On 23rd October last the Aussie broke a robust upswing

      

On 23^rd October last the Aussie broke a robust upswing on the news that bad debts at Chinese banks had increased by a factor of three. Anything that is bad for China  is also bad for the Aussie, and it was probably due for a correction anyway.

Then, on Oct 28^th, the governor of the Reserve Bank of Australia, Glenn Stevens, said that the Australian currency was too high for the fundamentals, which turned the correction into a new downtrend.

Now the dust has settled, and that downtrend has itself been broken. The Aussie is on the way up again. What’s more, examination of the daily chart shows that this has actually been the case since immediately after the last Federal elections in Oz. (higher highs and higher lows on the daily chart).

It seems now that the RBA has fairly firmly set its face against any reduction in the cash rate, which is about the only thing that has short term potential to take the wind out of the sails of the AUDUSD pair. The reason for this is that they greatly fear a housing bubble in the event that rates are lowered further, in spite of a well documented belief that, for the economy as a whole, a lower Australian dollar is highly desirable.

It would seem that the Australian monetary authorities are now depending on the US Federal Reserve, which will soon be newly led by Ms. Janet Yellen, to do the work of reducing their currency’s value for them, by starting to taper Quantitative Easing (QE). Right now, it is apparent that the market does not see that happening in 2013. However, you can be sure that the US Non Farm Payrolls report, due out this Friday, and which will give the best indication of all as to the imminence of tapering, will be just as closely watched Down Under as it will be anywhere else on the planet.