Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15
Limits to Economic Growth - Challenge and Choices - 22nd Nov 15
Long Dollar Trade and Current Copper Price Below Cost of Production - 22nd Nov 15
UK Housing Market House Prices Affordability Crisis - Video - 21st Nov 15
The Fed Has Set the Stage for a Stock Market Crash - 21st Nov 15
Stock Market Primary V Wave Continues - 21st Nov 15
Gold And Silver - Value Of Knowing The Trend - 21st Nov 15
UK Footsie Bulls Set To Foot The Bill - 21st Nov 15
UK Housing Market Affordability, House Prices Momentum and Trend Forecast - 21st Nov 15
GDX Gold Miners’ Strong Q3 Results - 20th Nov 15
End of Schengen, Stock Market’s Technical Strength Grows - 20th Nov 15
Justice for All and The Curious Case of Zambia - 20th Nov 15
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe - 20th Nov 15
Silver Prices and The Management of Perception - 20th Nov 15
Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - 20th Nov 15
Waiting for Goldot Again - 20th Nov 15
Michael Curran Goes Down-Market Shopping for Gold Stock Winners - 20th Nov 15
Why Isn’t This Incredibly Bearish Bond Market Development Making the News? - 19th Nov 15
SPX Appears to have Stopped its Rally - 19th Nov 15
The Great Fall Of China Started At Least 4 Years Ago - 19th Nov 15
Using Elliott Waves: As Simple As A-B-C - 19th Nov 15
Has Deflation Been Ddefeated? - 19th Nov 15
Dow Jones Stock Market Index is Not Going to Crash - 19th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

British Pound GBP Australian Dollar AUD Currency Analysis and Forecast 2010

Currencies / British Pound Mar 02, 2010 - 06:08 PM GMT

By: Nadeem_Walayat


Best Financial Markets Analysis ArticleIn response to a number of requests for an analysis of the Australian Dollar, this article seeks to conclude towards a forecast trend for the British Pound against the Australian Dollar for 2010. Thought readers should note that I neither track nor trade this currency cross and nor do I have the time to spend several weeks performing an in depth analysis of the Australian economy, therefore I am instead will relying upon existing analysis of the U.S. Dollar and GBP as a relative guide in terms of currency trends.

U.S. Dollar Bull Market - Current analysis suggests that the U.S. Dollar is in a bull market that targets USD 84.

GBP Bear Trend - The current analysis concludes towards Sterling being short-term oversold and could bounce higher to £/$1.52-53. However any bounce would be temporary as sterling continues to target a break of £/$1.40 which looks set to occur before the end of March. Further out, the technical picture of support at £/$1.40-37 could yet be blasted in a meltdown towards sterling hitting parity with the DOLLAR, never mind the EURO!

Therefore the above implies relative dollar strength and relative sterling weakness that is manifesting in the forex markets.

Aussie Dollar / U.S. Dollar Cross

The trend in the Aussie dollar is very strong, with the most recent price action resembling a corrective pattern. This is as a consequence of a stronger Australian economy and higher interest rates as illustrated by the metals and mining industry. At this point there is no sign of an end to the correction which looks set to continue to correct within the channel indicated. However it does suggest that ultimately the trend should resolve to the upside to target the 98.50 peak.

Aussie Dollar / British Pound Cross

It would not be an exaggeration to say that the British Pound has crashed against the Aussie Dollar given the move from 0.37 to 0.60 or a 60% drop. I am sure holders of Aussie dollars must be drooling over the relative gain in purchasing power in such a short space of time. i.e. for Australians UK houses are now some now 60% cheaper in a little over a year. Which is a manifestation of the Inflation Mega-trend that I have been warning off as nominal house price falls are replaced by real terms house price falls so as to delude home owners that UK house price are rising when they have in fact crashed at a far greater pace than that witnessed during the nominal house price fall period.

Fundamentals - UK's engine for growth was the financial sector that is now crippled for many years. Australia's is the commodities sector that continues to boom. UK has now passed £1 trillion of official debt with another £3+ trillion of unofficial debt in part as a consequence of bailing out the bankrupt banks that Australia never had to do. the UK economy crashed, Australia's just spluttered, UK economy is experiencing an anaemic economic recovery, Australia's is racing ahead. UK interest rates stand at just 0.5%, Australia has just raised rates to stand at 4%.

Technical Analysis - I see nothing on the chart that indicates an imminent reversal to the strong trend, as the up-trend line is expected to contain corrections during 2010. The breakout above 0.58, has triggered a strong Aussie dollar rally that could carry for some more weeks to probably as high as 0.65, however it will likely retrace back to 0.60 later in the year.

Investing - Clearly the long-term trend continues to favour sterling holders diversifying into australian companies such as large miners i.e. BHP Billinton to benefit both from corporate profits AND the currency advantage. For more on how to profit from the inflationary sterling bear market, see the New FREE 100 page Inflation Mega-trend ebook.

Migration - Sterling's collapse strongly favours migration from Australia to the UK and acts as a disincentive for Brit's to migrate to Australia.

Australian House Prices - Just as the crash in sterling is masking the real terms house price falls in the UK, however the strong Aussie dollar trend also suggests that Australian house prices should be heading for a large fall despite the stronger economy, as in real-terms they have become significantly more expensive over he past 12 months. Furthermore a strong currency should have a deflationary impact on the Australian economy as inflation is exported abroad, this also means australian wages should be under pressure and therefore further depress Australian house prices in terms of affordability. So I would conclude that many Australians must be eyeing selling their properties to lock in any gains, as the outlook should be for weakening Australian house prices.

Your inflation mega-trends investing analyst.


By Nadeem Walayat

Copyright © 2005-10 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


03 Mar 10, 01:19
Sorry, i will explain

Just to finish up on my earlier point. I live in a small city of 100 thousand, our lord mayor just annouced we are looking at doubling this figure over the next 20 years, and we happen to be one of the most conservative cities i have ever witnessed. Not to mention the large city i just come from, which expects to more than double growth. These happen to be real figures and not made up, i happen to be experiencing this growth.

When a building firm can win a contract to build 10 thousand houses, you need to be on top of whats happening in oz to understand the huge boom that is about to be undertaken in Australia. Its real, its happening now. Like you mentioned, buy Mineral stocks, Cant go wrong, but any stocks really. They are all moving off-shore, and will make a killing over the next 30 years (big 4 banks). Asia is our white knight, and we are on top of it like a pile of bricks.

You dont spend 78 million on a expo building just for fun. The government will turn that into 78 billion return. The government is looking at a population of 35 million, i think this is conservative in this huge continent, i would surgest that 70 million would be more comfitable in this huge land. The smart money is on aussie, you would be a fool not to take it.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History