Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
War and Young Americans - 27th May 19
Stock Market Rally Over – Downtrend Resumes - 27th May 19
How to Choose a Good Online Estate Agent - 27th May 19
Bitcoin Price Stalls Near $8100 - 27th May 19
UK EU Election Results, Brexit Party Victory, Labour and Tory Bloodbath, UKIP and ChangeUK Die - 27th May 19
The Three M's of Hyperinflation : Milosevic, Mugabe, And Maduro - 26th May 19
Global Multi-Market / Asset Charts Review - 26th May 19
An Oil Shock Could Be the Black Swan That Finally Drives Gold Higher - 26th May 19
Brexit Party Forces Theresa May to Resign, Boris Johnson Next Tory Prime Minister? - 26th May 19
IBM - Investing in AI Machine Intelligence Stocks - 25th May 19
Seasonal Dysfunction: Why Generations of Gold and Silver Investors Are Having Such Difficulty - 25th May 19
Employment - The Good and the Bad of Job Automation - 25th May 19
Gold Mining Mid-Tier Stocks Fundamentals - 25th May 19
Buy This Pick-and-Shovel 5G Stock Before It Takes Off - 25th May 19
China Hang Seng Stocks Index Collapses and Commodities - 24th May 19
Costco Corp. (COST): Finding Opportunity in Five Minutes or Less - 24th May 19
How Free Bets Have Impacted the Online Casino Industry - 24th May 19
This Ultimate Formula Will Help You Avoid Dividend Cutting Stocks - 24th May 19
Benefits of a Lottery Online Account - 24th May 19
Technical Analyst: Gold Price Weakness Should Be Short Term - 24th May 19
Silver Price Looking Weaker than Gold - 24th May 19
Nigel Farage's Brexit Party EU Elections Seats Results Forecast - 24th May 19
Powerful Signal from Gold GDX - 24th May 19
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

AUD/GBP Favourite Currency Play for 2008 Continues to Profit

Currencies / British Pound Feb 19, 2008 - 12:33 PM GMT

By: Ashraf_Laidi

Currencies Best Financial Markets Analysis ArticleWhile central banks in most industrialized economies are either reducing interest rates or expected to do so thus year, the Reserve Bank of Australia is expected to further raise its rates to fresh 12-year highs. Overnight, the RBA revealed in the minutes of its policy meeting this month a debate whether to raise rates by 50-bps. The central bank ended up raising rates by 25-bps to 7.25% to counter rising wage and price inflation. Last week, the Aussie hit multi-month highs after Australia 's unemployment rate unexpectedly fell to a 34-year low of 4.1% last month from 4.3% in Dec. Interest rate futures are now pricing an 80% probability of a 25 bps rate hike next month. Diverging interest and GDP growth rates were the backbone of our December calls for broad Aussie gains versus GBP, EUR and USD.


Specifically, we called favoring AUDGBP pair as our "favorite trade of 2008" as the pair is now up 7.5% year to date. Considering the prolonged downturn in UK housing, the resulting downturn in the British economy and the need for the Bank of England to slash rates by 75-bps to 4.50% this year, we expect the Aussie to reach the 50-British pence mark later this year, which is the highest since March 1997.

AUDUSD: We continue to see a 60% chance for the Australian dollar to reach parity against the US dollar later this year, especially in the event that global risk appetite remains largely intact. Interim resistance stands at 92.70 cents, followed by 93.20. Prolonged strength in the price of wheat and copper, all of which are major Aussie exports, shall also will also bolster the currency's standing and the nation's trade balance.

Euro Capped at $1.4800

Euro ekes out fresh gains amid a combination of rising risk appetite and prolonged USD weakness in the aftermath of the long holiday weekend. Friday's 1.9% annual increase in French non-farm payrolls and a 4.4% annual increase in Spanish inflation for kept the bears at bay. Although tomorrow's release of the US housing starts and building permits figures for January may signal further deterioration, our optimism for prolonged euro/usd gains remains guarded as we expect the market to retest preliminary support at 1.4650 and 1.4620. Upside capped at 1.4780, followed by 1.48.

Our bearish EURAUD outlook signaled last Thursday is on track as the pair has dropped from 1.6300 to 1.5995.as expectations of further RBA tightening contrast with increased pressure on the ECB to cut rates before end of Q2. Nonetheless, our positive AUD outlook versus EUR remains more limited in scope than that against GBP and USD.

Yen Drags Down Dollar

The overnight decline in USDJPY to 107.50 from 108.25 is a reflection of overall dollar losses than JPY strength, which is reflected in a rebound in gold to $925 per ounce and the aforementioned jump in EURUSD above $1.4720. But the yen remains weak against non USD currencies as risk appetite returns to global markets. The lack of US economic releases may make way for modest gains in equities today, which maintain negative pressure on the USD, especially ahead of tomorrow's starts/permits report. Interim support stands at 107.20, followed by 106.60. Upside capped at 107.80.

Sterling Heads South on Northern Rock Consequences

Sterling sustains broad damage as the nationalization of UK mortgage lender Northern Rock is expected to shed employment losses in the banking industry, weigh on already struggling lenders and exacerbate the government's poor finances. While our month-end call stands at $1.9500, we see the possibility of testing 1.9420 this week. Sterling's ability to make corrective bounces of at least 50-75 pips allows the possibility for a rebound to as high as 1.9560 (38% retracement of 1.9720-1.945), but resistance weighs at 1.9600 (50% retracement of said move), which may be challenged on tomorrow's US housing data.

Loonie Drops on Soft CPI

Canada's CPI rose 2.2% in the year ending in January, while core CPI rose1.4%, well below the 2.0% target, which opens the door for a 25-bp cut to 3.75% next month. Dovish comments from Bank of Canada Governor Carney support this outlook and open the door for 3.50% by year-end. The 2.9% decrease in Dec wholesale sales just released now should help boost USDCAD towards 1.0080, with resistance imposing at 1.0120. Support climbs to 1.0020.

By Ashraf Laidi
CMC Markets NA

Ashraf Laidi is the Chief FX Analyst at CMC Markets NA. This publication is intended to be used for information purposes only and does not constitute investment advice. CMC Markets (US) LLC is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission and is a member of the National Futures Association.

Ashraf Laidi Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

6 Critical Money Making Rules