
Fundamentally,
there is no reason to believe that the Aussie dollar [AUD] is about to come out
of its dominant downtrend any time soon. The latest statement from the Reserve
Bank of Australia (RBA) says that it has revised downward its estimate for Australian Gross
Domestic Product (GDP) for 2013, to 2.25% from 2.5%.
The RBA is
also concerned about the decline in the mining economy in Australia , to
the extent that it expects the non-mining sector to make up an expected
shortfall. One thing that would allow this to happen is depreciation in the
currency. The bank is quite explicit about this, saying that “a 10%
depreciation in the exchange rate could stimulate growth by half to one cent
over two years or so”.
One criterion that the bank has for cutting interest rates, the so-called cash rate, which would have
the effect of lowering the value of the dollar, is that inflation should be
between two and three percent. At the moment it is running at 2%
Technically,
AUDUSD is in a retrace from its downward trend but there is a significant line
of resistance to this, at 0.94038 (see monthly chart above). The high
probability trade would be to catch a resumption of the downtrend as the
exchange rate approaches this level.
We are out
of the market at present but we have set the Omicron Forex Silver Trigger algorithmic routine to enter the market, but only to the downside, when it gets the
momentum signal that can trigger a trade.
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