Is Australia And The Aussie Dollar Suddenly On The Nose?
Axi | Jan 24, 2017 12:57
Originally published by AxiTrader
I genuinely don't know the answer to the question I've posed with today's title to this column. But you have to wonder after the past 24 hours price action - The Australian dollar performed so poorly, while the US dollar weakened against other currencies. So "what's up"?
That's because while the Aussie is up around 0.3% against the greenback it is weaker on the crosses. It's lagged its major competitors.
As a result of this underperformance the Aussie has lost 0.85% against the pound, close to 0.6% against the kiwi with the AUD/NZD rate falling to 1.0484. The Aussie lost almost 1% against the yen.
As I noted before it begs the question - what's up?
To that end it's worth repeating what I said earlier in my overnight wrap.
That is the ASX is once again underperforming the moves in the US. Certainly, a large part of this is the downgrades from the broker community that have been coming thick and fast in the past few days for Australia's banking sector.
But I wonder if perhaps some of the selling of Aussie stocks, and underperformance of the Aussie dollar, can also be placed at the feet of Donald Trump.
I say that because if anything is clear it is that president Trump plans to implement as much of his policy platform as possible now he’s president. And it is also apparent that Mexico and China remain in his sights.
That’s problematic because given China is Australia’s major trading partner that places Australia’s business and political class in the uncomfortable position between China and our major defence ally.
Ultimately I’m not sure president Trump will start a trade war given – Chinese president Xi said in Davos last week – nobody wins in such a clash.
But should investment committees at major money managers around the world be worried about such an outcome when they sit down for their next meeting in February Australian assets may continue to suffer. Time will tell. But for now it’s looking like we need a fall to 5500 or a powerful rally in the US to reverse the weak sentiment in Australian stocks right now.
It's too early to tell just yet. One day's underperformance is nothing in even the small scheme let alone the grand scheme.
But it's something worth watching.
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Turning to the technicals now and overall my system is still long and has not generated a sell signal. While above 0.7520/40 the price action still suggests a move to the downtrend resistance at 0.7640/50.
But even with that the Aussie dollar may still lose ground on the crosses.
Have a great day's trading.
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