Livin' La Vida Loca Down Under

Thursday, June 18, 2009

I have spent so much time talking about the US and Europe lately, that I have almost neglected my favorite currency, the Aussie. So I will try to avoid ranking on Obama and Brown and Trichet, while I put a plug in for the down under dollar and go back to my love relationship with the potential this currency has.

The Australian employment report that came out overnight brought about another rise in Online Forex AUD Trading, almost across the board (The Yen had a strong day too). While the key change in employment payrolls was much better than most Forex Online traders expected at almost unchanged levels, the internal numbers could spell trouble.

The numbers showed full time employment falling sharply and part-time employment rising sharply, which is normal in a recession when most of the world’s industrialized nations are dealing with a 10% jobless rate. However, you do not want this to continue long term.

As well, the unemployment rate surged to 5.7%, still far below the global average – but nonetheless worrisome as the number keeps going up. This number matches the highest level seen in Aussieland since late 2003.

But here is why the currency is strong: The AUD continues to find strength as bonds have not managed to rally and equities stormed back into the close yesterday in the US after a steep intra-session sell-off.

The background theme for Aussie strength is the idea that the global recovery, led by China, is underway. I read an article in the Wall Street Journal just this morning about the levels at which the Chinese are buying commodities, which is bringing about serious questions of its sustainability.

If this trend slows in the near future, which I do not think it will (and I will explain this below), the Aussie could be in for a very sharp adjustment lower across the board. Chinese trade numbers are still off sharply for both imports and exports on a year over year basis.

Now, while the vaulted WSJ might believe this trend will burst eventually, sooner rather than later as they said, I am finding it difficult to swallow. Here is why: The Chinese have been consuming commodities at an alarming pace for their building, this is how they are stimulating their economy. But back in March I wrote about how the Chinese are also buying up commodities using US Dollar (Yes, I know I promised I but cannot resist mentioning the Greenbuck) while at the same time making public calls for a change in the global reserve standard.

Essentially, China is swapping Dollars for tangible items – and while the WSJ uses the import and export figures to assume that their consumption has to end – I am looking at their 2 Trillion Dollar reserves and saying, they are swapping paper for copper and oil and gold and iron because right now, there is not option other than the dollar – except real stuff.

So have no fear, the Aussie will be here – trust me on this.


Benjamin Cip June 18, 2009 at 10:35 PM  

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Anonymous June 24, 2009 at 12:58 AM  

Yesterday AUDUSD traded at 0.7927, according to the Relative Strength Index (RSI) it was oversold…. Today is up to 0.8012, I didn’t see this raise coming…but of course you did … :)
These are some forex gral. News…

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