Monday, November 25, 2013

Legends of the Falls

Below is an update for the Australian dollar that maintains the comparative profile from the Waterfalls of Australia note a few weeks back.  
Click to enlarge images
Taken in context with our earlier note that points towards a resumption of downward pressures on the US dollar index, we feel the Aussie is likely completing today the proportions of its retracement decline that began last month. 
Although the intermarket correlation environment is different today than it was during the last commodity driven deflationary scare in 2008 and 2009, to a certain degree the commodity currencies that are most influenced by the cycle are still the gear exchange in the relationship. Considering we are immanently looking for a major turn higher from corners of the commodity and reflationary story (gold and silver), we would expect the Aussie to follow higher in their wake. 
Downstream, this development should eventually provide the equity assets most closely tied to this reflationary trend a catalyst to first break-out of the over three year old consolidation and bear market.