The Australian Dollar / US Dollar (because gold is in USD)

Discussion in 'Currencies' started by JulieW, Jun 23, 2019.

  1. JulieW

    JulieW Well-Known Member Silver Stacker

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    I thought it might be interesting to check out the AUD/USD predictions in the Forex markets since the gold price is denominated in USD currently, and the AUD value is a direct correlation on the AU price.

    So U$D 1300 is about AUD2,000 or so and in future, as gold rises, if AUD rises then we hover around $2k as USD gold goes $1350, $1400 etc.​

    But, if we keep the differential, or the AUD smells worse, then AU gains could take us further and further toward AUD $3k, which I expect if the world turns into a bonfire.

    SO
    The following chart illustrates that there is a strong inverse relationship between the US Dollar and Gold. When the Dollar rises, the gold price tends to fall and visa versa, it should not be surprising given that the Gold is priced in dollars. The only recent deviation from the correlation was October to December which coincided with stock market weakness i.e. SAFEHAVEN buying of the Dollar AND Gold. So the safe haven buying that gold bugs obsess over tends to be temporary at times of stock market stress.
    The recent trend in the gold price has been shallower than the expected given that the USD has continued to march higher which implies relative strength, i.e. the gold price appears to want to go higher despite the rising dollar.

    A quick technical take suggests that the US Dollar may be running out of steam as it approaches resistance at $100, from where a correction could see a retracement to $95, a trend towards which would likely be the trigger for the Gold price to assault resistance at $1350.
    http://www.marketoracle.co.uk/Article65091.html


    AND
    Read the links and make you choices:

    "Should I invest in AUD to USD Currency Pair?" "Should I trade AUD/USD pair today?" According to our Forecast System, AUD to USD Forex pair is a bad long-term (1-year) investment*. "Australian Dollar / United States Dollar" exchange rate predictions are updated every 5 minutes with latest Forex (Foreign Exchange) rates by smart technical market analysis. Q&A about AUD to USD Fx forecast.
    At Walletinvestor.com we predict future values with technical analysis for wide selection of Forex (Foreign Exchange) pairs like AUD to USD. If you are looking for foreign exchange rates with good return, AUD to USD can be a bad, high-risk 1-year investment option. AUD/USD rate equal to 0.693 at 2019-06-23, but your current investment may be devalued in the future.
    https://walletinvestor.com/forex-forecast/aud-usd-prediction

    1. RBA Monetary Policy Meeting Minutes: Tuesday, 1:30. The minutes provide details of the RBA meeting in June, when policymakers cut rates from 1.50% to 1.25%. This marked the first rate cut in almost three years, and a dovish tone to the minutes could send the Aussie lower.
    2. HPI: Tuesday, 1:30. The housing market remains weak, with the House Price Index rolling off declines in the past four quarters. The fourth-quarter was particularly weak, with a decline of 2.4%. The markets are braced for another sharp decline in Q1, with an estimate of -2.5%.
      https://www.forexcrunch.com/category/forex-weekly-outlook/aud-usd-outlook/

    Morgan Stanley has tipped the currency as a buy, saying it should do well in the short-term because recent developments on the domestic and international interest field could see other investors who've bet against the Aussie being forced into a rethink of their wagers.

    "RBA Governor Lowe delivered a speech that confirmed the RBA's easing bias and alerted the market that more cuts could be delivered in the near future. However, markets have already priced in 50bp of cuts by year end, and Street consensus is increasingly shifting toward a July cut (while our economists' base case remains for only one more cut, in August), suggesting AUD upside risk," says Gek Teng Khoo at Morgan Stanley, in a note to institutional clients.
    https://www.poundsterlinglive.com/a...buy-at-morgan-stanley-as-others-stay-on-fence

    Morgan Stanley has tipped the currency as a buy, saying it should do well in the short-term because recent developments on the domestic and international interest field could see other investors who've bet against the Aussie being forced into a rethink of their wagers.

    "RBA Governor Lowe delivered a speech that confirmed the RBA's easing bias and alerted the market that more cuts could be delivered in the near future. However, markets have already priced in 50bp of cuts by year end, and Street consensus is increasingly shifting toward a July cut (while our economists' base case remains for only one more cut, in August), suggesting AUD upside risk," says Gek Teng Khoo at Morgan Stanley, in a note to institutional clients.
     
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  2. Oddjob

    Oddjob Well-Known Member Silver Stacker

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    Having worked in the finance sector, my experience has been that economists and their forecasts are as creditable as weather presenters (and now pollsters for that matter). They excel at telling you what happened and why, but fail dismally in predicting the future....why banks / investment houses employee economists is beyond me....better to respond to facts at hand rather than crystal ball gazing and selling a story.

