The AUDUSD has fallen out of bed over the last week or so — making a fool of my bullish bias at ~1.015 (see here to learn how I was fooled by exports).
It’s now trading ~98c down from ~1.02 a week back; ~1.03 two weeks back; and ~1.06 around five weeks ago.
The broad trading range over the last three years has been ~0.9440 (4 Oct 2011) to 1.106 (1 Aug 2011), so it’s not yet clear that we have a breakout, but the short-term price action sure is sharp. Note also how close together the high and low are in time — when the AUD moves it always moves quickly.
Given this, my initial thought was that this sort of price action for the AUDUSD was typical, if seen only from time to time — the last decade or so has delivered a long rally, punctuated by sharp (and sometimes terrifying ) declines.
Checking the facts made things seem less clear — we are at the edge of what might be characterised as a ‘typical’ correction for the AUD. It could be something more. The drop over the last five trading days (week) has been ~4.2%, which is fairly unusual.
If we zoom out a little to a two-week frame things don’t look quite as unusual — the 10 trading day (two-week) decline has been ~4.3%. Yeah, that’s still odd … but it’s less scary.
In FX, there is so much noise from flow that I think you need to look at monthly changes. On this basis, the decline (5.1%) is at the edge of normal — but not really that uncommon for a ‘correction’ phase.
Breathe out… Or maybe don’t: the five-week change is fairly extreme.
Going back five weeks takes us back to the day of the weak March Jobs report (jobs down 36k v. mkt -7.5k; unemployment rate +20bps to 5.6% v. mkt 5.4%). It is also prior to the low CPI and the rate cut. Over this period, the AUD is down ~7.5%, which is indeed unusual.
I think I’m going to sit this one out just now — but I’m a dip buyer around 96.70 (support in both the June’12 and Nov’11 AUDUSD corrections).