Governor Glenn Stevens Speech

So that Reserve Bank of Australia (RBA) Governor Glenn Stevens gave a speech this afternoon as mentioned in the update. He was giving a talk during lunch at the Queensland University of Technology Business Leaders’ forum. “There’s a sort of urban myth that is going around that it’s understood that we wouldn’t raise rates in the year of an election,” he said, “I object to that notion.” “Whatever has to be done has to be done.” “I think all the people concerned are aware of the state of the economy and the importance of long-term fiscal discipline,” Mr Stevens said. And so, what did the Aussie dollar do? He gave the speech around 1pm Sydney time, and it’s now 4.50pm Sydney time: the Aussie/US is trading at 0.8377 cents as I type - about 10 pips lower compared to this morning. Personally, after hearing a speech like that I would be bullish on the dollar, but perhaps the market needs a little more proof? Hey at least, the dollar didn’t go plummeting down as if there was no chance of an interest rate rise. BTW, did you manage to go short on the dollar by going short a few days ago when the dollar was ranging between 0.8410 and 0.8450? If so, Good on ya!

Aussie Dollar Experiment

I present to you the Aussie Dollar Experiment! This is a Forex Trading experiment using the simplest of all trading systems. Professional traders always advise on trading with a system, and I would like to test if flipping a coin can be used in a successful forex system. I will be flipping a coin at around 9am Sydney time (+10GMT) every day. Heads would mean a long trading position, Tails would be a short trading position on the Aussie Dollar. This would be theoretical - no real money involved, but I will be tracking the number of pips that we would theoretically be making (or losing) with this super simple trading system. I will also be putting an arbitrary stop at 30 pips against any current position. The system will also automatically take profits at double the stop loss at 60 pips and each position will be closed 12 hours after it had been opened. I’ll be recording this daily in a spreadsheet, then reporting the progress of the system weekly.
The Aussie Dollar Experiment forex trading system summary:

• Flip a coin: Heads = Long; Tails = Short
• Initiate trade around 9am Sydney time (+10GMT)
• Conditions to close a trade:
• Stop Loss at 30 pips; or
• Take profits at 60 pips; or
• Close Trade 12 hours later at 9pm.

This is a totally blind forex trading system; it doesn’t take into consideration any technicals like support and resistance or any fundamentals such as important economic announcements like employment or GDP growth. My hypothesis for this Aussie Dollar Experiment is that a blind trading system can make money. I’m predicting a small amount of pips would be gained from this… I will be running this experiment for at least a quarter or three months, depending on the system’s success. Wish the system luck!

Aussie Dollar Update

Wow. Boy does time fly. It’s the 11th June and the last entry on my forex trading blog was on the 3rd of March. Why? Call it a trading holiday - went to enjoy my time, see the world, experience the other side of life. Keep in mind, taking a breather is important. And now I’m back. Just when the Aussie dollar hits 17 year highs of over 84 cents per US dollar. The last time the Aussie was trading at this level was in August 1990. The dollar was launched to the stronger levels as a result of stronger than expected Gross Domestic Product (GDP) figures, rising 1.6 percent for the March quarter on quarter and 3.8 percent over the year to March 31 (Economists expected only 3.1 percent growth rate). And after three months of absence from trading the forex markets, its amazing to see that the Australian economy is still riding a strong metals cycle, with strong consumer demand, low unemployment, a level interest rate and strong business investment as a result of strong company profits. Continue reading Aussie Dollar Update…

Aussie at One-Week Highs

The Aussie touched one week highs on today’s Asian forex trade. The rally was a little stifled as a result of caution in the markets ahead of US employment data coming up overnight. This morning the Aussie was around 77.90 cents compared to 77.73 cents yesterday. Sue Trinh, currency strategist at RBC Capital, have noted that carry trades have gained renewed interest with investors encouraged by signs of consolidation in world share markets. Is the dollar set for recovery above 78 cents when just a week ago we were thinking about 80 cents? Hmm – something to ponder in the weekend.

Australian Dollar Stronger for Now

The Australian dollar closed the Asian forex trading day stronger today brought about by gains in local and regional stockmarkets as well as economic data released today. The Australian economy grew by 1.0 percent in the fourth quarter, lifting on year growth to 2.8 percent from 2.2 percent in the third quarter. Strong spending, construction and mining activity gave the economy a boost. Growth was expected by the market to be 0.6 percent. Assistant Reserve Bank of Australia (RBA) Governor Malcolm Edey told a business conference that the world economic outlook was strong with Europe and Asia ready to pick up the slack should the U.S. economy slow. Edey said the long-term prospects for growth in Asia were rich with both China and India set for decades of stellar expansion.

