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  • #1,001
  • May 17, 2011 4:35am May 17, 2011 4:35am
Is anyone who is bullish on the AUD seeing what is actually happening there. Listening to central bankers is one way to go broke. The house price bubble has now burst. We are hearing all the arguments from estate agents trying to justify that it is now a buyers market etc. Prices are heading south.

Mortgage debt to GDP is now larger in Australia than it was at the peak of the bubble in the US and the UK. Now that prices are falling, there has been an acute drop in demand. All that credit expansion that went into blowing up house prices is going to go into reverse. The asset side of the Oz banks is not going to look pretty 12-24 months from now. The next rate movement is down. The RBA possibly don't know that yet, but they will soon enough.

All the talk from the vested interests about a supply shortage will prove to unfounded. Look at it like this. Lets say your government gave everyone a stimulus cheque to buy a BMW over the next 6 months in your country, a $30,000 cheque. There would probably be a shortage for 6 months. But is there really a shortage? Or is it more a case of an artificial demand/boom story. well the same goes for the OZ real estate bubble. Huge credit expansion has bid up prices, creating an artificial demand, making it appear as if there is a shortage. However,, whether it was in Japan, ireland, the US, the UK, these same arguments were made at the peak, to be proved insubstantial once credit expansion reversed, demand dropped and prices head south, and non-performing loans increased.

Also see this...how do you think OZ will fair when China’s Real-Estate Developers Struggle with Debt; Servicing China's Total Debt Load is Problematic; Dramatic Slowdown in China Coming http://globaleconomicanalysis.blogsp...-struggle.html

The next 2 years is not the time to be long the AUD.
  • #1,002
  • May 17, 2011 5:18am May 17, 2011 5:18am
Quoting VedantaTrade
Is anyone who is bullish on the AUD seeing what is actually happening there. Listening to central bankers is one way to go broke. The house price bubble has now burst. We are hearing all the arguments from estate agents trying to justify that it is now a buyers market etc. Prices are heading south.

Mortgage debt to GDP is now larger in Australia than it was at the peak of the bubble in the US and the UK. Now that prices are falling, there has been an acute drop in demand. All that credit expansion that went into blowing up house prices is going...
Yes, all valid points. However the AUD is not strong, the USD is weak and as long as Beni Heli is printing $ there will be demand for gold and other resources and therfore AUD stays stronger. Regarding the housing market bubble, it is just a correction. Some people just bought at the wrong time thats all, but housing is essential and a basic need. Besides that, the US debt ceilling is slowly but surley cracking and needs to be proped up and be fixed for the long term. Right now in this time and age I believe that investors (creditors) do have no faith in the US$ and that is a fundamental change occuring globaly. AUD pays well and even if the RBA lowers the rates it's still a better ROI.

Cheers
  • #1,003
  • May 17, 2011 5:56am May 17, 2011 5:56am
AU has a lot of resistance here. Sometimes the best way to long AU is to short EUR/AUD, especially when the US session starts (because the Yanks do not appear fond of the Euro as the USD's main competitor and are prone to dishing out the reality check to London/Europe). On the other hand, the Yanks do love AU, but if market is wobbly AU may not go north, but the cross will travel south instead.

As for the discussion re market not wanting to buy USD's - there is one reason they will buy - because the Euro is looking more ill than the dollar. This is an ugly sister contest, on any given day one of them can have an outbreak of the pox, making market think the other one looks better (at least temporarily).
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  • #1,004
  • May 17, 2011 6:26am May 17, 2011 6:26am
The corollary re shorting EUR/AUD is that in times past, when market runs short, the cross has been very strong in north traffic (as risk comes off the table). This is an old ingrained habit market has - times have changed however - this past behaviour (of pumping the cross north when market runs short) has not been so prevalent more recently given the Euro's woes. Some caution required.
  • #1,005
  • May 17, 2011 7:25am May 17, 2011 7:25am
Quoting Pipstrumpf
Yes, all valid points. However the AUD is not strong, the USD is weak and as long as Beni Heli is printing $ there will be demand for gold and other resources and therfore AUD stays stronger. Regarding the housing market bubble, it is just a correction. Some people just bought at the wrong time thats all, but housing is essential and a basic need. Besides that, the US debt ceilling is slowly but surley cracking and needs to be proped up and be fixed for the long term. Right now in this time and age I believe that investors (creditors) do have no...
Just a correction...? That housing was a basic need are all the same arguments that were made in Ireland, the UK, Japan, the US, Sweden in the nineties, Finland etc etc. It didnt stop a 50% drop in these places in real terms. The attached chart shows an exponential growth in real estate prices, far from the mean in Oz.These never ever end in a correction. First time buyers have went on a buyers strike in Oz over house prices, there is even a facebook page. These are symptoms of a large bubble.

