AUD continues it's rise - Next stop $0.8262 ?

The AUD continues to remain in the regression channel as it climbs to the recent high of $0.8262

Options on Indexes - A risky choice ?

In his book "The Volatility Edge" Jeff Augen makes the comment that trading options on an index because it is safe is flawed logic, because index options do not reflect the true state of implied volatility.

Right now trading XLE which is a broad based energy index has shown a rather smooth price chart that moves between a reasonable range but over the past two months double diagonal and
calendar trades seem to have been crushed as a result of IV even though the IV has continued to remain low and the XLE options are under priced - low IV type trades such as a double Diagonal or Calendar have been punished over the past month.

Refer to the price chart above and note that both IV & SV remain low.

Maybe Augen is right in that some index options simply hide their real volatility away and are deceptive when it comes to income trades such as time spreads?

AUD/USD - Still potential to fall?

The AUD has been indecisive over the past week bouncing between the previous high of AUD$0.8263 and the channel low of AUD$0.7880

The question is still where is it heading over the medium term?

Even with the sideways movement over the past week, it has not broken outside of the lower regression channel and we can see from the attached graph that there is downward pressure on the AUD showing up in a drop in the Oscillator, a declining ADX and the MACD well and truly rolling over fromn an over sold position.

Is the Wave 4 target still viable at this stage - well yes but the longer the AUD stays in the channel the weaker the evidence becomes that the AUD will breakout to retest the earlier lows of AUD$0.75.

However even this may be a bit od a stretch as in order to get down around AUD$0.75, the currency needs to break out of the channel and the key support at AUD$0.7840 and then it will encounter resistance around AUD$0.7640 which is the 50 day MA.

If the AUD beaks the lower regression channel and falls below the support of AUD$0.7840, then odd on that we will see the AUD fall to around AUD$0.75 and at this stage an opportunity to lock in a few contracts as the next retracement would look to retest the new high of AUD$0.8600

AUD-USD retracing to 0.75 ?

AUD-USD is off it's recent high of AUD$0.8263 (3rd June), and looks to be retracing back down to the next support level at AUD$0.7740. If this support is breeched then the next support level is around AUD$0.7500.

Pressure for the retracement increased earlier in the week when :

1. the Reserve Bank of Australia (RBA) left the cash rate on hold and strongly indicated that ecxonomy was sufficiently stimulated with the impacts of previous rate cuts now flowing through.
2. An historic balance of trade deficiet caused by the high value of the AUD
3. GDP was reported as a positive 0.4% growth - theoretically making Australia one of the only advanced economies in the world to not be in recession
4. In addition to the economic indicators, the technical indicators are also showing a weakness with the oscillator declining, MACD crossing over and the ADX weakening.

So is the AUD in decline and is the next level of support AUD$0.7740 ?