$AUDUSD: Looking like a bottom...

27 oct. 2022

I suspect the Dollar Index is reversing, so I am identifying the currency pairs best positioned to rally from here. Given Australia's commodity exports, the Aussie pair is likely to benefit from increasing demand for copper, iron ore, lithium, to name a few, for years to come. Such tailwind won't help much if the Federal Reserve is still embarking in QT and tightening sprees, but we have some evidence pointing to a chance for CBs and govts/treasuries to reverse course or engage in some sort of policy reversal or pivot, via various tools at their disposal on the fiscal and monetary side of things. The headwind for Australia and Asia/Pacific being China as a wild card, post CPC 20th Congress, and black swan risk of a Taiwan invasion.

That said, if conflict does arise, precious metals would likely rally, and probably help boost the Aussie dollar as well. Overall I suspect we are headed for a long period of outperformance for commodities and commodity exporters' currencies in the FX realm. Emerging Markets become interesting in that regard as well, worth looking into them for opportunities too.

Cheers,

Ivan Labrie.

27 oct. 2022

Note

I commented on the odds of a rally in the Kiwi Dollar too, in my NZDUSD publication, where I shared a short signal that largely panned out:
Weekly and monthly downside targets and time are a done deal. Likely to get a mean reversion type rally back to levels not seen since 2021.

12 nov. 2022

Note

The entry here was stopped but then we had another signal popping, this time it worked. Overall, seems like the Aussie Dollar bottomed long term.