Ron Finberg's  Instablog

The Perfect Storm is brewing for the EURAUD which has dropped below 1.5200 today, and hit a 9 year low at 1.5178. When you step back and think about it, the trade makes perfect sense. The Euro is fragile due to Greece, while the Aussie is benefitting from positive Australian Economic news and rising Gold prices.

I have to thank a colleague for pointing out this pair to me, but it is definitely one of those moves that makes you say “Why Didn’t I Think of That?”

Even yesterday, when the Euro traded higher on short covering, or whatever reason, the EURAUD barely traded higher as the Aussie was rallying on global risk buying.

Is there much left in the move? Perhaps the big move lower is done, but shorting the EURAUD still appears like a decent long term short. Here’s why. Any safe haven buying will probably be caused by EU news, which would most likely cause the Euro to underperform major currencies. On the other hand, the Aussie could rally with two scenarios. One, commodities continue their move higher. Two, Greece receives a bailout, causing selling in the dollar and yen which creates across the board strength. Scenario one would be expected to cause the Aussie to outperform the Euro, while scenario two would favor the Euro. Nonetheless, as yesterday revealed, the moves higher in the EURAUD are smaller than the moves down, since any news that is causing Euro strength will probably be helping the Aussie too.

Open to hearing thoughts on this one. For the record I haven’t taken my own advice and I am still on the sidelines saying why didn’t I think of that.

Disclosure: No Positions