The other chart is US 10 year T-Bond...Why are yields falling over the last few months if faith is being lost in the US?...http://www.sierrachart.com/userimage...5634733808.png

I think the US is a disaster fiscally and monetary policy wise. But so is Japan, yet for a decade yields have been locked near zero. These things take time, and will not happen over night. For the next 12-24 months, the AUD is a high risk place to be. There will be many huge swings in between over the coming years and a right and a wrong time to be in certain currencies. For me the AUD is now high risk. I can see us getting beneath 80 again.
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  • #1,006
  • May 17, 2011 8:26am May 17, 2011 8:26am
Anyone have clue, where the ausiee going to north or south??
  • #1,007
  • May 17, 2011 9:18am May 17, 2011 9:18am
Quoting Drata
Anyone have clue, where the ausiee going to north or south??

If in doubt, stay out. This is the golden rule for trading fx, what you want is to stack the balance of probabilities in your own favour as much as possible. There are usually other things to trade that don't have the ambiguity. No position (being flat, i.e. out of the market on the sidelines watching for clarity) is also a trading position.
  • #1,008
  • May 17, 2011 11:48am May 17, 2011 11:48am
Quoting FX-Petra
closed my 0520 and 0590 @ 0590 on the pop up. Still holding 2 lots @ 0702. Will add again between 0460 and 0510 if given the chance.

Regards,
added one lot long @ 0510 as per plan. Will close around 0600 area if given the chance. My 2 lots @ 0702 look like dogs right now, but I am earing good intrest on them. I will stay in them until 0440 is breached, or until we get abouve 0700. Good trades to all....

Regards,
  • #1,009
  • May 17, 2011 4:21pm May 17, 2011 4:21pm
Quoting VedantaTrade
Just a correction...? That housing was a basic need are all the same arguments that were made in Ireland, the UK, Japan, the US, Sweden in the nineties, Finland etc etc. It didnt stop a 50% drop in these places in real terms. The attached chart shows an exponential growth in real estate prices, far from the mean in Oz.These never ever end in a correction. First time buyers have went on a buyers strike in Oz over house prices, there is even a facebook page. These are symptoms of a large bubble.

The other chart is US 10 year T-Bond...Why are yields...
Yes I agree in general but I never just look at one chart. I should a be more specific, sorry, housing in the city suburbs have overheated as old dumps on thiny little bit of land with a lots of pollution included a refelcted in your chart. Just move 50 km out of those locations and the world looks different and that has not been reflected on your chart. Massive correction to be happen for all the wanna be rich and little correction for the ones in not so trendy places. As said housing is essential just ask yourself where do people go once they have to move out of their houses? Answer: In a rental place where they can afford it or buy where price versus value is more realistic including the growth rate calculated over a 30 year period.
Conclusion: As long as people have jobs to service the mortgage we will see a retracement (depending on which chart you pull up), housing is a basic need such as food for the majority of people and for all the others it is to play in a wanna get rich quick scheme.
Regarding the first home buyers I truly feel sorry as they have been taken for a ride by their own masters, sort off like when you start trading FX.
Time will tell.

Cheers
  • #1,010
  • May 17, 2011 4:49pm May 17, 2011 4:49pm
Quoting Pipstrumpf
Conclusion: As long as people have jobs to service the mortgage
That I think, is the problem. The job pool in urban areas is shrinking rapidly. Our non-resource based export and tourism industries are taking a thumping because of the high AUD.

I live 50km from a major city, in what is normally, a very tightly held beach enclave surrounded by native conservation park. Property here hardly ever goes on the market, however in the last 3 months, there are now 6 on the market within a one black radius (quite unbelievable).

As I drive 10 mins up the road I pass a famous wine growing region and notice that the grapes are rotting on the vines this year. Something is very wrong.

Youth unemployment is running at 17.8%.

These are not the signs of a healthy economy.

This said, the problem for AU at present is the weakness of the USD. We could conceivably see a situation where even if equities fall over, the USD is not supported. The impact of this for AU will be to go higher, and further hurt our export and tourism based economy. How long this disparity between the fundies and the PA can go on is anyone's guess.

