FOREX Trading

Japanese yen sinks to forecast Y86 level

2009-10-22T16:37:00.000-07:00

In May 2009 I made the forecast (see blog post here) that the USD would fall to 86.5 before it would recover. This happened on the 7th October 2009, or near enough. The USD has been in a recovery against the Yen since. I would not be surprised to see the USD-JPY fall back again to this level before it rises. The justification will be primarily stronger interest rates in the US.

The prospect of an increase in energy taxes will also help the country's tax receipts and the terms of trade. I would not however be expecting any great improvement in the USD however....but expect some consolidation. The USD remains technically in its down trend against the Yen.

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Andrew Sheldon www.sheldonthinks.com

The USD set for further weakness

2009-09-01T22:35:00.000-07:00

I'd be willing to bet that the USD is set for further falls against the Japanese yen in the coming months. All that Fed pump-priming has placed solid support under the stock market, no doubt raising confidence in the business-end of the US market. The problem of course is the continuing rise in unemployment and the decline in retail sales. We might ask whether the market is anticipating a recovery, or some sustainability in the equities market. I think there is little prospect of that. The USD and equities are likely to weaken, however it will not be a total collapse since there is no significant inflation in the market yet, and a little bit of inflation works wonders for balance sheets.

For the reasons above, I am expecting the USD to fall back to 87 yen over the next 6 months, thereafter I would expect to see some strengthening in the USD as property prices are perceived to have bottomed, and interest rates are raised to boost savings. Expect energy taxes in the US at this point to improve the US budget deficit. The weak USD will of course help offset the 'below the line' deterioration in US export competitiveness. At this point I don't see a fall to the Y80 mark, as occurred a number of years ago (see earlier posts), though I leave an open mind on this point. A short-lived fall to Y80 is possible. I actually don't regard this correction (recession) as an end to the bull market. I think the derivatives market will take the global economy to new highs until the derivatives market ultimately collapses in 10-15 odd years. The recovery will affirm the positive thinkers that their management was always good. The regulation that you might perceive today is really just perception-based. Regulation in future will be no better than in the past. Companies will get away with dubious disclosure.
There are a great many people expecting tragedy from the US market. Basically I don't see that. The US is one of the freest and most dynamic countries in the world. So as long as that is true, and it could be a great deal freer, then it will continue to trump the EU and Japan. It will do what needs to be done. Savings will need to be boosted as occurred under Clinton, to correct the imbalance left by Reagan. Most of the US imbalance was corrected just by the collapse in spending.
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Andrew Sheldon www.sheldonthinks.com

AUD set for weaker outlook

2009-06-20T21:44:00.001-07:00

Australia has had a strong recover over the last 6 months, rising from 62c to 82c to the USD. In the next 6 months I would not be surprised to see the currency come off. There are of course some positives:

1. Some recovery in commodity prices
2. Government stimulated economic activity
3. Residual mining & energy investment
4. Continued weakness in property

The negatives are:

1. Decline in bulk commodity prices - priced annually based on Apr price fixtures for iron ore

2. Rising public deficit

For these reasons I believe the Australian dollar will pull back to 73c, but probably not before rising to 85c. Clearly the justification for a stronger AUD will be a weaker than expected USD. I don't expect this. I believe the US is looking at higher interest rates to boost savings, and higher energy taxes. I believe global warming will provide the justification for a carbon tax, but in this national emergency the proceeds will be spent on anything but the environment. In fact, the whole idea of artificially stimulating economic activity is contrary to stopping global warming. So I am expecting some Clinton-like austerity measures which will be strong on US interest rates, so a strong USD. So I'm expecting a 73c medium term target for AUD-USD.

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Andrew Sheldon www.sheldonthinks.com

EUR to reach 1.45

2009-05-12T01:31:00.000-07:00

The EUR is probably likely to go higher against the USD, but I would wait for confirmation of that trend because there is still more scope on the downside. I am however expecting the EUR to reach 1.45 in the next month.

