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Risk Tells in the Currency and Bond Markets Pointing to Further Short-Term Downside


Expect a downtrend from now until October and then a rally into the end of the year.


The Aussie dollar is not retracing any moves, just fulfilling what appear to be bearish set-ups.

The daily chart of the Aussie dollar / US dollar currency cross (AUDUSD) is shown below. The AUDUSD appears to be in the early stages of a wave ((iii )) lower with a downside target of 1.00435 (from current levels of around 1.03624). That's just the minimum short-term downside target. The bigger picture appears very bearish for the AUDUSD. My question is whether commodities and other risk assets will be displaying similar weakness. I'm not ready to make such a declaration at this point.

Click to enlarge

The chart below shows the Aussie dollar / Japanese yen cross (AUDJPY) on a daily basis going back to mid-2011. This cross also appears to be in a short-term third wave lower with a minimum downside target over 3,200 pips lower than current levels. It could be even worse than that in terms of the AUDJPY. The eventual downside target for the AUDJPY – after this downside, a sideways correction and one more shot to the downside play out – is all the way down at 70.944. That can't be good for risk assets – especially commodities – can it?

Click to enlarge
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