Tom Scollon

Well the worst was about 15 years ago when the Aussie fell to 50 cents.  Yes all you got then for your Aussie, was a lousy 50 cents for every dollar you spent overseas.  In the good ol' days you got maybe $1.40.  Everything was dirt cheap when we ventured overseas in the 70s and we loaded up with cheap clothes, antiques, jewellery and the likes.  And we got our first real taste of imported goodies like cars and Japanese refrigerators and big TVs.

Alas those were the days.  But let’s look at the dollar chart over the last 30 years:

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Unfortunately the chart does not show the 70’s but I can vouch for it as I was deep into exchange rates as I was in international trading.  That was the golden years for the dollar and despite its strength the world also at that time could not get enough of our raw materials – including agriculture.

You will also notice that we had another purple patch in 2011-13 but for the bulk of the last thirty years the dollar has been at the vagaries of foreign exchange markets and the dollar has been shaken all over the place.  Unfortunately that is likely to continue as the dollar is free floating according to market forces as opposed to some currencies which are ‘fixed’ by government.

So can the dollar fall to 50 cents?  Well back in 2000-2 it got a taste of the dunce’s corner.  It was a painful period.  We felt unloved.  We could not travel.  Nobody wanted our goods.  We could import as much as we wanted really cheaply but we were not in the mood.  Like most of the world we had a dose of the blues as that was the last biggish recession before the GFC bust of 2008.

If we continue to look at the big picture but zoom in and apply Elliott we see a projection only as low as about 70 cents:

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And we were there before in about 2008/09 – the more recent recession.  So you can see our dollar is a litmus test for the health of the global economy.

The above chart is a 90 week.  If we look at a 300 week we see a much lower dollar:

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To a low of possibly around 60 cents – a popular level that many economists enjoy to headline – people like to think in round numbers – easier for the front-page.

But you will note that we could also see a rising dollar back up to 90 cents.

Some analysts are paid to project exact levels.  But I also know that consensus forecasting rarely works. So I am inclined to hedge my bets.  And I know from coal face experience that we will continue to see a volatile dollar.  If the wall paper is peeled off the China economy there is no saying what might happen.

So my last chart is the monthly:

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And it says we could be all hopping on a plane in two years.

But beware the ‘X’ factor.

Enjoy the ride                          

Tom Scollon