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Andrew Sheldon www.sheldonthinks.com

USD-JPY looks like falling to 86.50 yen

2009-05-12T01:16:00.000-07:00

The USD technically looks like weakening. The head & shoulders pattern is indicated. There will be two points you can look for - a breach of the uptrend, and a confirming break of the 95.75 support level.
You might have expected a Clinton-like response from Obama on policy. But given the capacity of higher interest rates to undermine the housing sector, you can expect taxes on energy and the wealthy.
There is a meeting of countries in Copenhagen in Oct'09. I think that they will conclude that an agreement on Climate Change is too hard, so why don't we just tax energy heavily, reduce our reliance on the Middle East, raise a lot of money from discretionary spenders, give food vouchers to the poor, and just think deep thoughts about climate change. It was always only a facade to bring in a more comprehensive energy tax. Goerge was against it since it would have undermined his share price for Halliburton, but Obama fear not for the environment. That ought to raise a lot of tax as well, and I think America just might see a 'green is good' religious conversion as well. I am expecting they will annoint a 'green god' in the likeness of Obama.

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Andrew Sheldon www.sheldonthinks.com

The Yen set to strength against USD

2009-03-24T19:35:00.000-07:00

After the recent rally in the USD I would be looking for some weakness. The market is due for some bad news. My bet is that the bad news over the next few months is going to be the 2nd stage of the property crisis. Stage 1 was the sub-prime mess, and next we are about to move into a succession of ARM-reset initiated foreclosures. This will kill any confidence inspired by the recent rally in equity markets. I would also suggest that it will also likely prompt the Fed to bail the US government out of another truck load of debt.
Anyway, this chart structure is telling me that there is considerable (6-point) resistance to a stronger USD, so on this occasion I sold USD-JPY. The target price is around 94.60.

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Andrew Sheldon www.sheldonthinks.com

AUD and NZD appear consolidating

2009-03-13T22:30:00.000-07:00

The Australian (AUD) and New Zealand dollars (NZD) have recovered against the USD from their lows over the last week. There is more upside, but I would not expect it to last. There is really no basis for celebration in the coming months, so I would expect a series of short term rallies. The idea that low interest rates can stimulate the NZ and Australian economies is really false advertising. Since when is the answer to excess debt more debt. We will instead see more printing money, but give it time. In the meantime, its denial.
A stronger outlook for these economies can be expected when we see a recovery in food prices. Basically the problem with these two countries is that we need to see a lot of deleveraging. So we are not going to see a lot of spending by the private sector. Expect government public works. The farm sectors will fare the best, but they are just a smart part of the economy, but they will help the external account for both economies.
The NZD and AUD are likely to consolidate for a while. The John Keys Conservative government is saying the right things so I would expect foreign markets to be supportive of his government.

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Andrew Sheldon www.sheldonthinks.com

NZD outlook presents good investment prospects

2009-03-02T11:07:00.000-08:00

The NZD is languishing at new lows of 49.5c to the USD. The question is - will it fall further to 40c, the hostoric low last reached in 2003 if I am not mistaken. At that time NZ was battling a bad current account deficit, much like today, and like today it was contending with a low commodity price outlook. In this context, one might expect the NZD to fall to 40c. The problem I have with this scenario is the weak outlook for the US economy. I am thinking we can expect a lot of monetary inflation in the US, but we might also expect some taxes on the rich and an energy tax. We need to remember that any slowdown is going to demand the government to raise taxes since Bush was engaged in tax reductions, now we are looking at tax increases.

