This text is from blog famous currency strategist Joel Kruger .
OWOTNY AND AUSTRALIA – The Euro looks like it is slowly carving some form of a top on the daily chart, although we would still need to see a break and close below 1.3250 to really encourage reversal prospects. ECB Nowotny’s agreement with World Bank forecasts calling for negative growth in the EU this year has been weighing on EUR/USD. Elsewhere, Aussie has been the standout underperformer, after a much softer than expected Australian jobs report caught many off guard. This comes as no surprise to this guy, as I continue to project major weakness in the Australian Dollar going forward.
END WITHOUT MEANS – I see a local economy moving in the wrong direction, and at risk for more stress should the China recovery story prove to be less real than most have been pricing in (which I suspect will be the case). While yield differentials do still remain attractive, this is really the only thing the Australian Dollar has going for it right now (in my view), and much like the global equity markets, the Australian Dollar has been supported less on underlying fundamentals and more on the sheer incentive to be in a trade on the yield attraction.
A HARD RAIN’S GONNA FALL – On the strategy front, generally speaking, not much has been going on, and markets have been pretty quiet in mid-January…so quiet in fact that it actually has been a little eery. As a testament to this fact, just look at the S&P, which has closed in basically the exact same spot over the past 5 sessions. But when price action flatlines like this, you can bet that a storm is a brewin and some hard rain is gonna fall….translation…..look for a surge in volatility over the coming days. My outlook supports a breakout which puts risk correlated assets back under pressure.