
Things are pretty good in Australia right now. The cost of
living is high but the housing market is buoyant, to the extent that the
authorities are concerned about a housing boom. Unemployment continues at the
low rates that make other Western style economies green with envy.
But we are still short the Aussie dollar. This is even in the face of a
speech by Mr. Bernard Bernanke of the Federal Reserve in the USA yesterday,
who committed to a low Federal Funds rate for the foreseeable future. In
theory, this should lower the US dollar and assist the rise of the AUDUSD pair.
So why did we set up the Silver Trigger to enter a short position, which was
filled (see chart above), during the Australian session last night GMT?
Why did we also place a provisional short order for gold?
The answer is that hard commodity prices are still falling, and the
share prices of Australian mining companies are following suit. The fact of the
matter is that the Chinese measures will take considerable time to play out,
and it almost certainly will not be plain sailing in the meantime. There may
also be significant collateral and unintended consequences for the wider global
economy. In the USA ,
tapering is coming and will be on the radar in a big way in the New Year of
2014. In Australia
itself, there has to be a transition from a mining led economy to one that is
supported by consumer spending. This kind of switch does not take place
overnight and the Australian government is well known for its wish to have a
lower Aussie dollar, in order to assist in this.
But the big consideration is that the market is telling us that the US
dollar is on a rising trajectory. Every time there is a suggestion that
tapering might be delayed the reaction in the Foreign Exchange space is not
only muted, but also transitory.
Really very informative post thanks for this.
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