Questions:

Hi Howard,

First of all thanks for your excellent gold analysis. I m not sure if you follow the Australian dollar which seems to trade like commodities (they have iron , gold wheat etc). I believe they are paying
about 8%. Given the recent pullback, is this a good entry for a long term position? I would consider putting up to 10 percent of my portfolio in such  position if the long term for the currency (against US dollar) is still up. Do you have an opinion on long term trend in this? I realize it s only n opinion but I d appreciate hearing if you have any idea or notion on this.

Warm regards and thanks.

Philip G.

Answer:

^{Hello Phillip,}

^{I follow and trade the Euro, B Pound, and Yen in the currencies market, with an eye on the Can $ and Aussie $ and not opposed to take a trade in them too. I look at the Can. and Aus $ mainly with a technical eye meaning I look at the charts and look for a trade regardless if it was dog food, gold, or a currency.}

^{I could flip through a chart book without looking at the futures contract and if I see a chart formation with what I think would be a good risk reward, I would take it. Yes, I want to know what I am trading and look at the underlying product and the fundamentals that go with it, and if I do not see any reason not to take the trade, I will. I do not want to trade thin or illiquid markets because of the troubles that could bring, and the fact there are so many thick (large open interest), active, and world markets to trade instead. The only way I would consider trading a contract like lumber or pork bellies is if in the worst case scenario the trade would lose a very insignificant amount of equity and it would not be noticed, but for a $25,000 account, I would always advise against it if asked.}

^{With that said, I cannot comment about what your interest rates will do, but as you know last week you had a strong jobs report and the metals market remains strong. Your press in Australia suggests that the RBA will ease in September because your economy is already slowing.}

^{I expect your opinion would be better than mine on where the Aus $ is going fundamentally, but I will tell you technically, there is no reason to sell the Aus $ against the US $. The $.95 area seems like resistance for now and in the last year you have seen $.10 and $.09 pullbacks, but the trend has been up since Sept. 2001 and the worst pullback has been about $.12 in that time. Trade according to those parameters and look for the trend to continue until it is broken, with 9 to 12 cent pullbacks to be viewed as buying opportunities with some kind of plan to sell on rallies to take profits and waiting for the next correction to re-enter again.}

^{The US $ is another story because you are not talking the Aus$ against the Yen or Euro, so you must look at the US $ too. Record low values and the Fed meet on Tuesday. All markets are tied one way or another, from one extent to the other, and I have never seen markets across all sectors trade as volatile as what I am seeing today all at once. Whatever you do, do not commit too much capital on one thought or idea in today's trading world. Diversify and do not put your eggs in one basket in case the basket falls unexpectedly.}

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Howard Tyllas