Sand Spring Advisors LLC
A Currency World: AUD & CAD
December 9, 2002
by, Barclay T. Leib
I am travelling this week, actually writing this on an airplane. Chicago, Minneapolis, Dallas, and Kansas City are on the agenda over three days. Thus, by the time this short technical view gets posted (likely late this evening from Minneapolis), the charts pictured below will already be a day stale. For this I apologize, but hopefully the general message will still be worthwhile.
Some of the clearest immediate trends that I currently see across markets are within the currency sector. As previously espoused, the euro appears headed to a technical Fibonacci target near 1.04. Last week's drop in non-farm payrolls and shake-up of economic leaders at the Treasury and White House simply reinforces this view. When the U.S. economy appears to be staggering, as the Bush administration clearly now increasingly realizes, there is a simple solution: promise the markets new leadership, and let the buck fall.
Away from the euro, I also suggested last week that the USD/JPY uptrend is likely to take a substantive time out. This is unfortunate since a weaker yen is what the world really needs in order to "force-out" substantive portion of global savings that is currently hiding in Japanese Government Bonds. If the yen stops depreciating in the short-term, it will be harder to make this happen.
I also see the Australian dollar renewing its march higher in the short-term (likely on the back of a rising gold price toward $335 and perhaps $351). A reasonable minimum objective now for the Aussie would be up at .5897.
Chart constructed using Advanced GET End-0f-Day
Lastly, I noted over the weekend while catching up on some reading, that fundamentally-driven Bridgewater Associates is quite bullish the Canadian dollar. On a purely technical basis, so too am I. Many people accustomed to looking at charts of tech stocks now fallen from grace may recognize the chart pattern below where three final attempts to rally end in marginally lower highs, and then eventually falls apart to the downside. I have penned in a few tentative arrows as to the general manner that I might expect the Canadian dollar to behave in the days and weeks to come.
Chart constructed using Advanced GET End-0f-Day
There is no better time to book that Christmas vacation to Whistler and take advantage of the Canadian currency currently at least 10% too weak compared to where it will soon be.
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