The Australian dollar initially fell on Friday but then turned around to show signs of strength again in what has been a somewhat repeating pattern. The Asian markets tend to sell off the Aussie, perhaps in reaction to the concerns coming out of China, but by the time the Americans get on board, they start looking for some type of “risk on” type of trade.
One of the biggest drivers of this market as of late has been the Chinese mainland, which looks as if it is starting to struggle a bit, as economic numbers have not been particularly impressive. The Australian economy is highly reliant on commodity exports to the mainland, so it does make sense that traders will use the Aussie as a way to play China over the longer term. In the short term, we probably have seen more attention paid to the interest rates in America, which of course has a relatively strong influence on the greenback itself.
Recently, there have been a lot of concerns when it comes to the idea of the United States closing down its government, and that may have been part of the reason interest rates shot higher. Nonetheless, I think it is becoming obvious that the Congress was always going to past the continuing resolution, so it is not a huge surprise to see that happen; but at the same time, it takes some of the pressure off of the bond markets.
The question now is whether or not rising interest rates continue to be a concern, or if it is simply something that short-term traders are banking on. I do think that given enough time, we will have to make a much timelier decision, but in the short term it certainly looks as if we are trying to get towards the 0.73 level yet again. That is an area that has been important more than once, so it is not a huge surprise to see that we are grinding our way back to that region. Nonetheless, I also think that sellers will be waiting, so it will be interesting to see how this market plays out today, as it will be a new quarter so it will be interesting to see where money goes to work. We are still very much in a downtrend, despite the fact that it has been a very bullish market for the last 48 hours.
