FxWirePro Short Term Outlook: Aussie to Drop to 0.7 Against Dollar and 69 Against Yen
Anyone who missed out on Aussie’s big drop against Dollar and Yen after Bank of Japan (BOJ) stayed away from policy stimulus, Q1 inflation came at lowest since 1999 and RBA chose for a surprise rate cut, need not worry. Opportunity is still there and it’s big. Only that you will have to tolerate a bigger stop loss. Even then Reward is much bigger than the risk.
While Australian Dollar found support in rising commodities, mainly iron ore and coal prices and Reserve Bank of Australia’s (RBA) “policy very accommodative rhetoric. RBA recent broke away from that and China on the other hand trying to rein over commodity bubbles. Reversal of these two supporting factors are likely to take bigger toll over Australian Dollar.
Trade idea –
- Sell Australian Dollar against USD at current price of 0.75 and at rallies, with targets around 0.725, 0.712 and 0.703 area. Drop may extend towards 0.69 but we would prefer large profit booking around 0.7. Stop loss for this trade at 0.785.
- Sell Aussie against Yen at current rate of 80.3 and at rallies with targets around 70 area, we expect it go down further 60 but that may take much longer horizon. Stop loss for this at 86.5 area.