Australian Dollar Steady!

The Aussie dollar is steady for now. Australia’s monthly trade deficit in January has narrowed which encouraged the local currency somewhat. The deficit narrowed to A$876 million in January from a gap of A$1.379 billion in December. The Australian Bureau of Statistics (ABS) said that exports rose by 2 percent and imports fell by 1 percent in the month. The Reserve Bank of Australia (RBA) met earlier this morning but the market expects them to hold rates steady at 6.25 percent. The outcome of their meeting will be found out tomorrow. Watch out for fourth quarter economic growth data due 0030 GMT (11.30am Sydney time) also tomorrow which could influence forex markets.

It’s Those Carry Trades Again

Today was a nasty day for the Australian dollar. Those carry trades have forced investors to continue to sell down and unwind their carry trade exposures in their forex holdings due to the continued bearish market sentiment. It was interesting to note that government bonds continued to rally as nervousness across the region encouraged safe-haven buying. This morning the Australian dollar bought around 77.74 cents down from the 78.53 cents we saw last Friday. So, it was a correction of the markets? Don’t you just love it when the financial journos and the other market commentary people always pin it down to the correction the market needed? Anyway, the Australian dollar was clearly still being affected by the risk aversion procedures taken by the players in the market that started last week and it seems that it is affecting markets globally. Even Australian local economic reports didn’t even have any influence the markets at all: Aussie company profits rose 2.5 percent in the fourth quarter and inventories rose by 0.1 percent breaking the two quarter decline. On Wednesday the Australian Bureau of Statistics (ABS) will issue their fourth quarter national accounts data Wednesday at 0030 GMT or 1130 local Sydney time.

Australian Dollar Selling Pressure Easing

While the Australian dollar has drifted lower in forex trade today, selling pressures across worldwide markets have eased. Government bond prices have closed higher after the economic data out of US of a downgrade in US fourth quarter GDP (Gross Domestic Product). In local data there was an upbeat fourth quarter capital investment data where business investment lifted just 1.0 percent (seasonally-adjusted) in the fourth quarter from the third, the data included news of a sharp upward revision of expected mining sector investment through 2007-08. Miners expect investment will rise by 71% in 2007-08 over the previous year. You’ve got to remember there is still the uncertainty linked with the sharemarket which means that the Australian dollar will remain vulnerable. Watch out for Australian Retail Sales Data tomorrow.

Worldwide Markets Influence on the Australian Dollar

Today is proof that worldwide markets influence the Australian dollar. I watched as the Australian dollar fell by a substantial amount today. Why? Well if you don’t yet already know, it all started in China. Stock prices fell in China, then overnight in the USA. Australian markets followed the next day. Looks like the Aussie doesn’t look like a good currency to hold at the moment since the big players are in risk aversion mode. Investors are seeking to unwind their carry trade risk. However a slight bounce today in the forex markets came as economists said that an interest rate hike in Australia in the coming months remains on the table. Today the Aussie currency hit lows of around 78.55 cents compared to recent highs of about 79.50 cents. There is also plenty of economic news coming out of USA overnight such as the fourth quarter US GDP data – any hint of weakness and you know what will happen. Also any signs of rising stress in the U.S. sub-prime mortgage backed debt market might also be a negative influence. You’ve got to remember, there is also the geopolitical risks to consider. There are also the looming ambitions of Iran for nuclear and the US military presence in the region. Tony Morriss, a senior currency strategist at ANZ has said that, “The Australian dollar does not perform well during periods of risk aversion and it opened on the defensive this morning given the size of the overnight moves in stock and commodity markets.”

AUD Volatile Behaviour

I was watching the AUD/USD currency pair over the past few hours and was amazed by the volatile nature exhibited by the minute chart as shown above. So what made the dollar rock to and fro about 30 pips in a matter of hours? Government bonds took leads from US Treasuries which rallied from comments by former US Fed Chairman Alan Greenspan. Also the RBA have also noted that it had recently “stepped up” the selling of AUD in forex markets by purchasing foreign reserves in January. It is also worthy of note that the Australian dollar is close to multi-decade highs with regards to the trade weighted index. At the moment the AUD Trade Weighted Index (TWI) is at 65.2.