building on the comments I am responding too, more opinion that the AUD is the currency proxy for global reinflation, if it is to occur:
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Everyone wants to talk about euro weakness this morning. While the carnage in the single currency has led to a modest outperformance of Treasuries versus their European counterparts, particularly at the front end, we would keep a closer eye on the Australian dollar. As we have mentioned before, the Aussie is considered one of the most credible reflation indicators in the market right now, as its concurrent bounce with global equities and commodities has been an influential driver of the aggressive V-shaped recovery expectations priced into the Treasury market.
However, with the inability of gold to break through the $300 an ounce level, the Aussie has been the victim of a recent flurry of profit-taking. Of interest, the recent rally was capped by the 200-day moving, which rests just $0.0070 above the 50% retracement of this year's sell-off, and fits nicely with some former resistance derived from mid-February. Finally, we would note that while not shown on the accompanying chart, today's sell-off down to $0.5188 in recent trading, has taken the currency through trendline support stemming from the early April bounce. |
