The Reserve Bank of Australia
(RBA) has released its latest Index of Commodity Prices, which shows a
continuing decline. It has now gone decidedly below the average of 2012 / 2013 prices.
This means that the largest factor, apart from the interest rate, that
has underpinned the value of the Australian dollar is dropping sharply.
The text accompanying the
release states that the largest contributors to the fall in April 2014 were
declines in the prices of Iron
Ore Australia has been the largest foreign provider
of Iron Ore to China Iron Ore prices is bound up with retraction of the wider
Chinese economy, which can be expected to have implications for all the other
commodities, finished goods and services that Australia
…and its downward trend is intact
Yesterday saw the AUDUSD pair
achieve another lower high, to preserve the downward trend we entered as a
short trade on April 23rd. However, it only just about made it (see
chart above), and in so doing brought our position in the pair into a paper
loss until the rate dropped again. We would, of course, like our trades to be
always in profit, but this is the kind of situation that we must grin and bear for
as long as the criteria for being in the trade continue to exist.
The chart also indicates a
classic case of support to price as provided by the 200 period Simple Moving
Average (SMA) on the four-hour chart. For this trade to prosper, the US dollar
needs to strengthen, which would tend to drive the rate down through this
moving average. The Non-Farm payrolls report, due later in the global day
today, could be the catalyst for this. The ADP report on Wednesday last
indicated 220 thousand new jobs, which is healthy for the dollar. The problem
is, as has been pointed out here often, the ADP report does not always
correctly anticipate the government figures.
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