The weak NZD is going to be a saviour for the NZ economy, and the prospect of NZ expatriates returning from abroad cashed up from offshore earnings is going to offer a stimulus of its own. I suspect a few Europeans and Americans might also be considering retirement in NZ, and some families will be changing their priorities, and deciding emigrating to NZ means more times for the kids. These are the dynamics which move a small nation like NZ. Falling NZ interest rates however suggest that we might just see the NZD move to 40c. As per normal, we should watch the market for some direction. Certainly the falls in equities are reason to think the NZD is not going to be a growth currency for some time. But perhaps you might consider buying property in NZ at this time. Economic malaise creates the best possible setting for contrarian investments. You can buy a house in NZ for as little as $NZ68,000 (USD35,000). This is a natural move for retirees, intellectuals, programmers and international explorers. In 5 years you will be able to sell any property investment at a higher exchange rate. More info here. Chart updates from Yahoo Finance.

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Andrew Sheldon www.sheldonthinks.com

AUD and NZD range trading at best

2009-02-16T21:12:00.000-08:00

The AUD and NZD are likely to range trade for the next month, as the focus is on the EUR trade. There is still some play in the Yen, as it falls to the Y83-85 on weaker economic news out of the USA. We are going to see a weaker USD, and that I don't see adding either weakness or strength to the AUD or NZD. I would nevertheless expect a volatile AUD trading between 58c and 70c.

The NZD is likely to trade between 50c and 60c. I don't see any reason for a fall at this point to its historical level of 40c in the short term, though I can see that as a possibility in the longer term. The John Keys government is shaping up as a disappointment. A swear the guy is the illegitimate child of John Howard the way he is running policy at the moment. He must have been stillborn for the last 2 decades because he has learnt nothing, and he is fully against the trend. Counter-cyclical or just stupid? You be the judge.

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Andrew Sheldon www.sheldonthinks.com

The USD set to plummet!

2009-02-16T20:23:00.000-08:00

The USD is set to plummet against a number of currencies. You might be thus wondering where to place your money. Against the gain currencies I would suggest the EURO offers the better opportunity. Some months ago I forecast the Yen falling to Y85. As you can see that move is almost complete, with the USD currently trading around Y90. At the time I attracted considerable criticism for this forecast. I would however expect the EUR-USD to offer far better trading however in the next 6 months.
The question is - Can we expect the USD to break Y83? I think if this were to occur we could be looking at the end of the USD as the international base currency. The question is - what would replace it? Clearly its not going to be the dysfunctional EUR, the distrusted Yuan, the disenfranchised Yen, and what of the worthless USD? Well, the implication is clear, its the USD or its a new global currency. Is it possible that the US debt profligacy was nothing more than a political statement by the US government. Was the US government thumbing its noses at mercantilist Japan and China and saying, SCREW YOU. By all means hold our USD debts as we are going to dilute the value of them. This is interesting times because we are looking at a global emergency, which can provide the justification for a strong USD (higher interest rates) or a new international currency. I would expect Obama to support higher interest rates in the spirit of former President Clinton. But then maybe he wants to distinguish himself by taken the road rarely taken. The implications for gold and the USD are clear.

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Andrew Sheldon www.sheldonthinks.com

NZD-USD set for rally to 57c

2009-02-08T14:01:00.000-08:00

The NZD has fallen to the USD50c support as expected. The current does however remain in a downtrend. There is no hope of a reprieve from commodity prices in the short term, but it is evident from the short term chart that there is scope for a rally to 57c before the currency resumes its downtrend (and short term traders can take profits). If you are buying NZ property, which can be very cheap outside the cities, then I would suggest you take the opportunity to exchange currency on this future weakness. NZ has one of the most flexible foreign investment regulations in the world. There are 3 ways you can make money from property:

1. Capital growth - through market price fluctuations
2. Rental income - long term or holiday rentals, perhaps whilst using it in the off-season
3. Foreign exchange exposure - by trading volatile movements in the NZD
4. Value-add through improvements - whether DIY or outsourced
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Andrew Sheldon www.sheldonthinks.com

AUD carry trade back in play (Jan 09)

2009-01-04T19:31:00.000-08:00

This Monday's trading signals a return to the carry trade. Last October (2008) Japanese and other fund managers abandoned the AUD, NZD and other high yielding currencies in favour of the safety of the USD and EUR. This week investors are re-entering the AUD in droves. In Oct-08 we saw the collapse of the carry trade, today we are witnessing its re-building.

