSD is currently trading at 0.8125 with a strong long signal. The next major barrier to break for the AUD is at 0.8227. Once this level is breached there is no end in sight 0.8635 which is the low of 02 November 2014.

The rise of the AUD can be solely be contributed to the American inability to produce positive numbers in Q2 so far. Shale programs have been cut as the price of oil has fallen and the Shale production simply are no longer feasibly as it costs around $50 a barrel to produce shale oil. Whilst this was a profitable market with Oil at around $90 a barrel it simply no longer is. Inventory numbers reflect this shortcoming. WE had previously indicated that the US had used shale production to reduce oil prices to force Russia into a recession based on the American inability to introduce meaningful sanctions against Russia. This exercise seems to have now significantly backfired.

Also US retail numbers have been very disappointing and produced no growth. (See below)

US Economy doing it rough on 14th May 2015

Additional factors include that China has lowered its interest rate to drive GDP up and closer towards targets by encouraging business loans and economic growth thereby. Positivity in the Chinese economy have always given bullish signals to long AUD investors.

The USD has also recently been plagued by the UK General Election win by the Tories Conservative Party which gave the USD a strong bearish signal and renewed confidence in the GBP. This also drove parity based bullsĀ into the AUD.

Unless we see a significant move by the RBA and Glenn Stevens we are assuming long positions on the AUD again as the tide has turned. The RBA recently announced that the easing cycle was concluded for now hence we do not expect the RBA to cut interest but we could see additional quantitive easing measures apart from rate cuts.

Keep a lookout on any indicative measure on the AUD by the RBA for now.

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