ridethepig | AUD Long-Term Macro Map We shall open the chapter on AUD with the Monthly chart and as usual work our way down towards the inner time frames. The aim for the frontal attack here comes with a double whammy from USD devaluation and Commodity appreciation. AUD buyers are aiming to carry out the deeply laid plan (although it was almost refuted after the Covid crisis) since the macro flows seemed handicapped but now the short-circuit is clear.
Things will proceed as follows:
📍 On the USD side....
The key idea. All that has happened up till now was solely and simply to clear the board and unlock the pathway for large hands to get filled. Here we can prepare for the Dollar to begin its journey as planned towards the 75 and 50 targets over the medium and long term. Note that the immediate short-term outlook in DXY is still for a pullback after the latest payrolls, this will be bought as all believe things are right again.... the US had to make a choice between a higher stock market or a higher currency, this was a well orchestrated move from China & Russia right under everyones nose! How keenly the Whitehouse are to describe this as a win is very telling of the desperation! Why? Equities can continue rising and rising but what will the value of the dollar be then? The next example shows the example of how macro flows have been flanking in the background while all the masses are distracted:
📍 On the AUD side ....
Expecting very little from the RBA till 2021, a masterstroke from Governor Lowe and Scott Morrison to achieve the liquidity and get borrowing costs down. A lot of uncertainty around the local macro data, forecasts reached extreme readings to the downside so any overshoots are seen as 'positive' or 'less bad'.
In exemplary fashion, Lowe has managed to achieve the yield target above without bond purchases all month! Look and marvel! The usual critics will intervene and mutter something about inflation. But it is obvious that what I am admiring is not the way he conducted the rate cycle transition, but rather the performance of the AUD acting as a blockader to China / HK risk.
" In Australia, the government bond markets are operating effectively and the yield on 3-year Australian Government Securities (AGS) is at the target of around 25 basis points. Given these developments, the Bank has purchased government bonds on only one occasion since the previous Board meeting, with total purchases to date of around $50 billion. The Bank is prepared to scale-up its bond purchases again and will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year AGS. The target will remain in place until progress is being made towards the goals for full employment and inflation. "
On the account that RBA avoid negative rates, then maximum pressure will be applied from AUD buyers when commodity shortages enter into play from 2021. Let us take a closer look at Copper:
The point of the combination from Gold, Copper, Iron Ore will time the further illustration and lust to expand towards the 0.813x, 0.950x and 1.058x highs in the macro range. As usual we will open the inner flows with Weekly, and Daily charts before working our way into the Hourlies.
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