Gold could come to the rescue of beleaguered AUD
The bears are rampant in the AUD at the moment and there seems to be no prospect of any sort of rally but I remain a non-believer. Yes, I tried to pick a bottom above 90 cents and luckily managed to jump off that lift before it collapsed, but my sentiment hasn’t really changed and longer term I think these levels will prove to be cheap in the AUD/USD in particular. We certainly still have scope in pairs like EUR/AUD to return to more neutral levels but elsewhere the AUD selling is way overdone; do you really want to sell AUD/NZD at 1.14, or AUD/JPY at 87 given all the BOJ expansion? Well that’s what the market is doing and it’s doing so in size, if positioning reports are to be fully believed.
The RBA seems certain to cut rates tomorrow (certainly not 102% certain like the market is pricing in!) and that is adding more fuel to the bear’s fire but all that’s needed (given current extreme positioning) is one trigger to cause a really hefty dose of short-covering. I have a feeling that this trigger might come from Gold. The yellow metal is back above $1300 and looks to me like a market that is short and hopeful, rather than short and confident. I think there is a reasonable chance that a major low is already in place and if it starts taking out important technical resistance levels, then it will drag the AUD with it, whether the bears like it or not.