EUR/AUD for commodity contrarians

EUR/AUD for commodity contrarians

The down draft in the AUD has echoed the slide in commodity prices. For those who think that oil and copper, as examples, are near lows, the AUD may provide an excellent commodity basket proxy play. A statement today from the RBA may add an interest rate component to a short EUR/AUD position.

The RBA could be edging markets away from short AUD positions. Lowering economic growth expectations on the back of lower than forecast population growth is the latest in a recent series of hints, most notably the call from the Governor that the stimulus benefits of lower rates must be balanced against the longer term systemic risks (read build-up of leverage). On the other hand, the ECB appears fully committed to ongoing stimulus.

Here’s the picture:

20150807 euraud

The concurrent up trend and support level could offer a trigger for a swing trade, selling at 1.4748 with a stop above 1.4800. More ambitious traders could aim for a huge move towards the lows around 1.3700, but the congestion around 1.4440 may provide a more realistic trade target.