Earlier this year, the Australian Finance Minister, Mr Wayne Swan, said that the budget balance will have a 19.4 billion AUD deficit for the fiscal year ended on 30 of June and he was expecting 18 billion AUD deficit for the next year even if Ms Gillard's administration promised 1.5 billion AUD deficit for the fiscal year ended in June. Is quite unbelievable that Australia has such a deficit. The surprising balance deficit is a symptom of the beginning of an energy crisis. BHP Billiton and Rio Tinto - the natural resources boom exponents for the last years as Woodside Petroleum - the most important local company working in oil sector announced they delayed or even canceled projects worth more than 50 billion AUD. According to the Bureau of Resources and Energy Economics, the investment amount committed for projects in the resource sector continued to decline to 240 billion AUD in October compared to 268 billion AUD six months ago. The value of new projects ready to be operational, crashed to only 1.7 billion AUD - the lowest level in the last decade. All this is happening while more investors are coming to USA for similar projects. Australia is caught in the middle of the US recovering and Chinese sliding economy. The capital is now moving from emerging peripheries and their proxies back to USA, exactly the opposite way that we saw for the last 10 years.
The government changed in Australia, but the economical outlook didn't. What we see in 2013 is the most severe decline in the volume of projects in the natural resources sector since 1999. And is just the beginning. The government officials continue to hope that a dramatic reduction in investment will be compensated by increasing the exports. But exporting what? And to whom? China?
The central bank would risk a collapse of an overheated real estate sector if they raise the interest rate and let's not forget the fact that the institution explicitly favors a weaker AUD which would help the exporters and favor the government view. For several months, a standby situation is credible, but longer term, the path remains for an additional monetary easing.
Back in April, I wrote a few lines about an article I read in Business Insider: Paul Gambles (MBMG International) said that shorting AUD could be the trade of the century as he thinks aussie could fall over 40% in the next 18 months to 0.6000 vs the USD. At that time AUD/USD was trading at 1.0550 - 1.0600 and after 8 months the same pair is trading now at 0.9000 - 0.9100. Until now seems like we have no reasons to doubt Gambles' view and that means in the next 10 months left we could see AUD/USD reaching 0.6000 ??? WOW ! For me seems to good and to easy to be true :)
So I made myself some projections and I am not as bold as Gambles: my target is 0.8050. In finance, the technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. So if this is true - that we are able to forecast the future direction of the prices based on the past - look at my daily chart: