Market Update - USD AUD

The trend for a stronger AUD and weaker USD continues, albeit we have seen a slight correction over the last week. Traders have been spoiled with Aussie positive news flow, headed up by the recent interest rate hikes. The stock market correction last week helped the US dollar slightly, and dented enthusiasm for high yielders. Meanwhile though, the basic building blocks of this trend remain intact. Stocks are on the up again this week, and gold is hitting new all time highs on an almost daily basis, reaching $1,168 per ounce today.

In the absence of any market shocks we continue to advocate a stronger AUD and weaker USD. Right now the market is testing trend support, and as you can see from today's chart we have usually managed to surge up to fresh highs shortly after testing the trend line. That is no guarantee that the same will happen this time, but to repeat last week's update, "let the trend be your friend".

Any opinions expressed in this document are those of TorFX
analysts. Any analysis and/or forecasts provided are aimed at
helping clients understand market conditions and developing trends.
Clients are wholly responsible for their own trading
decisions.

Labels: aud-usd-update

Market Update - USD AUD

A picture speaks a thousand words. There's not much added value in me applying my technical view to this market. Clearly, the trend is positive for AUD, and as we techies love to say, "let the trend be your friend"!

For once, it's blindingly obvious what's driving this trend. The Reserve Bank of Australia have raised interest rates twice in two months, with their benchmark rate now standing at 3.5%. That compares with measly 0.15% offered by the US dollar. More importantly, the US administration have indicated that rates there will remain low for a long time, which is helping to drive a flow of funds out of the dollar, and into....Anything that offers a yield! That in turn is driving high yielding currencies higher. The high yield basket is typically the "commodity currencies", like AUD, CAD, and the Rand. Those currencies have the added benefit of a soaring gold price to lend a further tailwind. Right now it's hard to see any argument against selling USD / buying yield, unless we see another financial meltdown, or an increase in stock market volatility. High yielders benefit from the current conditions, but easily take fright if investors become risk adverse.

In the short term there is nothing to suggest an imminent trend change, so we will stick with the trend and suggest that the Australian dollar will continue to strengthen against its US counterpart.

Any opinions expressed in this document are those of TorFX
analysts. Any analysis and/or forecasts provided are aimed at
helping clients understand market conditions and developing trends.
Clients are wholly responsible for their own trading
decisions.

Labels: aud-usd-update