    As for the AUD, the Govt and RBA has no effective ammo left in the event of the next financial crisis. Back in 2007/08 interest rates were high enough to pull back a few percent "to stimulate the economy" and pre Rudd, Aust had no tangible Govt debt.....We have a large Govt debt profile now based on debt that did not fund tangible asset / infrastructure growth, rather political gain (funding social programs), interest rates are 1.25% so that doesn't leave the powers that be too many options when the SHTF next time.

    Neg interest rates are the last resort given the political damage that will occur if the Govt start taking a % of someone's savings...so what's left.....Welcome to "Australian Quantitative Easing"...it's on the cards....https://www.abc.net.au/news/2019-06...-quantitative-easing,-economists-say/11218476

    So if the RBA and Govt want to debase the AUD, thank god for precious metals.
     
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  3. JulieW

    JulieW Well-Known Member Silver Stacker

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    I agree Oddjob. I'm vastly amused by the innumerable corrections that the IMF makes to it's projections.

    [​IMG]

    No doubt there are more up to date predictions showing the same trajectories.

    As for 'Quantitative Easing' - I've been telling all and sundry that it's a misnomer and should be called Saver Tax. If money printing takes off, pity the country. All those pensioners will be royally stuffed.

    As you say, thankfully precious metals provides and escape hatch.
     
  4. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    These predictions are made, so the current X government can take their advice and change their policy to be above or below or ignore. So looking at IMF predictions and saying their wrong would be like listening to echo chamber.
     
  5. leo25

    leo25 Well-Known Member Silver Stacker

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    So ScoMo will take their advice and flush his surplus down the toilet.
     
  6. JulieW

    JulieW Well-Known Member Silver Stacker

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    More regarding a weaker USD.

    If the Fed couldn’t normalize interest rates when the debt was $22 trillion, how is it ever going to raise rates when the debt is $30 trillion or higher?

    The Fed couldn’t shrink a $4.5 trillion balance sheet. How is it going to shrink, say, a $10 trillion balance sheet or higher?

    The answer is it can’t and won’t. It’s impossible for the U.S. government to normalize interest rates with an abnormal amount of debt. The Fed is trapped.

    After nearly six years of 0% interest rates, the U.S. economy is hooked on the heroin of easy money. It can’t even tolerate a modest reduction in the Fed’s balance sheet and 2.5% interest rates, still far below historical averages.

    In other words, this monetary tightening cycle is over. The next move is a return to QE and 0%, and perhaps negative, interest rates. These moves would, of course, weaken the dollar and be good for gold.

    https://www.lewrockwell.com/2019/06/no_author/8-reasons-a-huge-gold-mania-is-about-to-begin/
     
  7. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    Another factor recently affecting the Gold price is the US/Iran situation which is independent of the USD price.

    Secondly, I have noticed over the years that when the USD goes down and Gold goes up (or vice-versa) the factors leading to this also cause the AUD to go up, and thus tempering the increase in the price of gold. This is not 1:1 but does take the edge of increases.
     
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  8. bubblebobble2

    bubblebobble2 Well-Known Member Silver Stacker

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    Just stock more metal... and don't put them in banks'SDB...
     
  9. openeyes

    openeyes Well-Known Member Silver Stacker

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    Agreed, get rid of plastic and replace it with metal. Shiny metal.
     
  10. JulieW

    JulieW Well-Known Member Silver Stacker

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    A few opinions just now:

    The Australian Dollar was left reeling Thursday by a resurgent U.S. Dollar, which was boosted by a safe-have-seeking push into the bond market, and the antipodean currency is said to need further progress in the U.S.-China trade talks as well as in the Brexit process in order to recover its poise.

    ....
    The global environment is turning sour for the commodity-backed Australian Dollar just days before third-quarter inflation data hits the market and local analysts are suggesting the looming release of the figures could serve to keep a lid on the antipodean currency up ahead even if the mood over in the U.S. and elsewhere improves. Aussie inflation has been trapped below the Reserve Bank of Australia(RBA) target for years, leading the bank to cut its interest rate three times already this year.


    The RBA has cut Australian rates in an effort to lift domestic growth and inflation, although markets are betting it will have to keep cutting for a while yet before the outlook improves. However, it's the ebbing and flowing extent to which investors are wagering on more cuts that matters most to the Aussie, and rate expectations are sure to be impacted by next week's inflation figures.

    ....
    https://www.poundsterlinglive.com/a...ment-needs-more-trade-and-brexit-progress/amp

     
  11. bubblebobble2

    bubblebobble2 Well-Known Member Silver Stacker

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    RBA can cut the rate to negative, but banks aren't that stupid to follow... look at past history, which bank has passed full rate as per RBA... cause they know they can... why? Cause they're the ones that play puppets on ScoMo and his gang, and Turnbull, and Howard
     

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