Why you might ask would fund managers throw money back into commodity currencies? There are several reasons:
1. The vulnerability or exposure to low commodity prices has been priced in
2. The Australian economy will benefit from a low AUD since its commodity exports are priced in USD
3. The Australian economy produces a lot of food as well as minerals, and its now out of drought, and producing record harvests.
4. The interest swap trading AUD:JPY is still very good, and that will always be the case as long as the Australian economy retains its relative size and character to the Japanese economy.

A few weeks ago traders were saying that the carry trade was over. But in fact its a cycle more than a fling. It will always exist, if not the AUD it will be another currency. Interestingly the NZD is not responding as favourably as the AUD. The reason for this is likely to be the poor NZ current account deficit, currently running at 9% of GDP. mind you, that reluctance to buy NZD will be soon corrected. I think we will see the AUD strengthen quickly from Y65 to Y70 very quickly, so I recommend that trade, thereafter I would expect some bad news to curtail it in the short term.
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Andrew Sheldon www.sheldonthinks.com

Outlook for the AUD-USD - support is in sight?

2008-10-08T14:24:00.000-07:00

The AUD has been absolutely hit in the last few months, falling from a high of $US0.985, just short of parity to $US0.6995 in recent days. The currency has since recovered to 0.714. The question is - Is this the bottom? The market talk is that the Australian government, having lead the central bank cuts with 1%, might be looking at another 1% in future. In fact the ECB and Fed are taking the same direction. As long as asset prices are falling there is no possibility of stimulus. The flipside of that is that interest rates are ineffective as a basis for stimulating the economy. if asset prices are falling because people buy generally when they think prices are going to rise. Asset prices will keep falling for as long as people think they are overpriced. The market talk is that property prices need to fall another 25% in Western markets.
The argument is - Is the carry trade over? No, not for years yet I suspect. Until the Japanese government decides to adopt some fiscal courage there is no possibility of the Japanese central bank raising rates. The unwinding of the carry trade has brought the AUD down, but watch as people jump back on board that boat. This is why the currency is so volatile. Traders are going to trade it back up again.
The next question is - What is the bottom for the AUD? The AUD did hit a support at 0.704 and recover, though I would not be surprised to see it test $0.678 in the next two days. Certainly your trades should reflect that possibility. This is a sweet opportunity to buy AUD. The Australian economy is among the most healthy.
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Andrew Sheldon www.sheldonthinks.com

Stronger USD outlook likely to rebuild savings

2008-09-08T17:19:00.000-07:00

The outlook for the US economy is certainly weaker as the Fed steps into a revive the government owned agencies - Freddie & Fannie Mae. These agencies were destined to fail, and highlight the extent to which these government-owned agencies have been used to bankroll US property market investment. Foreclosures will need to be absorbed by the market before we can expect any rebuilding of confidence in US markets. So we might ask - what is the direction for interest rates? The way I see it, something has to give, whether its:

1. Higher inflation - its not going to be asset inflation, so it will have to be cost-of-living inflation
2. Weaker USD - this is if the Fed Reserve continues to subsidise credit in the USA
3. Higher interest rates - in order to rebuild savings in the USA - which will boost the savings rate, but will likely also strengthen the USD. There will need to be tax increases as well to finance government.