In the meantime, house prices are falling rapidly both in the cities and outer suburbs. People are in mortgage distress thanks to govt stimulus that was never truly needed. The result was artifical inflation of house prices. Now alas, the cupboard is bare. We have a problem called deficit and a increasing gulf between the resources sector and the rest of the country - one that is doing significant damage to many, not just new home buyers.
  • #1,011
  • May 17, 2011 5:12pm May 17, 2011 5:12pm
AUD held support @1.0500 as per yesterdays levels resistance now coming in minor at 1.0640 and major 1.0700-20
Sell towards 1.0700 placing stops above 1.0750
Fake out on Eur/AUD @1.3425/35 break caught many tech buyers short AUD. Pullback limited. Perhaps another attempt at the break is on the cards.
  • #1,012
  • May 17, 2011 7:23pm May 17, 2011 7:23pm
Which is the nicer looking dog, the Audie, the Dollar, the Euro, or Yen?
1. The Audie pays swap, the Dollar costs swap.
2. The Dollar just hit the debt limit yesterday 5/16/11.
3. The Dollar will default on August 2nd.
4. Greece, Ireland, and Portugal are on life support.
5. The head of the IMF is in jail.
6. The Yen is radioactive.
Like Petra, my long positions in AUD/USD look like dogs; but they pay me swap; which is a lot more than the .01% I get from my Bank of America savings account. I can hold them forever if need be. Eventually I will close them at a profit. http://www.forexfactory.com/images/icons/icon7.gif
(P.S. I vote for the Collie as the nicer looking dog.)
  • #1,013
  • May 17, 2011 8:12pm May 17, 2011 8:12pm
Hi Drata,
To tell you the truth, no one knows whether the Audie will go up or down. I think it is going sideways. If I really knew which way the Audie was going, I would max out my credit card, mortgage my house and dump it all into AUD/USD.
Best thing for you to do is to take Jade's advice and stand aside for now. Watch which way the other Audie pairs are going (EUR/AUD is upside down). Wait until the Audie is in an up trend and then go long. (Check out the thread on Trend Trading). Avoid shorting the pair and you will avoid paying swap.
Take Petra's good advice and think long term. Avoid scalping the market. Yeah, I know I do scalp the market, and I am trying to quit; but it is so much fun; it reminds me of when I was a just a puppy playing in a sand box.
Happy trading! http://www.forexfactory.com/images/icons/icon7.gif
  • #1,014
  • May 17, 2011 8:13pm May 17, 2011 8:13pm
Quoting jerrycollie
Which is the nicer looking dog, the Audie, the Dollar, the Euro, or Yen?
1. The Audie pays swap, the Dollar costs swap.
2. The Dollar just hit the debt limit yesterday 5/16/11.
3. The Dollar will default on August 2nd.
4. Greece, Ireland, and Portugal are on life support.
5. The head of the IMF is in jail.
6. The Yen is radioactive.
Your analysis is razor sharp and too funny !

On a more sober note, we are however, possibly on the cusp of a meltdown. Just make sure you'll are on the right side of it. The bear flag on the S&P may follow through shortly with a series of big thump south days. You have to ask yourself just how obscene is it that the bulls don't see the writing on the wall - no more stimulus bucks (what really is market expecting? another huge bull run once all the fake money is withdrawn?), the US on the edge of default and the silly f*ks STILL send it north. Little like money laundering on a grand scale - it will eventually come unstuck.
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  • #1,015
  • May 17, 2011 8:25pm May 17, 2011 8:25pm
Consumer confidence falls in Australia.
It seems more are erring on the side of caution and either paying down debt or saving.
This may go against Swans budget plans for a surplus.
Less GST receipts, business failure and therefore less corporate tax and less pressure on interest rates.
As previously stated 1.0500 and 1.0720 are the levels for the break outs so currently bulls and bears can dance to their own tune.
Personally I favour the downside test despite favourable carry trade.
  • #1,016
  • May 17, 2011 8:42pm May 17, 2011 8:42pm
i agree. i think the aussie could go down to 102 and still be long term bullish.

