It’s quite a rarity to see a pair trade at levels last seen in 2000. EUR/AUD has this honor. The breach of a technical barrier reflects the fundamentals perfectly.
EUR/AUD is now trading at 1.5268 bouncing off the a bottom of 1.5188 earlier. These numbers don’t mean too much as this isn’t a popular cross. EUR/USD is the world’s most popular and AUD/USD is gaining traction in recent years. EUR/AUD? Yes.
EUR/AUD isn’t a popular cross. GBP/JPY, EUR/GPY and EUR/GBP are far more popular. I noticed this price by chance – it’s almost a decade low. Back in May 2000, EUR/AUD traded lower, as low as 1.5010.
May 2010? At that time, the Euro was a little more than a year old, and was just a monetary instrument. There were no Euro notes or coins – they were introduced only in January 2002.
Usually such a breakout means that the pair has more to fall, but it’s hard to say where to. Looking at lower levels from is quite meaningless. Lower levels were seen so far in the past, that they are only anecdotal now. In addition, there was no Euro before 1999: the charts are based on the Deutsch Mark, French Franc and even the Greek Drachma.
Fundamentals well reflected
This cross will move by fundamentals more than technicals. Readers of Forex Crunch are aware of my bearish sentiment towards the Euro, and especially my appreciation of the Australian economy. Unemployment in Europe is almost double the Australian unemployment rate.
The Australian economy enjoys prosperous trade with China. This kept Australia from falling into recession. In Europe, the big countries such as Germany and France are doing well, while the small countries are weighing heavily on the continent. Spain has an unemployment rate of 20%. Ireland, Italy and Portugal are in heavy debt. Greece has biggest debt – half a trillion dollars, or more than all its GDP.
The interest rate gap: 3.75% to 1% in favor of Australia makes it an interesting carry trade as well. Long term investors have seen EUR/AUD fall every month since February 2009 going all the way from 1.98 to 1.52. That’s a whole year. Apart from the profit made by the change of price, the interest rate gap has brought a small overnight profit every day.
Are you following, monitoring or trading EUR/AUD? I’d be glad to know.
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6 Comments
Hi Yoyah. Great site by the way. You’re really providing a great service here so thanks. I keep an eye on this pair because it’s a great way to play either countries trials or tribulations separately from the usual lock-step EURAUD movement we see with risk and yeild vs US dollar [although this correlation has broken down of late as has the AUDNZD a bit]. Recently with the Greece woes it’s been a good short play.
ps
I just looked at the long term chart myself and it is an interesting observation you’ve made. What we are seeing is a confluence no doubt of largely macro factors including long term AUD [+China] strong economic fundementals, EUR weaking with US Fed hike prospects and short term panic driven heavy selling due to Greece. A rare setup indeed!
Thanks Matt!
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