The Democratic (Clinton) tradition has been to rebuild savings after the Republicans (Reagan, Bush) have decimated the treasury. I would therefore expect increases in interest rates, higher tax and increased government spending. This will be a 'rebuild America' program, with a lot of flag waving and a strong USD. The implication is that the US is going to go into hiberation for a few years, so if you are looking for a growth scenario, you will be looking to Asia, and obviously Australia will benefit from that. Though without a strong US, we would be looking at a weaker growth scenario for Asia, and I would not be surprised to see domestic stimulus to rebuild the global balance. Expect property booms in Asia. There will be great opportunities given the current global weakness. The stronger phase will be in 5 years when the US does contribute.
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Andrew Sheldon www.sheldonthinks.com

AUD-JPY faces a consolidation period

2008-09-08T17:00:00.000-07:00

The AUD-JPY exchange rate is an important indicator of the carry trade. At this point, we are witnessing a consolidation in the AUD after it hit support around Y86. This consolidation is occurring because of the mix of good and bad news facing the Aust economy. The focus is on Australia because we see notthing happening in Japan. No reform, no significant stimulus. Just a reshuffling of party leaders. One day they are bound to get it right. The factors likely to underpin some strength in the AUD include:
1. Weaker interest rates is likely to see a rebuilding of interest in property investment
2. Certain metal commodities have remained fairly strong - coal, iron ore, alumina, gold
3. Australia's commodity focus & position in Asia mean it will fair better than other commodity producers - except perhaps South Africa (gold, platinum focus)
4. Increasing takeovers and investments by Chinese companies in Australian resource projects augers well for the country's future. Remember the impact Japan's investment had on investment. China's participation will likely be more significant.
5. Stronger food prices and rains I suggest will likely see a stronger rural sector, also helped by mining.

Those factors undermining the AUD are:
1. Lower interest rates is likely to place pressure on the yen carry trade, as funds are shifted out of Australia. NZ?
2. Business investment is going to result in greater outflows, mainly for mining. These projects will see the AUD rise high in future, but investors are short term focused so they will focus on the current account deficit, although it does strengthen economic activity, it does not flow through greatly to the retail sector.
3. The weaker global economic outlook is placing pressure on commodity prices, and thus those countries with commodities exposure.

Short term I am expecting a stronger Australia equity market, initially from the broader market, but thereafter the commodity-based markets should kick back in, and will rejoice in the greater interest by Chinese investors (mostly government enterprises) in our mineral & energy resources. I actually don't see a lot of weakness in interest rates because inflation is still high and spending will likely recognise the bottom. Until the global economy can see a problem, I think we are looking at the AUD going sideways against the JPY. The greater action will be the AUD-USD until we see more positive recovery in commodity prices.
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Andrew Sheldon www.sheldonthinks.com

The USD poised off resistance

2008-07-08T21:38:00.000-07:00

The USD has been strong, though it remains to be seen if it will break 108.2. I think not given the weakness in the market. I think the Fed will lean towards a rate cut rather than concerns about inflation. Its first priority will be growth, and whilst it might talk about raising rates to deal with inflation, the reality is that most of the money supply imbalance will be corrected by insolvencies and reduced speculation (debt liquidation) rather than interest rate increases. Why? Because the Fed will be taking its time to raise rates. It will talk about it but the reality is - the economy always gets primacy. The case for this is stronger close to an election -even if Bernacke suggests otherwise. The notion that the Fed is independent is a crock. We just need a fall below Y105 to correct market perceptions.

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Andrew Sheldon www.sheldonthinks.com

The USD-JPY - a cautionary note

2008-06-19T20:17:00.000-07:00

The USD has experienced some strength lately, though I suspect that is about to come to an end around Y109. The USD did however convincingly break its downtrend, so that is reason for caution, however I would give it until the end of the month to prove otherwise. I believe the coming 2 weeks will be a bad one for the USD. I dont see stronger interest rates to support the USD. Might the US economy show some unexpected strength? Well we'll need to watch the indicators. Importantly the Dow Jones index is at a support level, and I suggest that is a basis for support.

