Higher US Rates Pushes AUD To A Two-Month Low

The AUD/USD made an intra-day high of .8135 on January 26th.

At the time, we noticed that this had a potential for a “double top” formation relative to the .8125 high posted on September 28th.

You're not a member!  Trial today

The Aussie traded down to .7760 overnight and the internal momentum indicators are now pointing lower.

The fundamental reasoning for the recent fall has been the divergence in interest rates between the USA and Australia.

Since January 1st, the US 10yrs have risen from 2.4% to 2.85%. Over the same period, the AUD 10yrs have traded from 2.65% to 2.85%.

We expect this divergence to continue this year as the FED continues to tighten rates and the RBA remains neutral. At this point, the US 10yrs have a high target of 3.25%.

This estimate is based on the FOMC raising rates 3 times during 2018, which would correspond to the AUD/USD trading back to .7150.

Investors looking to profit from a lower AUD/USD can buy the BetaShare ETF with the symbol: YANK.

YANK is an inverse ETF, which means the price of YANK increases as the AUD/USD trades lower. It also has a weighting of 2.5%, which means the unit price will fluctuate  by 2.5% for every 1% change in the AUD/USD exchange rate.

With a current price of $13.20, we calculate that the price of YANK will be near $16.50 as the AUD/USD returns to the January 2017 low of .7160.

BetaShare ETF: YANK


Leave a Reply

Investor Signals Pty Ltd ABN 44 143 555 453 is a Corporate Authorised Representative CAR No. 439411 of Advisor Plus Pty Ltd AFSL 474520
© 2024 Investor Signals

Send our ASX Research to your Inbox

Or start a free thirty day trial for our full service, which includes our ASX Research.