Best of the Week
Most Popular
1.War on Cash, Bank of England Planning Hyper QE, Scrapping Cash for Digital Currency - Nadeem_Walayat
2.Stock Market End Run Smash Crash Looks Imminent... - Clive_Maund
3.Europe Refugee Crisis, UK to Repatriate 120,000 Hungarian Economic Migrants Back to Hungary - Nadeem_Walayat
4.The Great Deflation Will Destroy All Bubbles – These Too - Harry_Dent
5.Deflation Signals Abound for U.S. Dollar, Forex Markets and Commodities - Rambus_Chartology
6.U.S. Housing Market Two Outs in The Bottom of The Ninth - James_Quinn
7.Poland, Czech, Slovakia and Hungary Refugee Hypocrisy After Flooding UK with 4 Million Economic Migrants - Nadeem_Walayat
8.The Two Real Reasons Crude Oil Prices Are Currently Slipping - Dr. Kent Moors
9.R.I.P. Interest Rates - Andrew Snyder
10.Steps from a Deep October Stock Market Selloff - Bob_Loukas
Last 5 days
Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - 6th Oct 15
Redesigning Internet and Facebook to Explore Their Full Potentialities... - 5th Oct 15
Nightshades Curb Your Enthusiasm - 5th Oct 15
U.S. Recession Watch, High-Yield – Rising Defaults - 5th Oct 15
The Social Challenge to Find Humanity in Capitalism - 5th Oct 15
Fed Interest Rate Hike: "I don't care. It doesn't really make much of a difference" - 5th Oct 15
Gold Rose 2.2%, Silver Surged 5.4% After Poor Jobs Number On Friday - 5th Oct 15
Gold, Silver Precious Metals: a Critical Week Ahead - 5th Oct 15
Stock Market Correction Still in Force - 5th Oct 15
Gold Price Change in Character - 5th Oct 15
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15
Gold And Silver – A Reality Check - 3rd Oct 15
Stock Market Primary IV Still, or Primary V Underway? - 3rd Oct 15
The Oil Industry’s Day of Reckoning - 3rd Oct 15
U.S. Interest Rate Hikes Keep On Slippin' Into the Future; Treasury Yields Sink Again - 3rd Oct 15
China's Stock Market Crashing; Time for Panic or Restraint - 3rd Oct 15
SPX Stocks Bulls Struggle to Regain the Upper hand... - 2nd Oct 15
The Two Faces of Stock Market Volatility - 2nd Oct 15
Money Supply and the Fed’s Serious Inflation Risks - 2nd Oct 15
Stock Market How Bad Can This Get, And How Fast? - 2nd Oct 15
A Worrying Set Of Recession Signals - 2nd Oct 15
Negative Jobs Report Sents SPX, TNX Lower - 2nd Oct 15
Don't be Fooled by the Recent Equity market Rallies. Its a Bear Market, Stupid! - 2nd Oct 15
US Bond Market - How to Fix This - 2nd Oct 15
Survival Secrets from Colorado Resource Investing Front Lines - 2nd Oct 15
What Two Risks From Rising Interest-Rates Could Each Trigger A New Global Crisis? - 1st Oct 15
Stock Market S&P 500 Volatility-Based Price Probability Range - 1st Oct 15
Dow Stock Market About To Crash Like October 1929? Get Your Physical Silver - 1st Oct 15
Stock Market Negative Expectations Once Again - Will It Break Down? - 1st Oct 15
Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - 1st Oct 15
Best Short-Term Commodity Market Opportunities - Video - 1st Oct 15
The Coming Corporate "Crime Wave" - 30th Sept 15
Stock Market Retracement May Have Run Its Course - 30th Sept 15
A Stocks Bear Market Is Now More Likely Than Not - 30th Sept 15
The Killer Ape, Human Evolution, Artificial Intelligence and Extinction End Game - 30th Sept 15
Junk Bond Market Imminent Collapse Threatens (Unwelcome) BIG Rate Rises - 30th Sept 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

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