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Andrew Sheldon www.sheldonthinks.com

AUD-NZD breaks previous highs

2008-06-05T18:46:00.000-07:00

The AUD is fairly strong at the moment due to the strong export revenues from coal, iron ore and gold, and metals in general. The agricultural commodities are also providing mixed support. This is one of the reasons why the AUD is strengthening against the NZD of late. The other reasons are the interest rate differential is opening up. NZ interest rates are showing signs of peaking and growing inflation pressures in Australia are prompting a desire by the RBA to increase rates. It therefore seems likely that the AUZ will sustain its premium over the NZD having breached the $1.25 historic cross rate, last reached in early 2006. Thats not to say I see the NZ central bank lowering rates significantly or at all. I think they have just as much need to worry as Australia. NZ'ers have never been good savers. Australia has a better track record on this statistic. So I do expect the AUD-NZD to continue its rise to about $1.33, but then I suggest there will be profit taking. This will have big implications for NZ in terms of investment - see here.

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Andrew Sheldon www.sheldonthinks.com

The USD-JPY on a knife edge

2008-06-01T18:14:00.000-07:00

One of my readers from Japan Forum was highlighting the fact that the USD has been strong lately - contrary to my few that it could be heading to Y85. I retain the view, and gave him the following response:

I think its premature to say whether I still believe the USD-JPY is going to Y85. My reasons for weak USD are that I think US Fed will lower fed rate to 1% as before, concerns about an election, weak economic news and also the possibility of a bank failure. Likely JP Morgan or Goldman Sachs based on their derivatives exposure, but who knows. Also if you look at a chart, the USD is at the peak of its long term downtrend, so you might want to hold that thought. I of course expect it to fall. In support of your view, you might want to look for strength in USD over the coming week. We are really on a knife edge.
Basically I dont see USD going to Y85 as any sign of USD worth, just as a speculative possibility. Which is why I recommend AUD, rather than JPY-USD on my blogs. AUD doing very nicely. So maybe its an issue of perspective. If you want to hold USD long term, I do think the USD will rise strongly next year. As I said months ago, the US will eventually have to raise interest rates to become a 'savings' country, so the associated higher interest rates will result in a stronger currency. Just in the short term, I see weakness. So maybe its an issue of time perspective. As a trader my money goes elsewhere.

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Andrew Sheldon www.sheldonthinks.com

Reiterating AUD support

2008-05-27T18:42:00.001-07:00

The merits of the NZD are however overshadowed by the outlook for the AUD. The AUD:USD offers better exposure to commodities for several reasons. I think the Australian food commodity export prices are rising faster than NZ food exports, Australian natural gas exports cover its oil imports, making it effectively a slight net oil equivalent exporter. Subdued property market is slowing consumption like in NZ, but Australia has solid buisness investment in mining industry - thats future productive capacity. Iron ore, coal, gold, copper prices remain high, and most of these revenues are locked in for the next year. For this reason I think the AUD is the currency to hold at least until September, then I would be switching to USD I suspect.

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Andrew Sheldon www.sheldonthinks.com

NZD makes sense as a carry trade

2008-05-27T18:31:00.000-07:00

The NZD has been having a rally of late. If you focus on the negative press you might have thought otherwise about holding NZD. The reality is that a weak domestic economy is good for the NZD since it undermines credit growth and domestic consumption, which in turn reduces imports, whilst exports remain resilient. NZ has the benefit of being a food exporter, so it should benefit more in future as we see more general increases in the prices of food. NZ produces little oil so there is some basis for weakness there. NZ is not a great story, but if you are looking for a interest swap (yield) proposition it makes a lot of sense, whether as a carry trade.

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Andrew Sheldon www.sheldonthinks.com

Westpac second to call $A-greenback parity

2008-05-07T22:47:00.000-07:00

According to the SMH Online "Westpac has become the first major Australian bank to predict that the Australian dollar will achieve parity with its US counterpart". Having forecast that the USD parity twice in the last 2 months, I'm glad the banks finally recognise the reality. I was hounded on Japan Forum for my bold forecast. The error of many was to overstate the importance of the current account deficit and foreign debt (55% of GDP). These factors are not as important in the current context as they were back in the 1980s. The reasons are:
1. The current account deficit (7% of GDP) will fall as interest rates rise
2. A significant amount of the CAD is due to capital inflows which are actually financing much-needed mining & energy production capacity. That capacity of course is going to increase our export earnings.
3. The outlook for metal prices looking forward 10 years is very good
4. We have yet to see the farm sector make any real contribution to our exports, and food prices are starting their own price rally. This is truly the era for commodities.

