Is It Time For The Aussie To Turn?
Today’s Spotlight Market
The Australian Dollar continues to slide, but the downtrend has begun to slow since February.? Traders have begun to take notice of the relative stability in the currency and are asking themselves if this is a sign that the currency is bottoming.? There are still a number of internal and external forces working against the Aussie Dollar, but the Reserve Bank of Australia has found itself in the crosshairs of critics, who support a stronger currency.? There is pressure to not let the currency fall to 70 cents on the US Dollar, which could slow rate cuts or could even result in the central bank doing a full 180 degree turn and raising rates to stabilize the currency.
Fundamentals
For many years, the Australian Dollar was the beneficiary of its role as one of the main exporters of natural resources? to China.? The Australian economy was able to weather the storm of both the US and EU banking crises due to the relationship.? However, Chinese economic growth has fallen to 7.0% in Q1 of this year, falling 5% since 2010.? In theory, the fact that Australia is an export heavy economy, it should benefit from the weakening of the currency.? However, things have not worked out that way, as China itself has had troubles with exports.? Chinese exports fell 15% in the month of March, while forecasters had been looking for an increase of 12% for the month.? Chinese exports were also down 12.7% from March of last year.? The weakness of the export market has negatively impacted employment, which has actually seen a bit of a rebound.? Historically speaking, the unemployment rate in Australia is above norms, currently sitting at 6.1% in the most recent report.? That is down from 6.3% the month prior, but remains extremely vulnerable.? The weakness in commodity prices and anemic Chinese exports could hit employment in the mining sector.? The RBA is expected to cut interest rates at least one more time this year, which could further pressure the currency against the greenback.
Technical Notes? -? View Today’s Chart
Turning to the continuous Australian Dollar chart, we see the currency managing to hold above the 0.7500 level.? The Aussies has tested the low 0.7500?s several times, but has rebounded each time.? If the currency is to stabilize or reverse, it is imperative that 0.7500 is held.? Prices are above the 20- and 50-day moving averages this morning.? If the Aussie is able to hold here, it could gain some traction.? On the upside, a move above the 0.8000 mark could be a huge boost to near-term momentum for the currency.
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