Aussie Strong as Long as RBA Leaves Rates Unchanged

Speculators are driving the AUD USD higher today. Traders areoptimistic about a recovery in the Australian economy because of theovernight news that Chinese manufacturing increased for the first timein nine months. Look for the Reserve Bank of Australia to hold rates steady.

Speculators are driving the AUD USD higher today. Traders are optimistic about a recovery in the Australian economy because of the overnight news that Chinese manufacturing increased for the first time in nine months. News of a recovery in China’s economy could lead to increased demand for Australian exports.

Investors have also been buying the Aussie because of demand for higher-yielding assets. This is being triggered by trader optimism that the global recession may be easing. Traders are now looking for return on their capital rather than just return of their capital.

The recent strength in the global economy may open the window for the Reserve Bank of Australia to leave its benchmark interest rate unchanged at 3.0% tomorrow. The financial markets are indicating that there is a 24% chance of a 25 basis point reduction. Any cut will be bearish for the Australian Dollar but a cut of greater than 24% could trigger a sharp break.

Despite the fact that the weekly swing chart is indicating a change in trend to up by the move through .7267, this pair is not expected to sail through to the target zone at .7928 to .8382 without some kind of a pullback. Economic reports are still indicating weakness in the Aussie housing market and an increase in unemployment.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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