The implications is that rising interest rates will curtail spending, and thus imports, whilst exports will continue to increase. As far as the foreign debt is concerned, its a sign of Australia's attraction as an investment destination. In fact, we have good quality housing stock as collateral, aside from the mines. Who wouldn't want to invest in Australia's high yielding currency. Actually the AUD can be considered a 'hard currency'.

Westpac forecast today that the Australian dollar will reach $US1.01US by the start of next year as interest rates in Australia stay high and the benefits of the resource boom remain strong in the economy. I personally think the AUD will perform even better. I can see it topping out at $1.05 by year end because of rising rates in Australia, but falling rates in the US. That situation will reverse come year-end, though I still see the AUD staying in a high range, with $A0.95 a likely support in coming years. The Australian dollar was 94.84 in the New York after the Reserve Bank left official interest rates at 7.25%.

The AUD will benefit from further cuts in interest rates by the US Federal Reserve, and this is occurring at a time when the AUD is under pressure to raise rates. Its possible the RBA will hold off too, as I suspect it will not want to push the AUD higher, particularly if it too perceives the Fed as subsidising the US banking system prior to an election. There is potential for a widening in the so-called yield gap between US and Australian rates. Apart from the yield gap, there is the attraction of portfolio investment in the Australian mining industry. We have yet to see any significant investment in gold companies, and I believe we might yet see a lot of Chinese investment in Australian mining, just as the Japanese did decades ago.

The reality is that the banks never understood the metal sector. They thought this was just another unsustainable commodities rally. "Before today's update, Morgan Stanley had the strongest Australian dollar outlook among major financial firms with its prediction the currency would be at 96 US cents by the first quarter 2009". Pathetic. Can one expect their fund managers to be any better? Overpaid dicks.

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Andrew Sheldon www.sheldonthinks.com

AUD-USD going to parity with USD

2008-05-06T09:34:00.000-07:00

I have long argued that the AUD is moving towards parity with the USD. I can see the AUD rising as high as 1.05USD, however I remain to be convinced of that. Technically the AUD looks like gathering momentum, and I see the Fed keeping interest rates low in the lead up to the US presidential elections. Post-election I actually see US interest rates being raised aggressively, which will send the AUD into a tail-spin. So it will be a short term ascension for the AUD. I expect the Fed to start raising rates just prior to the election, if only to create the perception of independence. Who are they kidding?

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Andrew Sheldon www.sheldonthinks.com

EUR-USD returning to USD1.60

2008-05-06T09:28:00.000-07:00

The EUR-USD is set to rally again to USD1.60 based on technicals. The EUR is currently lying at USD1.55 support. -------------------------------------

Andrew Sheldon www.sheldonthinks.com

AUD-JPY will break Y100 again

2008-05-06T09:18:00.000-07:00

The AUD has had a good run against the Yen as expected. Although I can see short term delays breaking Y100, I actually believe the AUD is going to return to its previous high of Y108. At this point it will be sold off. The outlook for the AUD is going to remain positive. Strong capital inflows is supporting the market, whilst high oil prices and higher interest rates are helping to curb spending. It doesn't get any better. Higher interest rates is required to curb imports, which paradoxically result in a stronger AUD. At some point (Y108) the traders take their Yen and run though, and the likely reason will be weaker outlook for industrial commodities. Iron ore & coal though look good, so do the agricultural commodities. Inflation remains a problem.

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Andrew Sheldon www.sheldonthinks.com