Quoting lasty
Consumer confidence falls in Australia.
It seems more are erring on the side of caution and either paying down debt or saving.
This may go against Swans budget plans for a surplus.
Less GST receipts, business failure and therefore less corporate tax and less pressure on interest rates.
As previously stated 1.0500 and 1.0720 are the levels for the break outs so currently bulls and bears can dance to their own tune.
Personally I favour the downside test despite favourable carry trade.
  • #1,017
  • May 18, 2011 12:58am May 18, 2011 12:58am
RTRS-MOODY'S DOWNGRADES AUSTRALIA'S FOUR MAJOR BANKS TO AA2; OUTLOOK STABLE


Market was aware of this news however
  • #1,018
  • May 18, 2011 2:09am May 18, 2011 2:09am
Quoting lasty
RTRS-MOODY'S DOWNGRADES AUSTRALIA'S FOUR MAJOR BANKS TO AA2; OUTLOOK STABLE


Market was aware of this news however
AUD is going DOWN.
  • #1,019
  • May 18, 2011 4:35am May 18, 2011 4:35am
Quoting jerrycollie
Which is the nicer looking dog, the Audie, the Dollar, the Euro, or Yen?
1. The Audie pays swap, the Dollar costs swap.
2. The Dollar just hit the debt limit yesterday 5/16/11.
3. The Dollar will default on August 2nd.
4. Greece, Ireland, and Portugal are on life support.
5. The head of the IMF is in jail.
6. The Yen is radioactive.
Like Petra, my long positions in AUD/USD look like dogs; but they pay me swap; which is a lot more than the .01% I get from my Bank of America savings account. I can hold them forever if need be. Eventually I...

http://online.wsj.com/article/SB1000...ws_us_business

Australian Banks downgraded by Moody. I m surprised they are this early, they are usually late to the party, or end of the party. However, I have been looking At Oz banks balance sheets, credit side of the sheet is looking ominous. They will be in serious trouble with only a 5-6% deteriorating in asset quality.

They also rely on over seas funding, think, I hope no one is long AUDJPY.
Interest rates are already priced in and are a reflection of what has already been. It is expectations that drive markets. Interest rate expectations in OZ are mis-priced. Remember in 2008 the AUD payed a positive carry...then within 8 months unwind wiped out 5 years of gains in months. As a previous poster said, house prices are falling, the retail sector in Oz is struggling, and first time buyers have went on strike.

As NPL goes up, and the interbank lending crunch comes to OZ banks, I think we will see big cuts in Oz rates. In a deflationary environment the USD will most likely go up. The FED can create reserves, it cannot create money, the banks need to do this, and we need a willing borrower. It takes two to tango. If the global market places winces, and retracts from credit expansion, and the individuals collectively decide they do not want to borrow, highly likely when assets correct, the contraction and destruction in credit will be much faster than the FEDs ability to print money. All those dollars that were used to bid up prices then become an illusion, and what once existed evaporates, making them less plentiful. Thats why we see a strenghtening USD in these situations.It happens at such break neck speed as everyone rushes for the exit at once. That is the nature of a system of fractional reserve banking and leverage and pyramiding. Eventually the central banks will flood the system with so much liquidity that a huge rally will come. However, it is protecting yourself before that which is important.

T-Bond yields are falling fast, despite all the fears of a US default. Why are T-Bonds falling if the market is fearing a default. Conversely Greek bonds yields are surging with the fear of default. Care to explain this apparent anomaly?

Its not actually going to default you know, not at this juncture. Remember the day the US was downgraded by S+P, the USD surged. When everyone in the market unilaterally expects Y to happen when X happens, usually they are wrong footed.

I hold core gold and silver positions, and I m short the AUD for fundamental and hedging reasons to other positions. But to be naked long IMHO is crazy. Any of you guys who are naked long the AUD are taking on a huge risk.

Look at history, when you have an asset bubble of this size, whether in Sweden, Ireland, the US, the banking system always gets into trouble. I do not see why Oz banks will be any different. Be careful.
  • #1,020
  • May 18, 2011 4:47am May 18, 2011 4:47am
In May 1951 there was a top in the commodities markets, gold, silver, corn wheat,soyabeans all collapsed. We ar 60 years from that point and that is a Gann cycle. Now, silver tanked recently, gold is off its high and the AUDUSD looks like someone gave it a punch on the nose.

Is this the top, only time will tell. Should you be careful here, yes because even if the cycle is wrong, caution is a valid outlook in the markets, for me the AUD will have to prove it wants to go down, by doing it.

As look as it goes up its for buying.

Good trading to you all.


Mike Haran
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