Euro Aussie Forecast June ’09

During the month of May the Aussie continued to strengthen against the Euro within range of 783 pts. High at 1.8276 and Low at 1.7493. Market action theme for May was primarily toward riskier assets. The EuroUsd made siginifcant gains as did the AusUsd. Therefore the EuroAus being a cross rate has continued moving down. As EuroAus is calculated by EuroUsd divided by AusUsd. Given the fact that the US dollar has a big impact on the direction of EuroAus, it is worth having a look at the forecast for the dollar. The US dollar has reached sentiment extremes, against all the major currencies, implying the US dollar is posied for a come back. 

Elliot Wave International a Famous Market forecast group, have been looking for a turn in the dollar for a number of weeks.

Here is what they had to say in there latest update on Friday………………..

“Another reason to suspect a dollar low is a clear five-wave decline from November 2007 to January of this year has led to an ABC countertrend rise. This push has carried Cable into the area of the previous fourth-wave of lesser degree and sentiment is now becoming extreme. Subscriber SB sent us this front page photo of Thursday’s Daily Express, which celebrates the Pound’s “booming” rally versus the euro and dollar. According to Paul M. Montgomery’s Magazine Cover Indicator, when a financial market makes the front page of a non-financial weekly or daily, odds are the trend in force is near an exhaustion. Cable could extend a bit higher to complete its wave structure, but odds are greatly increasing that the sharp rise from January is nearing an end, which, when it does, implies a dollar rally.”

Source:  http://www.elliottwave.com

Financial Forecast Short term Update

Click on image for larger picture.

The above chart shows a descending channel (thin red lines), as long as price remains within this channel, prices will continue to fall. One reason to expect a low any day is the divergence between price and the RSI, as shown with the purple vertical lines, this type of action is consistent with market lows. As long as the RSI stays above the green TL, expect a move higher toward the upper end of the range 1.8700′ish.

Therefore taking into consideration, the cross market analysis, I would expect the EuroAusd to have one final push to a new low early in June, most likely the first week, toward the Orange area on the above chart. The range for June is most likely to be roughly between 1.7300 and 1.8700. A move above the upper channel TL  (thin red line), would be the first indication that the current down trend is coming to an end, and a trend change could be taking place, lasting many months possibly years. The Elliot wave followers are predicting a long term low somewhere near current levels. A move below the lowest thick green TL on the above chart (currently near 1.7100) would prove this analysis wrong.

Euro Aus Forecast May ’09

Occasionally friends and family ask what I think is happening with the Euro / Aussie exchange rate. So each month under Category – Euro Aussie Exchange Rate, I will post a technical analysis, on what might happen in the future.  Bear in mind anything can happen, and it is extremely difficult to forecast exchange rates.

The first chart is a weekly chart starting year 2000 until now, with the maximum low at 1.499  or  (0.667 for the aussies), and all time high 2.1096  (0.474), with a fibonacci zone between 1.8757  (0.533) and 1.7328  (0.577). Generally speaking if price moves above the fib. zone, chances are its going up, and below going down.  The MACD (Moving Average Convergence Divergence) indicator has peaked at a historically high overbought area and is pointing down, heading back to 0 and price somewhere near the 61.8 fib zone  1.7328  (0.577).

Click on chart for better view.

The next chart is a daily chart from October 2007 until now. Red descending trendline is the line in the sand for a Medium term (weeks /months) Bearish case. A move above this line would indicate the current down trend has changed to up. Lower heavy green ascending trendline, represents the lower extreme of price movement and a possible low target of 1.700  (0.588) in the next 1 to 6 months. If price drops to this line Expect price to bounce back up toward 1.800  (0.555). A break of this line would put price into its usual dominant range area between 1.7300 (0.578) and 1.6200 (0.617). Maybe some time toward 2010.

Currently the market low at 1.7981 (0.556) is the major support area (light green trendline). A move below this support could see a move down to the grey zone. The ATR (20) indicator  (Average True Daily Range over 20 days), is showing movement of 260 points (0.0260) per day, as a guide.  Note during times of fear in the market the Euro Aussie  goes nuts and can move 1000 points in a day, usually up. Due to the current economic climate, there is a good chance price could bounce up from current levels and head back toward the red trendline 1.9200  (0.520) 1 – 3 months. The catalyst for such a move, would be some disaster, ie. swine flu, financial bad news.

Technically RSI  (Relative Strength Indicator) has been extremely oversold at 18, below 30 is considered oversold. Therefore a rally is expected in the coming weeks, potentially to test the 200 Day Moving Average  (dark blue squiggly line) near 1.880  (0.531).  Typically when price moves below the 200 MA market players consider the medium term trend to be down.  Often price will test the 200 MA before heading lower.

Once the global economic crisis is over, with America and Europe recovering and GDP heading back into positive, which could be anything from 1 to 5 years. I would expect the exchange rate to settle back into its historical range (grey area). Until then it will be hard to forecast.