2011

Hi Everyone

Happy New Year to all, I am not one for predictions or forecasts but seeing everyone else makes them at this time of the year, I suppose I may as well throw my hat into the ring as well.

Everything I read about the Aussie dollar is bullish and whilst most of these forecasts are made off hard data, like anything it deals with history to predict the future. There is no denying that 2010 has been a stellar year for the Australian Economy and the Aussie dollar. This economy has basically been created on the back of one thing (China) and when that bubble bursts and it will burst eventually, its going to be a tsunami size impact on the Australian economy.

The bursting of this damm won't be like a normal bubble, cause we have a communist government in power, which means that information and more importantly the flow of information can be regulated somewhat, so China can drip feed the world information. To my mind this actually hurts them more cause as we have seen throughout 2010 with the euro zone, the more you try and sensor any bad news the more the reaction and over reaction the market will have, cause in the absence of the truth the market will make it up as it goes and that can never be good.

Year end flows in the commodity currencies have been extreme to say the least, with the Aussie and NZD dollars seeing almost unbelievable levels by the close out of this year, every other commentator keeps saying yes but thats caused by the commodities and how hard they are rallying and yes there is no denying that to some degree that is true, call me cynical but I just don't buy it, all I see is central banks trying to get rid of their USD's that they bought to try and weaken their own currencies. At this time of the year, the Central bankers and big investors pretty much use up all the liquidity that's left to push pairs to where they need them to be for the start of next year, make no mistake, AUD, NZD are not that bullish, I been around long enough to know what bullshit smells like and these pairs in particular stink quite a bit. Yesterday we had a particularly good run of US economic data and what happens the USD sells off in response to this, if there isn't a better illustration of manipulation then please tell me what it is.

Next week the new year begins and I suppose we will get our answer as to what happens next. I personally believe that 2011, will be used to position the USD in a stronger position for a possible rate tightening schedule starting 2012 by the federal reserve. This may not be the path that Mr Bernake will be wishing for but markets always run in front of reality. I see China allowing the Yuan to strengthen slightly to help fight inflation and multiple rate hikes will let some of the air out of the china bubble and mean the risk currencies will come off a bit in response to this tightening.

Well its 5pm here, time to put on the party suit on and bring in 2011.

Happy New Year All

Simon

AUD Analysis

AUD has prooved once again that it can be a little bullett prrof, although I do think its far from convincing. In November we made a beautiful hammer on the monthly chart.

 

The retrace of this hammer has been expected and anticipated, as long as we keep under parity and definitely dont close above 10020, then I believe it to be in play and significant.

 

Coming down to the daily chart, the action has been sideways since the right shoulder was put in, but I believe this to be the time of year instead of an invalidation of the formation, respect of the trendline from the head to the right shoulder is the next area where we need to see rejection, some overshooting of price is anticipated in thin December markets.

NZD Analysis

I have been banging on a bit about NZD lately on twitter and I thought I might document some of my thought process and technical analysis into the blog as sometimes its hard to convery all of these thoughts into a tweet.

As regular readers are aware I conduct top down analysis of my pairs but rarely look much under the daily timeframe, so starting with the Monthly chart lets get started. 

The hammer in November was significant , with december starting out with a nice retrace of it to 0.7650 as expected.

 

The weekly chart is clearly now showing lower highs and lower lows.

 

This week I expect a pullback towards the 7450/7500 area for this pair before we continue with the trend lower.